While presenting the Union Budget 2021, finance minister Nirmala Sitharaman on Monday said that it proposes to incentivise incorporation of one person companies (OPCs). She added that the non- resident Indians (NRIs) will also be allowed to incorporate OPCs in India.
One person company (OPC) means a company formed with only one (single) person as a member, unlike the traditional manner of having at least two members to form a company.
Announcing the scheme, finance minister said "incorporation of OPCs will be incentivised by allowing such companies to grow without restriction on paid up capital and turnover, allowing 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 allow also non-resident Indians to incorporate OPCs in India".
The move will benefit startups and innovators and will also help NRIs with entrepreneurial potential to enter the Indian market.
"This will be a big boost for startups," Sitharaman said while presenting the first paperless Union Budget.
In India, the induction of OPC was given in the Dr J.J Irani Committee report dated May 31, 2005. The very essential of an OPC until now was that the member and nominee have to be a resident of India, which means that they should have stayed in India for more than 182 days during the immediately preceding one calendar year. This has now been reduced to 120 days, thus easing the entry of the Indian diaspora into the market.
{{/usCountry}}In India, the induction of OPC was given in the Dr J.J Irani Committee report dated May 31, 2005. The very essential of an OPC until now was that the member and nominee have to be a resident of India, which means that they should have stayed in India for more than 182 days during the immediately preceding one calendar year. This has now been reduced to 120 days, thus easing the entry of the Indian diaspora into the market.
{{/usCountry}}According to the Companies Act, 2013, if the paid-up share capital limit of the OPC exceeds the prescribed limit (currently ₹50 lakh) or turnover exceeds ₹2 crore in three years preceding consecutive years, then the company shall lose its status as an OPC and shall be required to compulsorily convert to either to a private company or public company.
The budget has changed this requirement also as OPCs will be allowed to grow without any restriction on paid up capital and turnover, allowing conversion into any other type of company at any time.