Budget 2021 – Changes in Corporate Laws

Decriminalising LLP Act

The Government has announced that it shall now take up Limited Liability Partnership Act and decriminalize its various provisions to remove harsh provisions for minor offences and enhance ease of doing business. Earlier, the Government had taken up the Companies Act for decriminalizing and the same has been completed.

Definition of Small Companies extended to cover more companies

Small companies are presently defined to be companies with paid up capital INR 50 lakh and turnover up to INR 2 crore. Thereby, various exemptions and benefits are available to such companies. The Government has announced that the thresholds are now revised to INR 2 crore paid up capital and INR 20 crore turnover for small companies. The move is aimed to benefit approximately two lakh companies in India.

Restrictions on One Person Company (OPC) lifted

Government has announced that one person companies shall now be free to introduce any amount of paid up capital and transact for any amount of sales turnover, the restrictions are being lifted. Presently, if the paid up capital or turnover exceeds the limit, mandatory conversion to a Private Limited Company is specified. Now, OPCs can convert into any other form, at any point of time, at the choice of the entrepreneur.

Residency for One Person Company reduced to 120 days

For the purposes of forming one person company, the director must be Indian citizen living 182 days in India. This limit is now being reduced to 120 days. Thereby, the Non-Resident Indians (NRIs) can also incorporate OPC in India.

E-courts for National Company Law Tribunal (NCLT)

To ensure faster resolution of cases, the NCLT shall now set up e-Courts system and develop alternate methods for debt resolution and special framework for MSMEs.

MCA21 3.0 to be launched

Ministry of Corporate Affairs (MCA) shall be launching machine learning based MCA21 version 3.0 to enable e-Scrutiny, e-Adjudication, e-Consultation and Compliance Management, as per announcement.

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