Impact of financial budget 2021-2022 on the provisions of Companies Act, 2013

“You can’t go back and change the beginning, but you can start where you are and change the ending” – C.S. Lewis

Amendments under Companies Act, 2013 due to the Financial Budget of 2021-22

1.  The decriminalizing of the procedural and technical compoundable offences under the Companies Act, 2013, is now complete. I now propose to next take up decriminalization of the Limited Liability Partnership (LLP) Act, 2008.

Impact of Amendment:- The Government plans to decriminalize 12 compoundable offences under the LLP Act, 2008 and remove the section 73 of the Act.

Section 73:- Penalty on non-compliance of any order passed by Tribunal.- Whoever fails to comply with any order made by the Tribunal under any provision of this Act shall be punishable with imprisonment which may extend to six months and shall also be liable to a fine which shall not be less than fifty thousand rupees. (Now this section has been deleted from LLP Act, 2008)

 

2.    Sir, I propose to revise the definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid up capital from “not exceeding `50 Lakh” to “not exceeding `2 Crore” and turnover from “not exceeding `2 Crore” to “not exceeding `20 Crore”. This will benefit more than two lakh companies in easing their compliance requirements.

 

Firstly we have to read the definition of Small Company which is given under section 2(85)

 

“Small Company” means a company, other than a public company-

(i) paid up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees,

And

(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees.

 

Provided that nothing in this clause shall apply to—

 

(A) a holding company or a subsidiary company;

(B) a company registered under section 8; or

(C) a company or body corporate governed by any special Act;

3.    As a further measure which directly benefits Start-ups and Innovators, I propose to incentivize the incorporation of One Person Companies (OPCs) by allowing OPCs to grow without any restrictions on paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non Resident Indians (NRIs) to incorporate OPCs in India.

 

Impact of these amendments:

 

Point1:-

Before this amendment there are two ways of conversion of One Person Company (OPC) into Private Limited Company:

 

1.    Voluntary Conversion

2.    Mandatory/Compulsory Conversion

 

This is a condition where you need to convert an OPC to private limited company compulsorily. If-

 

(a) paid up share capital of OPC exceeds Rs. 50 lakhs and

 

(b) the yearly turnover of immediately previous three consecutive financial years is more than 2 Crores rupees,

 

then it is obligator to convert the OPC into a private or public limited company within a period of 6 months from the date when the above two limit has been exceed by OPC.

 

Note:- Now this limit has been withdrawn by the Government and due to this amendment an OPC can convert into Private or Public Limited form without any restriction. It means voluntary conversion is still allowed and now there is no requirement of compulsory conversion of an OPC into Private or Public Limited Company.

 

          Point 2:-

 

Section 3 of Companies Act, 2013 read with Rule 3 & 4 of Companies (Incorporation) Rules, 2014.

 

Only a natural person who is an Indian citizen and resident in India can be member and nominee of an OPC.

 

Note:- Now an Indian citizen who reside in India 120 days can form an One Person Company (OPC). Earlier requirement was of 182 days instead of 120 days. And before the amendment NRIs not allowed to form an OPC in India. But now NRIs allowed operating One Person Companies in India.

4. To ensure faster resolution of cases, NCLT framework will be strengthened, e-Courts system shall be implemented and alternate methods of debt resolution and special framework for MSMEs shall be introduced.

5.  During the coming fiscal 2021-22, we will be launching data analytics, artificial intelligence, and machine learning driven MCA21 Version 3.0. This Version 3.0 will have additional modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management.

 Following are the Key features of MCA 21 Version 3.0:

ü  E-Scrutiny

ü  E-adjudication

ü  E-Consultation

ü  MCA Lab

ü  Chatbot enabled helpdesk

ü Compliance Management System (CMS)

 

Author:- Author of this Article is CS Vinay Pandey

About CS Vinay Pandey:-  CS Vinay Pandey is Associate Member of Institute of Company Secretaries of India and Law Graduate from VBSPU, Jaunpur.  He is Co-Founder of Professional Study Point and faculty of Financial Management Paper of CS Professional Programme.

CS Vinay Pandey

(Company Secretary & Writer)

(CS, LLB, B.Com)

cs.vinaypandey@gmail.com  

Mob/Whatsapp: 9911473074

 

Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at cs.vinaypandey@gmail.com