The concept of One Person Company (“OPC”) was originally envisioned by Dr J.J. Irani Committee in May 2005, which was later incorporated in the Companies Act, 2013 (“Act”).
The Ministry of Corporate Affairs, Government of India has released a notification dated February 1, 20211 (“MCA Notification”) on Companies (Incorporation) Second Amendment Rules 2021 (“Amendment Rules 2021”) which has brought the following changes to Companies (Incorporation) Rules 2014 (“Incorporation Rules 2014”):
Prior to the amendment, only a natural person who is an Indian citizen and resident in India was eligible to incorporate an OPC or was eligible to become nominee for the sole member of the OPC. However, under the Amendment Rules 2021, the definition of OPC shall be widened to include any natural person who is an Indian citizen whether resident in India or otherwise. This allows non-resident Indians to incorporate OPCs in India. Also, the number of days mentioned in Explanation 1 to Rule 3 of Incorporation Rules 2014 has been reduced from 182 days to 120 days, for calculating the resident status of person resident in India.
The Amendment Rules 2021 has further done away with Explanation II to the Incorporation Rules 2014, paving way for an OPC to convert itself into any kind of company under the Act. The Amendment Rules 2021 has also done away with minimum and maximum thresholds of paid-up capital requirements, which previously existed under sub-rule (7) to Rule 3 of Incorporation Rules, 2014
Rule 6 of Incorporation Rules 2014 provided that upon exceeding paid up capital of fifty lakh rupees and average annual turnover (during the relevant period) of two crore rupees, OPC shall cease to continue as an OPC. The new Amendment Rules 2021 ensures that the OPC may continue to retain its status as OPC irrespective of the increase in its paid up capital or annual turnover.
The existing Rule 6 of Incorporation Rules 2014 has been substituted with the following:
After completion of all requirements, Registrar of Companies shall approve form and issue new certificate of incorporation.
In Rule 7(1) and Rule 7(4)(i) related to “Conversion of private company into One Person Company”, following have been substituted, namely:-
E-form No. INC-5 related to “One person company - Intimation of exceeding threshold” has been omitted and E-form No.INC-6 related to “One Person Company and Private company–Application for Conversion” has been substituted.
Please note that this Amendment Rules 2021 shall come into force form April 1, 2021.