MCA revises One Person Companies (OPCs) rules vide Companies (Incorporation) Second Amendment Rules, 2021.

MCA amends Rule 6 associated with One Person Company to switch itself into a Public Company or a Private Company in some cases and Rule 7 related to change of Private Company into One Person Company, vide Companies (Incorporation) Second Amendment Rules, 2021.

As a measure that directly benefits Startups & Innovators in the country, particularly those who are providing products & services on e-commerce platforms, and to bring in added unincorporated companies into the organized corporate sector, the incorporation of One Person Companies (OPCs) is being incentivized by altering the Companies (Incorporation) Rules to provide OPCs to raise without any restrictions on paid-up capital and turnover, enabling their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also provide Non-Resident Indians (NRIs) to incorporate OPCs in India.

Some of the advantages of reduction in compliance responsibility for over 2 lakh companies as an immediate outcome of the amended definition are as under:

• No need to serve the Cash flow statement as part of the financial statement.
• Other companies need to provide details of remuneration to directors and key managerial personnel. Small companies are obliged to provide details of the only total amount of remuneration drawn by directors in their Annual Return.
• Compulsory rotation of auditor not required.
• An Auditor of small companies is not required to state the adequacy of the internal financial regulators and their operating effectiveness in the auditor’s report.
• Hold entirely two board meetings in a financial year.
• The Company Secretary's Annual Return can be acknowledged or where there is no company secretary, by a single director of the company.
• Lesser penalties for Small Companies.
• Lesser filing fees for Small Companies.

The Ministry of Corporate Affairs (MCA) published the Companies (Incorporation) Fourth Amendment Rules, 2021 wherein the modifications in e-Form INC-35 are notified. The notification attempts to amend the Companies (Incorporation) Rules, 2014.

Under the Companies (Incorporation) Rules, 2014 (hereinafter mentioned to as the said rules), in rule 38A, (i) in the peripheral heading, for the words, “and Opening of Bank Account”, the words, “Opening of Bank Account and Shops and Establishment Registration”, shall be replaced. In additional information, Application for enrollment of Goods and Service Tax Identification Number (GSTIN), Employee State Insurance Corporation (ESIC) registration and Employees’ Provident Fund Organisation (EPFO) Registration, Employees’ Provident Fund Organization (EPFO) Registration and Profession Tax Registration Opening of Bank Account and Shops and Establishment Registration. For clauses “(c) and (d)” linking to “Profession Tax Registration and Opening of Bank Account”, the several clauses shall be replaced, namely ” Profession Tax Registration with effect from February 2020, Opening Bank Account with the conclusion from February 2020, Shops and Establishment Registration.” The Ministry has reported changes in e-Form No.INC-35 and rather of “AGILE-PRO”, the letters “AGILE-PRO-S” were included wherein an opening of bank account and shop and establishment registration has been included. 

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