With the intent to benefit start-ups and small businesses, the Finance Minister announced several measures to promote ease of doing business for One Person Company which includes the following key amendments:
- Incorporation of One Person Company (OPC): The Budget made space for easing norms for setting up of One Person Company by scrapping the minimum capital requirement of INR 1 Lakh for setting up an OPC. Earlier, only Indian resident citizens were allowed to form one person companies in India. Non-resident individuals with entrepreneurial potential are now enabled to set up One Person Companies (OPC) with no paid up capital and turnover restrictions, reducing registration timeline from 182 days to120 days.
- No mandatory conversions: Prior to the amendment OPCs were required to mandatorily convert into public or private company if the paid-up share capital of the OPC exceeded fifty lakh rupees or its average annual turnover during the immediately preceding three consecutive financial years exceeded two crore rupees. However, with the amendment, the mandatory conversion has been done away with, which means, if the OPC crosses the thresholds it would still continue to be an OPC.
- No lock-in period for Conversion: Prior to the amendment, OPCs could be voluntarily converted into public or private company only after two years from the date of incorporation. The amendment has removed this two year waiting period, thus enabling early conversions.
- Changes in limit for determination of residential status: Prior to the amendment, in order to incorporate an OPC, a citizen of India in order to be considered ‘resident in India’ should have stayed in India for a period of not less than one hundred and eighty two days during the immediately preceding financial year. The amendment has now reduced the limit for determining residential status from one hundred and eighty two (182) days to one hundred and twenty (120) days.