Amendments to OPC Compliance Rules

The amendment of One-Person Company compliance is changing the way solo entrepreneurs handle their business responsibilities in India. As the business environment evolves, the Ministry of Corporate Affairs has made compliance simpler and more adaptable to help OPCs grow. These aren't just small adjustments—they reshape the entire compliance framework for OPCs under the Companies Act, 2013. In this blog, you will learn about amendments to One Person Company Compliance, its privileges, impact and more.

What are One Person Companies?

A One Person Company is a business structure introduced under section 2 (62) of the Companies Act, 2013. This allows single individuals to incorporate and operate a company with limited liability. This model provides the benefits of a corporate entity while simplifying the compliance requirements, which makes it an attractive option for solo entrepreneurs in India.

What is One-Person Company Compliance?

One-Person Company compliance refers to the set of legal and regulatory obligations that a single member company in India must fulfil to remain in a good position with the Ministry of Corporate Affairs (MCA) and other relevant authorities. Despite of simplified structure, an OPC is required to adhere to various compliance requirements under the Companies Act, of 2013.

Key Amendments to  One Person Company Compliance of 2021

The MCS introduced important changes in 2021 to make the One Person Company (OPC) regulations more flexible and supportive for business owners and entrepreneurs. Listed below are the key amendments to the One Person Company Compliance of 2021:

1. NRIs Can Now Start OPCs

Previously, only Indian residents were permitted to register an OPC. However, with the new amendment, even non-resident Indians (NRIs) can now form an OPC since they are considered Indian citizens. This amendment opens the door for Indian entrepreneurs residing abroad to start a business in India under the OPC model.

2. Reduced Residency Requirement

To be considered a resident in India, the minimum number of days has been reduced. Earlier, it was 182 days, however, now any Indian citizen who has stayed in India for at least 120 days during the financial year is considered a resident. With this amendment, the NRIs who are planning to set up an OPC in India can do so without staying long in the country.

3. Easy Conversion to Private or Public Company

Earlier, an OPC could not convert into a private or public limited company unless it had completed two years from the date of incorporation. This restriction has been officially eliminated. After the implementation of the amendment, an OPC can convert at any time into a private or public company. To convert to an OPC, you need to maintain. Listed below are the criteria for converting:

• You need at least two members and two directors for a private limited company.
• You need to have seven members and three directors for a public limited company.

However, companies registered under section 8 cannot convert in the manner stated above.

4. Removal of Capital and Turnover Limits

To support the growth and scalability of OPCs, the MCA has lifted earlier financial restrictions that were seen as a barrier to expansion. These limits often forced business owners to convert their OPC into a private or public company after they crossed a certain threshold. This, in turn, led to additional compliance and administrative burdens. Listed below are the previous financial limits of OPC:

• Rs. 50 lakh on paid-up capital.
• Rs. 2 crore as annual turnover.

After the amendment, these limits have been removed, and there is no specific turnover limit. With these changes in compliance, OPCs can now grow freely in terms of capital and revenue without the pressure to alter their legal structure. It enables entrepreneurs to focus on scaling their business while continuing to enjoy the benefits and simplicity of operation as a One-Person Company.

5. Changes in Filing Requirements

To reduce procedural complexities and streamline compliance for OPCs, the MCA has revised the filing requirements associated with company conversion and notifications. These updates aim to make regulatory processes more efficient and less time-consuming for OPC owners. Listed below are the key modifications to e-forms that are involved in this process:

• E-Form INC-5: Earlier this form was mandatory to inform the Registrar of Companies (RoC) when an OPC exceeds its turnover or capital limits. However, after the implementation of the 2021 amendment, the forms have been discontinued.
• E- Form INC-6: After the 2021 amendment, this form has been revised to accommodate multiple types of company conversion which also includes both the transformation of an OPC into a private or public company and the reverse process of converting a private company into an OPC.

Amendment of One Person Company Compliance post 2021

Listed below are the key amendments to One Person Company Compliance after 2021:

1.  Mandatory Inclusion of Nominee Details in the Memorandum

The Companies (Incorporation) Amendment Rules, 2023, effective from January 23, 2023, mandate that the name of the nominee for a One Person Company (OPC) must be explicitly stated in the company's Memorandum of Association (MoA). This amendment aims to enhance transparency and ensure clarity regarding succession planning within OPCs. The nominee's consent is to be submitted using Form INC-32 (SPICe+), accompanied by the applicable fee, as outlined in the Companies (Registration Offices and Fees) Rules, 2014.

