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As we all know, the Companies Act, 2013 has come up with revolutionary reforms in the corporate structures bringing variety of comprehensive provisions to encourage the companies, corporates, entrepreneurs and public at large. One such novel concept introduced under the Companies Act, 2013 is of “One Person Company”.

A One Person Company (OPC) is a hybrid version of a Corporate structure and proprietorship concern wherein, a Company can be incorporated by only one person being the member of the Company. Unlike the other structure of the Corporate, a OPC does not need to have minimum of two/three directors or such increased number of members as is the case in the private/public Companies.

However, the structure of OPC had come with various asterisks of limitations viz. eligibility of incorporators of OPC, triggered limit for conversion of OPC into any other form of Company, limitation of membership of the OPCs etc.

It is noteworthy that the Budget 2021-22 is the budget of encouragement and development wherein various relaxations has been given to the corporates such as decriminalization of penalties for LLPs, increasing the threshold limit for the small companies, E-court frame work for NCLTs etc. One such major relaxation given under Budget 2021-22 is for OPC by widening the eligibility criteria for incorporating the OPC in India and for the mandatory conversion & non-conversion criteria for OPC.

Consequent upon the said changes, the Ministry of Corporate Affairs came up with the Companies Incorporation (second Amendment) Rules, 2021 in force from 1st April, 2021, under which the following amendments have been made:

Incorporation of new OPC: The earlier provisions of the said rules had the mandatory criteria that only a natural person who is an Indian citizen and resident in India for at least one Hundred and Eighty Two days can incorporate a / OPC. However, after the amendment, a natural person who is an Indian citizen whether resident in India or otherwise can incorporate a One Person Company. Moreover, the limit of “resident in India” has also been reduced from One hundred Eighty Two days to One Hundred Twenty days, giving flexibility to the Non Resident Indians to incorporate the OPC. That is to say, it opened the doors for the foreign direct investments, foreign individuals and non-resident Indians to incorporate OPC in India.

Conversion of OPC into Company: Earlier, no OPC had the option for conversion into a private or public Company before the expiry of two years from the incorporation. Consequently, if the OPC within such two years of incorporation exceeds the threshold of paid up capital of Rs. fifty lakhs or average annual turnover of Rs. two crores, it has to mandatorily convert itself into a private or public limited company within six months of triggering the threshold.

However, after this amendment any OPC can convert into a company irrespective of its incorporation date and that there are no mandatory criteria for any OPC as to compulsorily convert into a Company. Both the conversion provisions have been omitted under the said amendment.

In nutshell, this amendment shall surely bring various small, micro and medium entrepreneurs on board.

G. S.R. 91 (E) Companies (Incorporation) Second Amendment Rules, 2021.


Contributed By : Alpa Rawal (Practicing Company Secretary)

[Email :]


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