Budget 2021 relaxes threshold for Small Companies and allows NRIs to form One Person Company [Read Finance Bill]

Budget 2021 - threshold for Small Companies - NRIs - One Person Company - Taxscan

The Union Budget 2021 has proposed to amend the definition of small companies under the Companies Act, 2013. As per the new definition, small companies means a company that has paid-up share capital of not more than 2 crores. Earlier this paid-up capital was caped at 50 lakhs. The threshold of Annual Turnover has also been raised from 2 crores to 20 crores.

A small company is a Private company that has a limited area of operation. It has fewer number of employees and the Companies Act, 2013 has provided for certain benefits for small companies. Some of the benefits are:

  • A Small company needs to hold only 2 Board Meetings in a calendar year, whereas other companies are required to hold 4 Board Meetings.
  • The Annual Return can be signed by Company Secretary alone or in case of no Company Secretary, by a single director.
  • No need to maintain a Cash Flow Statement as part of its Financial Statements.
  • No need to report internal Financial controls and the operating efficiency of the company.
  • Lesser Penalties as compared to every other company.

NRIs allowed to form One Person Company.

The Annual Budget 2021 proposes to allow the NRIs to form One Person Company (OPC). Earlier the NRIs were exempted from forming One Person Company. However, they were allowed to become directors of an Indian company.Only resident Individual persons could start the One Person Company (OPC) in India. This new proposal would undoubtedly benefit many NRIs.

As per Section 2(62) of the Companies Act defines a one-person company as a company that has only one person as to its member. Furthermore, members of a company are nothing but subscribers to its memorandum of association, or its shareholders. It is effectively a company that has only one shareholder as its member. Companies Act provides certain benefits to the one person companies like – No need to hold annual meetings, no independent directors required, more remunerations to directors compared to other companies.

Subscribe Taxscan Premium to view the Judgment

Support our journalism by subscribing to Taxscan AdFree. We welcome your comments at info@taxscan.in

taxscan-loader