2. Filing of Form CSR-2 for Companies Under CSR Obligations

The Companies (Accounts) Second Amendment Rules, 2023, introduced on June 2, 2023, require companies falling under the purview of Corporate Social Responsibility (CSR) provisions to file Form CSR-2 separately for the financial year 2022-2023. This form must be filed by March 31, 2024, after the submission of Form AOC-4. It's important to note that this requirement applies only to companies meeting the criteria specified under Section 135 of the Companies Act, 2013.

Privileges of Amendment of OPC Compliance

Listed below are the privileges of amendment of OPC compliance:

1. No Capital or Turnover Restriction for OPCs

The 2021 amendment removes the earlier limit of ?50 lakh paid-up capital and ?2 crore annual turnover for OPCs. This change allows OPCs to grow freely without the fear of forced conversion into private or public companies. It supports small business owners who want to scale without structural disruption. The amendment also reduces compliance pressure linked to turnover thresholds, which makes the business environment more flexible for OPC entrepreneurs.

2. NRIs Can Start an OPC in India

The 2021 reform allows Non-Resident Indians (NRIs) who are Indian citizens to start OPCs in India. Earlier, only resident citizens could do so. Now, any NRI who holds Indian citizenship can incorporate an OPC without meeting the 120-day residency requirement. This move encourages overseas Indians to invest in India, which in turn improves foreign participation and supports the government's goal of boosting start-ups through ease-of-doing-business reforms.

3.  Immediate Voluntary Conversion into a Private/Public Company

The earlier law requires OPCs to wait two years after incorporation before converting into a private or public company. The 2021 amendment removes this mandatory waiting period. Now, OPCs can convert anytime based on business goals. This flexibility helps entrepreneurs shift models quickly as per their growth strategy. It also allows startups to attract investors more easily by converting into larger structures whenever needed, without legal delays.

4. Simplified Compliance for OPCs

OPCs enjoy relaxed compliance compared to private limited companies. They do not need to hold annual general meetings or board meetings like multi-member companies. The compliance checklist becomes shorter, saving time and effort. The 2021 update continues this benefit, encouraging solo entrepreneurs to start legally registered companies without fear of complicated procedures. It also reduces cost burdens on founders during the early business stages.

5. Mandatory Mention of Nominee in MoA

The 2023 amendment makes it compulsory to mention the nominee's name in the Memorandum of Association (MoA) at the time of OPC incorporation. This change ensures legal clarity in case of the death or incapacity of the sole member. It improves succession planning and strengthens governance. The nominee's consent must be submitted using Form INC-32 (SPICe+), along with the applicable fees as per company rules.

6. Defined Procedure to Change Nominee

The 2023 update provides a clear procedure for changing the nominee after incorporation. The sole member must first get written consent from the new nominee through Form INC-3. Then, the company must file Form INC-4 within 30 days to inform the Registrar of Companies. This defined process ensures transparency and legal compliance. It removes ambiguity and makes it easier to manage nominee updates during the business journey.

7. Nominee Automatically Becomes Member on Owner’s Death

In case the sole member dies or becomes incapable, the nominee immediately becomes the new member of the OPC. This provision ensures business continuity and avoids legal complications during emergencies. The new member must nominate another person within 15 days. The company must then update this information with the Registrar within the next 30 days. The amendment improves stability and trust for stakeholders.

8. Nominee Has the Right to Withdraw Consent

The nominee in an OPC has the right to withdraw their consent at any time. If this happens, the sole member must nominate another individual within 15 days. The company must file the necessary forms with the Registrar within 30 days. This legal right protects the nominee and keeps the structure fair. It also ensures that the company remains compliant and transparent in case of changes in the nominee's consent.

Conclusion

To conclude, the amendments to One Person Company reshape the way solo entrepreneurs manage their businesses. They bring flexibility, clarity and new growth opportunities. With these changes, NRIs can start OPCs, financial limits no longer hold back expansion and nominee processes become clearer to protect business continuity. These updates make OPCs a strong and agile choice for India's emerging entrepreneurs.

Dealing with these changes can be overwhelming, Online Legal India offers the support you need to handle all compliance steps smoothly and accurately. Their expert team helps you stay on track with the law, so you can focus on growing your business.