One Person Company (OPC): Recent Changes in Budget

As proposed in Budget Speech in respect of amendment in the provision of One Person Company. MCA has introduced “Companies (Incorporation), Second Amendment Rules, 2021 on 1st February 2021.

Most Important: Amendment in Process of Conversion of One Person Company to Private/ Public Company

Date of Effectiveness of these rules:

[1] These rules came into effect on 1 April 2021

Key Amendments:

  • A person other than a resident in India can incorporate OPC in India
  • A person who stays in India for 120 days in the preceding financial year shall be considered a resident in India for purpose of OPC.
  • No need to convert OPC to other types of companies, even reaching on turnover of 2 crores or more.
  • OPC can be converted into other types of companies any time after incorporation at the discretion of Promoters. 

INCORPORATION OF OPC- AMENDMENT IN RULE 3:

First amendment: for the words, “and resident in India” the words “whether resident in India or otherwise” shall be substituted;

Only a natural person who is an Indian citizen and “Whether resident in India or otherwise” shall be eligible to incorporate One Person Company.

Also Read: Companies Amendment Act 2020: Notified Sections

Impact: Earlier only Indian resident was allowed to incorporate OPC in India, now person other than a resident in India can incorporate OPC in India.

Second amendment: in Explanation 1, for the words “one hundred and eighty-two days” the words “one hundred and twenty days” shall be substituted;

 Explanation – 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.

Impact: After this amendment, if a person stays in India for 120 days instead of 182 shall be considered a resident in India for the purpose of One Person Company. 

Third amendment: As per Rule 3(7) OPC can’t convert into another type of company before the expiry of 2 years from its incorporation.

This rule has been OMITTED.

Fourth amendment: Rule 6 in relation to the Process of Conversion of OPC to Private/ public has been completely substituted and the new process is introduced by the MCA.

Full fledge New process of conversion of OPC into Private/ public company shall be published in next article i.e. editorial no 656.


Disclaimer: The entire contents of this document have been prepared based on relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, I assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a piece of professional advice and is subject to change without notice. I assume no responsibility for the consequences of the use of such information.

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