Companies (Incorporation) Second Amendment Rules, 2021, notified by MCA

MCA notifies the Companies (Incorporation) Second Amendment Rules, 2021, applicable w.e.f. 01/04/2021, to amend rules relating to One Person Companies (OPCs), for covering the following situations:

a) Previously NRIs were not allowed to incorporate OPCs. Now any natural person, who is an Indian citizen, whether resident in India or otherwise would be allowed to form an OPC.

b) For being considered as a resident in India, the residency period has been proposed to be reduced to 120 days from 182 days for NRIs.

c) Rule relating to voluntary conversion unless OPC has completed two years from the date of incorporated is proposed to be omitted and with effect from 01/04/2021, Conversion of One Person Company into a Public company or a Private company shall be permitted anytime. 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 minimum of seven members and three directors as the case may be,

d) Similarly the limitation of Paid up capital & turnover presently applicable for OPCs (paid up share capital of fifty lakhs rupees and average annual turnover during the relevant period of two crore rupees) is being done away with so that there are no restrictions on the growth of OPCs in terms of their paid up capital & turnover.

e) Rationalization of e-forms applicable for OPCs by omitting e-Form No.INC-5 and modification of e-form INC-6 (application for conversion from OPC to a Private company or a Public company and also Private company to OPC.

As a measure which directly benefits Startups & Innovators in the country, especially those who are supplying products & services on e-commerce platforms, and in order to bring in more unincorporated businesses into the organized corporate sector, the incorporation of One Person Companies (OPCs) is being incentivized by amending the Companies (Incorporation) Rules to allow OPCs to grow without any restrictions on paid up capital and turnover, allowing 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 allow Non-Resident Indians (NRIs) to incorporate OPCs in India.

MCA Notification dt. 01/02/2021: Companies (Incorporation) Second Amendment Rules, 2021

G.S.R. 91(E).- In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Incorporation) Rules, 2014, namely:-

1. (1) These rules may be called the Companies (Incorporation) Second Amendment Rules, 2021.

(2) They shall come into force on the 1st day of April, 2021.

2. In the Companies (Incorporation) Rules, 2014,-

I. In rule 3,-

(a) in sub-rule (1),-

(i) for the words, “and resident in India” the words “whether resident in India or otherwise” shall be substituted;

(ii) in Explanation 1, for the words “one hundred and eighty two days” the words “one hundred and twenty days” shall be substituted;

(b) sub-rule (7) shall be omitted.

II. for rule 6, the following rule shall be substituted, namely:-

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 sub-section (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 and 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:-

(a) Altered MOA and AOA;

(b) copy of resolution;

(c) the list of proposed members and its directors along with consent;

(d) list of creditors; and

(e) the latest audited balance sheet and profit and loss account.

(4) On being satisfied that the requirements stated herein have been complied with, the Registrar shall approve the form and issue the Certificate.

III. in rule 7,-

(a) in sub-rule (1), the words “having paid up share capital of fifty lakhs rupees or less and average annual turnover during the relevant period is two crore rupees or less” shall be omitted.

(b) in sub-rule (4), in clause (i), the words “,the paid up share capital company is fifty lakhs rupees or less or average annual turnover is less than two crores rupees, as the case may be” shall be omitted.

IV. In the Annexure,

(a) the e-Form No. INC 5 shall be omitted.

(b) for the e-Form No INC-6, the following form shall be substituted, namely:-

e-FORM NO INC 6
[Pursuant to section 180/ the Companies Act,2013 and Rule 6 and 7(4) the Companies (Incorporation) Rules, 2014}
One Person Company and Private company- Application for Conversion
(..contd.. please refer above MCA Notification dt. 01/02/2021 for format)

[F. No. 1/13/2013 CL-V, Vol. IV]

Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 250(E), dated the 31st March, 2014 and last amended vide number G.S.R.44(E), dated the 25th January,2021.

MCA Updates (Company Law)
Company Law General Circulars, Notifications, Orders, etc. issued by the Ministry of Corporate Affairs (MCA), in different years:
MCA General Circulars: 2021, 2020, 2019, 2018, 2017, 2016
MCA Notifications: 2021, 2020, 2019, 2018, 2017, 2016, 2015
MCA Orders: 2020, 2019, 2018, 2017, 2016, 2015
IBBI Notifications: 2021
Note: For Official/ updated copy, please visit the MCA website.

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