The Union Budget 2021-2022 presented in parliament today ( 01/02/2021) aims to catalyze central government’s efforts to rest the already contracted economy due to covid-19 pandemic . ‘This Budget provides every opportunity for our economy to raise and capture the pace that it needs for sustainable growth.’ With this perspective, the central government proposes the following on company matters:
1.Decriminalization of offences /defaults under Limited Liability Partnership (LLP) Act, 2008 which involves only technical and procedural lapses. ( This is in accordance with the suggestion contained in the report of Company Law Committee on Decriminalization of the Limited Liability Partnership Act, 2008 dt. 04/01/2021.);
2. Revision of definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid up capital from “not exceeding `50 Lakh” to “not exceeding `2 Crore” and turnover from “not exceeding `2 Crore” to “not exceeding `20 Crore”. This will benefit more than two lakh companies in easing their compliance requirements. ( There are a lot relaxations for small companies under the Companies Act, 2013 in comparison with other companies : need to hold only minimum two board meetings in a financial year , need not include cash flow statement in the annual financial statement , need not get pre certification of e-forms etc.);
3. Widening the extent of the concept and constitution of One Person Companies (OPCs) :As of now the paid-up share capital of a One Person Capital should not exceeded rupees fifty lakhs and average annual turnover during the period of immediately preceding three consecutive financial years shall not exceed rupees two crores. If any of these thresholds are breached , One Person Company (OPC) is mandatorily required to convert itself into either a private or a public company. Besides, only a resident Indians can form One Person Companies (OPCs). As a further measure which directly benefits Start-ups and Innovators, the government incentivize the incorporation of One Person Companies (OPCs) by allowing OPCs to grow without any restrictions on paid up capital and turnover, allowing their conversion into any other type of company at any time, reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allow Non Resident Indians (NRIs) to incorporate OPCs in India;
5. Strengthening of NCLT framework: ‘To ensure faster resolution of cases, NCLT framework will be strengthened, e-Courts system shall be implemented and alternate methods of debt resolution and special framework for MSMEs shall be introduced’; and
6. MCA21 Version 3.0: During the coming fiscal 2021-22, the government will be launching data analytics, artificial intelligence, machine learning driven MCA21 Version 3.0. This Version 3.0 will have additional modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management.