MCA allows NRIs to form one person company (OPC); relaxes norms for conversion of OPC to public/private companies
February 3, 2021
The MCA has amended Companies (Incorporation) Rules, 2014 to allow a non-resident Indian to form a One Person Company (OPC) and to relax the norms for conversion of OPC into a public company or private company and private company to OPC, as under :
Rule 3 and Explanation I thereto is amended to provide that only a natural person who is an Indian citizen whether resident in India or otherwise shall be eligible to incorporate a OPC. 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.
Sub-rule (7) of Rule 3, which barred a OPC from converting voluntarily into any kind of company unless two years had expired from the date of incorporation of OPC and upon the paid up share capital exceeding fifty lakh rupees or its average annual turnover during the relevant period exceeding two crore rupees, has been omitted.
Rule 6 has been substituted to ease the norms of conversion of OPC into a public or private company. The automatic cessation of the status of OPC upon the paid up share capital of OPC exceeding fifty lakh rupees and its average annual turnover exceeding two crore rupees is omitted and the substituted Rule 6 reads as follows:
“ 6. Conversion of One Person Company into a Public company or a Private company.-
(1) The One Person company shall alter its memorandum and articles by passing a resolution in accordance with subsection (3) of section 122 of the Act to give effect to the conversion and to make necessary changes incidental thereto.
(2) A One Person company may be converted into a Private or Public Company, other than a company registered under section 8 of the Act, after increasing the minimum number of members and directors to two or seven members d two or three directors, as the case may be, and maintaining the minimum paid-up capital as per the requirements of the Act for such class of company and by making due compliance of section 18 of the Act for conversion.
(3) The company shall file an application in e-Form No.INC-6 for its conversion into Private or Public Company, other than under section 8 of the Act, along with fees as provided in the Companies (Registration offices and fees) Rules, 2014 by attaching documents, namely:
Altered MOA and AOA;
copy of resolution;
the list of proposed members and its directors along with consent;
list of creditors; and
the latest audited balance sheet and profit and loss account.
On being satisfied that the requirements stated herein have been complied with, the Registrar shall approve the form and issue the Certificate.”
Rule 7 (Conversion of private company into One Person Company) has been amended to remove the condition for private companies having paid up share capital of fifty lakhs rupees or less and average annual turnover during the relevant period of two crore rupees or less for converting into OPC.
Form INC.5 which provided for notice to the Registrar informing that the OPC has ceased to be a OPC on account of increase in the threshold limit of paid up share capital and average annual turnover, has been omitted and Form INC. 6 which is the application for conversion of private company into OPC has been substituted.
To refer to the notification dated 1 February 2021 of Companies (Incorporation) Second Amendment Rules, 2021, click here.
The Bar Council of India does not permit solicitation of work and advertising by legal practitioners and advocates. By accessing the Shardul Amarchand Mangaldas & Co. website (our website), the user acknowledges that:
The user wishes to gain more information about us for his/her information and use. He/She also acknowledges that there has been no attempt by us to advertise or solicit work.
Any information obtained or downloaded by the user from our website does not lead to the creation of the client – attorney relationship between the Firm and the user.
None of the information contained in our website amounts to any form of legal opinion or legal advice.
All information contained in our website is the intellectual property of the Firm.