Finance Minister Nirmala Sitharaman unveiled the new amendments to the Companies Act, 2013 (CA, 2013) during the presentation of the Union Budget 2021.
These amendments now permit anyone, “whether resident in India or otherwise,” to incorporate an OPC in India, allowing Non-Resident Indians (NRIs) to set up their company with sole ownership and independent of an Indian company director.
MPVD & Associates explains the amendment’s specifics and the advantages of the new Tax rule for NRIs and foreigners.
What Is Special About A One-Person Company (OPC)
The One Person Company (OPC), in contrast to the conventional method of requiring at least two members to incorporate a company, gives a single person the authority to establish a private limited company in India. It not only makes the company incorporation process more affordable, but it also requires fewer prerequisites, time, and complexity.
What Are The Benefits of Incorporating An OPC as an NRI or Foreign Citizen
Although there were no strict requirements to start an OPC, the Companies Act of 2013 stipulated that the OPC’s only member must be an Indian citizen and resident. This would imply that they were not included in the scope of creating an OPC in India.
Previously, NRIs could only be a part of a private limited company or private company which required at least 2-3 directors and 2-3 shareholders, and at least one director needed to be an Indian resident Moreover, there were stages to attest an NRI’s Indian ancestry to register a company in India. The evidence and documents were mandatorily authenticated by the Indian embassy or a notary public.
But things are now changing, with many of the rules being relaxed. NRIs can enjoy the following benefits for setting up an OPC in India:
- Incorporate a separate legal entity status for the member, relieving them of all personal responsibility for any company losses.
- Increase paid-up capital and turnover without restriction
- Establish an organization single-handedly, without any partners.
- Be able to convert the company into any other type of company, such as a Pvt. or Ltd.
- Fundraising gets easier with eligibility to get venture capital and angel investment as well as receiving grants and loans from organizations and banks
- Reduce the residency requirement for NRIs, same as for Indian citizens, to establish an OPC in 120 days rather than 180 days.
- There is no rigid requirement for bookkeeping or having a company secretary or annually compiling cash flow statements. The NRI company director merely needs to timely sign the annual returns. And that’s it.
The Indian government is more open to welcoming NRI entrepreneurs to enter the Indian market by making company incorporation easier, cheaper, and more provisional in India.
This amendment is aimed at bringing forth more and more prospective and revolutionary startups and innovations to prominence for the welfare of society with a global outlook.
How It OPCs Would Work for NRIs and Foreign Nationals
Permitting such businesses to expand without limitations on paid-up capital and turnover, as well as allowing conversion into any other type of company at any moment, will boost the incorporation of OPCs in India.
OPC is a unique kind of company formation in India that is more functional for startups searching for small-scale incorporation to get started and run a small business with limited liability.
Incorporation is quite simple. The Ministry of Corporate Affairs (MCA) released the SPICe form, also known as Form INC-32, which makes things more cohesive. You can get in touch with MPVD & Associates CA firm in Kolkata to guide you with the prerequisites and arrange the documents. NRIs would need the following things to set up an OPC in India:
- Digital Signature Certificate (DSC)
- Director Identification Number (DIN) of the Director as proposed in the SPICe Form
- A unique company name that can be approved in the SPICe+ application
- The Memorandum of Association (MoA)
- Articles of the Association (AoA)
- Pan Card
- Address Proof
- A company nominee
- The minimum authorized capital worth INR 1 Lac
Things That One-Person Company Owners Cannot Do
While it sounds good to start alone with limited liability, you must note that neither NRIs nor Indian residents can have more directors in an OPC, and it always has to be run by that one person who incorporated it.
OPC cannot gain additional shareholders or members to raise more money. So, when you are ready to grow your business and hire more people, you must convert it into a private limited company or a public limited company.
Finally, be aware that OPCs cannot carry out non-banking financial activities like buying corporate securities. It cannot be changed into a business with altruistic goals.
If you are an NRI looking to set up a company in India, then contact MPVD & Associates for a more guided roadmap and personalized insights for industry-specific queries.