Companies (Incorporation) 2nd Amendment Rules 2021

The Ministry of Corporate Affair (MCA) has notified the

Companies (Incorporation) 2nd Amendment Rules, 2021 to further amend the Companies (Incorporation) Rules, 2014. With this notification, MCA amends the provision related to the conversion of One Person Company to into a Public Company or a Private Company and rule 7 related to Conversion of 1 into One Person Company. This new rule shall come into force on 1st April 2021. The Companies (Incorporation) 2nd Amendment Rule is briefly explained in the present article.

Amendment in Rule 3 – One Person Company

Only a natural person who is an Indian citizen whether resident in India or otherwise shall be eligible to incorporate a One Person Company
Only a natural person who is an Indian citizen whether resident in India or otherwise shall be a nominee for the sole member of a One Person Company

Note: Resident in India means a person who has stayed in India for a period of not less than one hundred and twenty-two days during the immediately preceding one calendar year

No person will be eligible to incorporate more than a One Person Company or become nominee in more than one such company.
No minor shall become member or nominee of the One Person Company or can hold share with beneficial interest. Such Company cannot be incorporated or converted into a company under section 8 of the Act and Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate. N
No company can convert voluntarily into any kind of company unless two years have expired from the date of incorporation of One Person Company, except threshold limit (paid-up share capital) is increased beyond fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees

Amendment in Rule 6 – Procedure to Convert One Person Company into a Public Company or a Private company

According to the Companies (Incorporation), 2nd Amendment Rules 2021, the One Person Company can alter its memorandum and articles (MOA) by passing a resolution following section 122 of the Companies Act to give effect to the conversion and to make necessary changes incidental.

Condition to Convert One Person Company into a Private or Public Company

A-One Person company can be converted into a Private or Public Company, other than a company registered under section 8 of the Act by following the conditions mentioned here:

After increasing the minimum number of members to two or seven
After increasing the minimum number of directors to two or three
The one person company need to maintain the minimum paid-up capital as per the requirements of the companies act and by making due compliance of section 18 of the Companies act for conversion.

Application for Converting One Person Company into a Private or Public Company

The company need to apply e-Form No.INC-6 for its conversion into Private or Public Company, other than under section 8 of the Companies Act, along with fees as in the Companies (Registration offices and fees) Rules, 2014. E-Form No.INC-6 is attached here for reference:

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Documents Required

For converting the one Person Company into a Private or Public Company, the applicant needs to submit the following documents:

Altered Memorandum of association (MOA) and Articles of association (AOA)
Copy of resolution
The list of proposed members and its directors along with consent
List of creditor
The latest audited balance sheet and profit and loss account

On being satisfied that the requirements stated have been complied with, the Registrar shall approve the form and issue the Certificate.

Amendment in Rule 7 - Conversion of Private Company into One Person Company

According to Companies (Incorporation), 2nd Amendment Rules 2021, a private company other than a company registered under section 8 of the Act can convert itself into one Person Company by passing a special resolution in the general meeting.

Before passing such resolution, the company needs to obtain No objection in writing from members and creditors.
The one person company needs to file a copy of the special resolution with the Registrar of Companies within thirty days from the date of passing such resolution in Form No. MGT.14.

Application for Conversion

The company need to apply Form No.INC.6 for its conversion into One Person Company along with fees as provided in the Companies (Registration offices and fees) Rules, 2014, by attaching the following documents:

Documents Required

The company needs to attach the following documents for the Conversion of private company into One Person Company:

The directors of the company shall give a declaration by way of an affidavit duly sworn in confirming that all members and creditors of the company have given their consent for conversion
The list of members and list of creditors
The latest audited Balance Sheet and the Profit and Loss Account
The copy of No Objection letter of secured creditors

On being satisfied and complied with requirements the Registrar shall issue the Certificate.

Click here to know more about official notification pertaining to the Companies (Incorporation) 2nd Amendment Rules 2021.

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Frequently Asked Questions

Common questions about Companies (Incorporation) 2nd Amendment Rules 2021 Guide.

The main purpose of the Companies (Incorporation) 2nd Amendment Rules, 2021 is to amend the provisions related to the conversion of One Person Company into a Public Company or a Private Company, and the conversion of a Private Company into a One Person Company.

Only a natural person who is an Indian citizen, whether resident in India or otherwise, is eligible to incorporate a One Person Company. A person is considered a resident in India if they have stayed in India for at least 122 days during the immediately preceding calendar year.

No, according to the amended rules, a minor cannot become a member or nominee of a One Person Company or hold shares with beneficial interest.

No, the amended rules state that a One Person Company cannot be incorporated or converted into a company under Section 8 of the Companies Act, which deals with companies formed for charitable or other specific purposes.

A One Person Company cannot voluntarily convert into any other type of company unless two years have elapsed from the date of its incorporation, except if its paid-up share capital exceeds fifty lakh rupees or its average annual turnover during the relevant period exceeds two crore rupees.

To convert a One Person Company into a Private or Public Company, the company must increase its minimum number of members and directors as per the requirements, maintain the minimum paid-up capital, and make due compliance with Section 18 of the Companies Act. The company must then apply through e-Form No. INC-6, attaching the required documents.

When converting a Private Company into a One Person Company, the company must attach an affidavit from the directors confirming consent from members and creditors, a list of members and creditors, the latest audited financial statements, and a copy of the No Objection letter from secured creditors.

No, according to the amended rules, a One Person Company cannot carry out Non-Banking Financial Investment activities, including investment in securities of any body corporate.

A Private Company can convert itself into a One Person Company by passing a special resolution in a general meeting, obtaining written consent from members and creditors, and filing a copy of the resolution with the Registrar of Companies within 30 days. The company must then apply through Form No. INC-6, attaching the required documents.

The Companies (Incorporation) 2nd Amendment Rules, 2021, provide clarity and updated regulations for the conversion of One Person Companies into other types of companies and vice versa, streamlining the process and enhancing compliance with the Companies Act.