Key Takeaways: - New Gateway for NRIs - Elimination of time limit / threshold for conversion of OPC - OPCs in India

1. One Person Company – Recent
Amendments & Relaxations
CS Meenakshi Jayaraman

2. Research Credits
Iswariya BS

3. Legends Used
AOA Articles of Association
FY Financial Year
LLP Limited Liability Partnership
MOA Memorandum of Association
NRI Non-resident Indian
OPC One Person Company
ROC Registrar of Companies
w.e.f. with effect from

4. Presentation Schema
Gateway for NRIs
Removal of restriction on
Conversion of OPC into Private /
Public Company
Benefits & Limitations of OPCs Statistics

5. OPC

6. One Person Company
Companies Act, 2013 introduced the concept of OPC with 1 shareholder, 1
nominee and minimum of 1 director (either the shareholder himself or some
other person)
A natural person shall not be a member of more than 1 OPC and nominee
of more than 1 OPC at any point of time
Minor cannot become a member or nominee of OPC or hold shares with
beneficial interest
Restrictions:
It is prohibited to be incorporated or converted as a Section 8 Company
It cannot carry out Non-Banking Financial Investment activities including
investment in securities of any body corporate
Rationale of Amendments: To provide gateway for NRIs to enjoy the status of Company in India
and to provide relaxations in timelines for conversion

7. Amendments
w.e.f. 1st April, 2021

8. Gateway for NRIs

9. Gateway for NRIs
• Earlier provision:
• For incorporating an OPC in India, both the promoter and the nominee shall be a
citizen and resident in India
• Resident in India - who has stayed in India for a period of not less than 182 days
during the immediately preceding FY
• After amendment:
• For incorporating an OPC in India, both the promoter and the nominee shall be a
citizen of India and may or may not be resident in India
• Resident in India - who has stayed in India for a period of not less than 120 days
during the immediately preceding FY
• Analysis:
• Residency of the promoter or nominee is no longer considered as a criteria for incorporating
an OPC in India
• Number of days to become a resident is amended in line with Income Tax Act, 1961
Income Tax Act, 1961 – Amendment in Finance Act, 2020 – A citizen of India or a Person
of Indian origin will become a resident in India, if his stay in India is 120 days or more
(having total income other than income from foreign sources exceeding Rs.15 lakhs
during the FY) and for others it is 182 days or more (w.e.f. FY 2020-2021)

10. Removal of restriction on
Conversion of OPC into Private /
Public Company

11. • After amendment:
• Voluntary conversion: No time limit
• Mandatory conversion: Not applicable
Analysis:
• To encourage OPCs to scale up their business without any restriction or thresholds, the
amendment has been introduced
OPC Conversion
Earlier provision
Voluntary conversion: After 2
years from the date of
incorporation
Mandatory conversion: If,
•Paid up capital exceeds Rs.50 lakh
•Average annual turnover exceeds
Rs.2 crore

12. Legal aspects relating to Conversion
Alteration of MOA and
AOA of OPC by passing a
resolution
Conversion to either
Private or Public
Company
Increasing the number of
members or directors as
applicable to each type
of Company
Maintaining the
minimum paid-up-capital
as required under the Act
Filing of Form INC-6 with
ROC with necessary
annexures and fees
On being satisfied, the
ROC will issue Certificate
of Incorporation
• Mandatory attachments:
• Altered MOA and AOA
• Copy of resolution passed
• List of proposed members and directors along with their consent
• List of creditors and
• Audited Balance sheet and profit and loss account
• Form INC-5 – Intimation of exceeding threshold to ROC – will not apply
effective 1st April, 2021

13. Benefits & Limitations of OPCs

14. Advantages
Compliance burden: Requirement to hold number of meetings, rotation of auditors,
issue of general meeting notices, etc.
Easy incorporation and conversion procedures
A boon for start-up entrepreneurs with new business ideas

15. Limitations
Business activities: Prohibition to carry out Non-Banking Financial Investment activities
including investment in securities of any body corporates
Cannot be incorporated or converted as a Section 8 Company
Cannot raise funds from outsiders by way of issue of shares
Option for direct conversion into LLP is not available
Annual compliance procedures to be monitored and complied with

16. Rationale for conversion
OPC to Private / Public Company Private Company to OPC
Expansion of business transactions Declining revenue
Synergy with similar type of business Minimum compliance
For the purpose of raising additional
capital
Hybrid structure

17. OPCs in India

18. Sector wise OPC (Jan 2021 end)
Source: Ministry of Corporate Affairs
• Majority of the OPCs are engaged in Business services, followed by Community, Personal
and Social services, Manufacturing and Trading

19. OPCs v. Total Companies registered (in active)
Source: Ministry of Corporate Affairs
• OPCs are forming only less than a percent (0.21%) during the period ended 31st March,
2015 and 2.64% during the period ended 31st January, 2021 of the total no. of Companies
registered
• Thus, it is expected that ratio of the number of OPCs to the Total no. of Companies will
increase in the upcoming days as the criteria of residency is removed in the amendment

20. Newly incorporated OPCs and its authorised share capital
The chart clearly shows the increase in the no. of OPCs over the last 1 year and its authorized share capital
in relation to the total no. of OPCs
Source: Ministry of Corporate Affairs

21. Thank You!
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