- What is a one-person company?
One Person Company (OPC) is incorporated by a single person. Before the enforcement of the Companies Act, 2013, a single person could not establish a company. If an individual wanted to establish his business, he/she could opt only for a sole proprietorship as there had to be a minimum of two directors and two members to establish a company. The concept being newly introduced in India was already popular in outside countries. It gives a single promoter full control over the company while limiting his/her liability to contributions to the business. This person will be the only shareholder and director (there is a nominee director, but with no power until the original director is incapable of entering into a contract).
- Amendments were introduced during the Union 2021 budget in February.
“Startups” was a key point for the budget and hence a few amendments have been made to Company Incorporation Rules (2014).
AMENDMENT IN CONCEPT OF ONE-PERSON COMPANY
The Companies (Incorporation) Second Amendment Rules, 2021 passed on 1st February 2021, through these rules MCA has made amendments in many provisions of One Person Company
This Rules came into effect from 1st April 2021
The Central Government introduced the following rules to further amend Rule 3 of the Companies (Incorporation) Rules, 2014
|Old Provision||Amended Sub-Rule|
|Rule 3- One Person Company(1) Only a natural person who is an Indian citizen and resident in India(a) shall be eligible to incorporate a One Person Company;(b) shall be a nominee for the sole member of a One Person Company. The explanation I – For the purposes of this rule, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding financial year.|
(1) Only a natural person who is an Indian citizen whether resident in India or otherwise(a) shall be eligible to incorporate a One Person Company;(b) shall be a nominee for the sole member of a One Person Company. The explanation I – For the purposes of this rule, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and twenty days during the immediately preceding financial year.
|(7) No such company can convert voluntarily into any kind of company unless two years is expired from the date of incorporation of One Person Company, except threshold limit (paid-up share capital) is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.||OMITTED|
What does this imply?
1. Now NRI can incorporate (OPC) in India.
2. It is not mandatory to convert an (OPC) into another type of company upon crossing the threshold limit.
3. OPC can convert to another type of Company any time after incorporation without any transition period.
4. Process of OPC in another type of Company has been completed amended.