NEW DELHI: With the one-person-company (OPC) concept not finding enough takers, the government is simplifying the registration procedure and reducing penalties to encourage small entrepreneurs to corporatise their businesses
Introduced in April 2014 under the new Companies Act, the OPC concept was seen as an enabling platform for entrepreneurs, especially IT startups, to corporatise their entities. But just 1,953 OPCs with collective authorised capital of Rs 44.83 crore applied until end-February
Harsh provisions in the law were widely seen as a key deterrent for small businessmen to convert their businesses from sole proprietorship to OPCs.
"Simplifying of process and toning down of penalties will definitely boost the number of OPCs in India," said Riaz Thingna, partner at consultancy firm Walker Chandiok & Co. Already OPCs have been granted exemptions such as option of not including cash flow statement in financial statements. Other measures such as relaxing the compliance and filing requirements are in the pipeline and will be notified soon, a senior government official said, speaking on the condition of anonymity. Earlier, .if an OPC or any of its executives contravened the provisions of the Companies Act, it was punishable with a fine of Rs 10,000 with a further Rs 1,000 per day if it didn't fix the problem. The penalty, as per the new company incorporation rules issued last week, has been reduced by 50%. "The penalty has been reduced to Rs 5,000 and the daily fine to Rs 500. New businesses take some time to understand the process. We need provide them that leeway. We'll also simplify the filing process as well to . give a boost to OPCs in India," the official said.
The new Companies Act made it legal to set up a company with just one director. The registration conditions include a paid-up capital of less than Rs 50 lakh and annual average revenue of not more than Rs 2 crore in three consecutive years preceding its incorporation.
Currently, in terms of economic activity, 1,063 OPCs are into business services.
