Budget 2021: Compliance for one-person companies reduced

February 1, 2021

The Finance Minister of India, Nirmala Sitharaman, has announced in the Budget 2021 that the government have planned to reduce the compliances for one person companies (OPC). This would help in promotion of the entrepreneurship and innovation in India.

Highlights

The One Person Companies (OPC) are the companies that are having only one member and shareholders.
In such companies, there is lesser requirement of the regulatory frameworks.
This concept of OPC is new in India but, such companies are quite popular in other markets like US, Europe and Singapore.

How this announcement is significant?

Most of the start-ups in India have multiple shareholders. The start-ups usually comprise of some angel or co-founders.
The recent announcement made during the budget, will encourage the One Person Companies structure in India.
As per the announcement, these companies would also be allowed to grow without any restriction on paid up capital and turnover.
These companies will further be allowed to convert themselves into any other type of company at any time.
The residency limit for an Indian citizen to set up an OPC have also be reduced from 182 days to 120 days. This would help in incorporating more OPCs in India.
This announcement is also significant for the NRIs who wants to set up their Start-ups in India. Earlier, NRIs were not allowed to set up OPCs. But the recent announcement will encourage them to set up OPCs with less compliance requirements.

Start-ups in India

The Indian government has recognised some41,061 start-ups in India, as of now. This sector is growing rapidly in India with the emergence of more and more unicorns in the market. There are around 38 unicorns in India and at least 12 start-ups were added to the list in the year 2020.

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