Small businesses such as One Person Companies have one director or owner and far fewer employees in comparison to regular sized Companies and Businesses arrangement. Such a registered single-owner company generates lesser annual revenue than a regular-sized corporation. The latest amendments to the Companies Act in 2013 define the rules and provisions regarding such One Person Company Registration.
One Person Company is in a better place when filing compliances with the MCA compared. For instance, One Person Company must hold only two board meetings in a year, as per the MCA standards. At the same time, a regular company must hold four meetings within the same year.
Also, One Person Companies are not required to maintain their cash flow statement. They can get their annual returns signed by a Company Secretary or a single director.
MCA’s new amendment regarding One Person Company
The Ministry of Corporate Affairs has amended the Companies Act of 2013 by updating some rules in the Specification of Definitions DetailsRules section of 2014. This amendment came into force on April 1, 2021.
Paid-Up Capital Revision
The MCA, through this amendment, seeks to increase the current thresholds for paid-up Capital from “not exceeding Rs 50 lakh” to “not exceeding Rs 2 crore”.
Turnover Limit Revision
The MCA also increased the turnover limit from “not exceeding Rs 2 crore” to “not exceeding Rs 20 crore”.
One Person Company Definition Revision
This latest amendment revises the definition of One Person Companies by increasing the thresholds for paid-up Capital from “not exceeding Rs 2 crore” to “not exceeding Rs 4 crore”. The MCA has also increased the Company’s turnover from “not exceeding Rs 20 crore” to “not exceeding Rs 40 crore”.
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One Person Company: Benefits of Amendment
This latest revision with respect to the One Person Companies has turned advantageous for the Company’s owner in terms of filing compliances:
- OPC needn’t prepare and file a cash flow statement as part of their financial statements.
- OPC can prepare and file an Abridged Annual Return.
- The MCA doesn’t mandate a rotational audit of an OPC.
- An OPC’s Auditor needn’t report on the adequacy of its internal financial controls and operating effectiveness.
- An OPC can hold only two board meetings annually.
- An OPC can file their Annual Return signed by a Company Secretary. If there is no CS, the director of the OPC can authorize the returns.
- The MCA imposes far less severe penalties for One Person companies.
Intention of Amendment: Ease of Doing Business
As part of their latest drive, the Ministry of Corporate Affairs has been taking several initiatives toward Ease Of Doing Business. They want the incorporation and compliance of such a snipped model to become an easy process for living corporates.
Therefore, the MCA has decriminalized various provisions of the Companies and the Limited Liability Act. The Ministry has promoted the fast-track mergers of Companies with startups. They have also incentivized the incorporation of One Person Companies (OPCs).
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Government’s Aim
With this, the Government aims to create a conducive environment for running businesses by law-abiding companies. Therefore, they have reduced the compliance burden on the companies. Companies such as an OPC represent lakhs of citizens’ entrepreneurial aspirations and innovation capabilities. They significantly contribute to growth and employment in a city, town, or state. This latest revision was one such step towards this giant objective.
