In the Union Budget presented by India’s Finance Minister Nirmala Sitharaman on 1st February 2021, few key proposals have been given to support the Corporates and the compliance regime which as follows:
- New version of MCA21 3.0 will be launched during the year 2021-22 which will include data analytics, artificial intelligence, machine learning as well as additional modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management.
- The definition under the Companies Act, 2013 for Small Companies is revised by increasing their thresholds for Paid-up capital from “not exceeding `5 million” to “not exceeding `20 million” and turnover from “not exceeding `20 million” to “not exceeding `200 million” to benefit small companies in managing their compliance requirements.
- Non-Resident Indians (NRIs) will be allowed to incorporate One Person Company (OPC)s in India. The residency limit for an Indian citizen to set up an OPC is also proposed to be reduced from 182 days to 120 days.
- Finance Minister proposed to remove the restriction on paid-up capital (presently 5 million) and turnover (presently average annual turnover of 20 million in preceding three consecutive financial years). OPC will also be allowed to convert itself into any other type of company at any time (presently OPC is mandated to convert itself into a private or public company upon crossing the threshold)
- Similar to the Companies Act, 2013 the decriminalization of the offences under the Limited Liability Partnership (LLP) Act, 2008 will be launched which will benefit the non-compliant LLPs.
- It is also proposed to strengthen the National Company Law Tribunal (NCLT) framework by introducing the e-Courts system and alternate methods of debt resolution to ensure faster resolution of cases.
- The alternate methods of debt resolution and special framework for Micro, Small & Medium Enterprises (MSMEs) shall also be introduced.
The proposals have received positive reactions from the corporate sector. The corporate sector and professionals are now looking forward to the new version of the MCA portal. Decriminalizing offences under LLP law is necessary to bring the structure at par with a private limited company. An increase in the CSR applicability threshold or reduction in the % of contribution would have been a welcome move for corporates that are facing a cash crunch due to pandemic related business disruptions.