MCA amends definition of small companies, allows NRIs to incorporate One Person Companies

The ministry of corporate affairs (MCA) amended the Companies Rules to revise the definition of a small company and to allow non-resident Indians (NRIs) to incorporate one person companies (OPCs) in India.

The changes, announced by finance minister Nirmala Sitharaman during her budget speech on Monday, will come into effect from April 1, according to the notifications.

“Paid up capital and turnover of the small company shall not exceed rupees two crores and rupees twenty crores respectively,” the notification said.


The previous definition was based on thresholds defined by the Companies Act which mentioned a maximum paid up capital of Rs 50 lakh and turnover of Rs 2 crore for the immediately preceding fiscal.

Amendments to the Act in 2018, contained provisions for increasing the paid up capital and turnover thresholds for small companies up to Rs 10 crore and Rs 100 crore, respectively.

The move is expected to lighten the compliance burden of about 200,000 companies, Sitharaman had said.

With regard to OPCs, the amendment has substituted the words “whether resident in India or otherwise” to the clause that earlier stipulated that only an Indian resident could incorporate an OPC.

The notification also reduced the number of days a person has to stay in India to qualify as a resident as per these rules to 120 days of the previous year, from 182 earlier.

Further, the MCA allowed voluntary conversion of OPCs to a private or public company, subject to the minimum requirements of board members and paid up capital as prescribed by the Companies Act.

The finance minister had said the move would benefit startups. Experts felt the move would augment investments from NRIs while incentivising more unorganised sector players to conduct their businesses through a legally set up entity.