OPC company relaxations

MCA has vide their circular dated 1st February, 2021 given some relaxations with respect of One Person Companies (OPCs) in India. These are as follows:

  1. OPC can be incorporated by a natural person who is an Indian citizen and resident in India or otherwise. Which means even non resident Indians can incorporate an OPC.
  2. The term “resident in India” means any person who has stayed in India for 182 days or more is replaced with 120 days or more. But frankly this explanation of the term resident in India should have been knocked off once the government has decided to allow resident or non resident Indians to incorporate OPC. Poor drafting.
  3. Hitherto, OPCs cannot voluntarily convert itself into other forms of company i.e. normal private limited unless 2 years has passed since its incorporation or before this period of two years, it has crossed either of the two thresholds i.e. paid up share capital of Rs.50 lakhs and average annual turnover of Rs.2 crores. Now this has been knocked off, which means that OPC can convert itself voluntarily into a normal private company at any time without considering the time factor (2 years from incorporation) or the threshold factor as above.
  4. Hitherto, OPCs was required to mandatorily convert itself into a private limited company/ public limited company only if it exceeded certain thresholds such as paid up share capital of Rs.50 lakhs and turnover of Rs. crores. Now all that mandatory clause has been knocked off. So OPCs can voluntarily convert itself whenever it wants. Which means that OPCs can exist with whatever share capital or turnover it may have. The procedures have also been simplified. Form INC-6 is required to be filed with few documents required.
  5. Similarly, hitherto private company could be converted into an OPC only if its paid up share capital was less than Rs.50 lakhs and average annual turnover is less than Rs.2 crores during the relevant period. Now these limits have been removed which means that private companies can be converted into OPCs at any level.
  6. In some places, it is “or” and some places it is “and” – which suggests poor drafting;
  7. Ease of doing business for OPCs. But OPCs did not enjoy the recent CFSS scheme, which was extended to other corporates.

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