Union Budget 2021: Amendments proposed in existing Laws

Last year witnessed some significant changes in the existing laws. To simplify the laws and facilitate ease of doing business, 29 Labour Laws got consolidated into four Labour Codes. The government carried out the decriminalisation of the Companies Act, 2013. On 1st February 2021, the Finance Minister, Nirmala Sitharaman stated in the Union Budget that the decriminalisation of Companies Act, 2013 is complete. She also noted that there would be the implementation of the four Labour Codes this year.

The Union Budget 2021 has proposed several amendments in the current laws. The changes proposed in the existing laws are as follows –

Consolidation of Securities Act into single Securities Code

One significant amendment proposed in the Union Budget 2021 is the consolidation of four Securities Act into a single Securities Market Code. The government will consolidate the SEBI Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a single rationalised Securities Markets Code. SEBI (Securities Exchange Board of India) will be the gold exchange regulator.

Decriminalisation of Limited Liability Partnership (LLP) Act, 2008

The Finance Minister proposed to take up the decriminalisation of the LLP Act, 2008. The Government will carry out the decriminalisation of the LLP Act similar to the Companies Act in the procedural and technical compoundable offences under the LLP Act.

Amendment in the definition of ‘Small Companies’

The Finance Minister proposed an amendment in the definition of ‘Small Companies’ under the Companies Act, 2013. The Companies Act defines small companies as companies having paid-up share capital which does not exceed Rs.50 lakh. It is revised, and there will be an increase in the paid-up share capital limit from not exceeding Rs.50 lakh to not exceeding Rs.2 crore. 

The turnover limit of small companies should not exceed Rs.2 crore as per the present Companies Act. The government will increase the turnover limit from not exceeding Rs.2 crore to not exceeding Rs.20 crore. The revised definition of small companies will benefit more than two lakh companies.

Revisions in ‘One Person Company’ rules

The Finance Minister proposed to incentivise the incorporation of One Person Companies (OPCs). There will be no restrictions in the paid-up capital and turnover of OPCs. They can convert into any other type of company at any time without any restriction. The Government will amend the law relating to OPCs to allow the NRI’s (Non-Resident Indians) to incorporate OPCs in India. There will be a reduction in the limit of Indian citizens’ residency period from 182 days to 120 days for individuals who wish to set up an OPC. These amendments will directly benefit startups and innovators.

Strengthening the NCLT framework

The National Company Law Tribunal (NCLT) framework is strengthened to ensure faster resolution of company cases. There will be an implementation of the e-court system and alternate methods of the debt resolution system. The Finance Minister also proposed for an introduction of a special framework for MSMEs.

Launch of MCA21 Version 3.0

The Government will launch MCA21 Version 3.0, which will have data analytics, artificial intelligence and machine learning. This upgraded version will have the additional modules for e-Adjudication, e-Security, e-Consultation and Compliance Management.

The proposed consolidated Securities Market Code will reduce the complications and simplify the Securities Act. The single Securities Market Code will ensure ease in following compliances. The proposed revision in the definition of paid-up capital and threshold limits of the ‘Small Companies’ will benefit and cover more companies under its definition.  

The changes proposed in the law relating to OPCs will promote startups and entrepreneurs. The relaxation of rules concerning the OPCs will encourage its incorporation. The proposal to the decriminalisation of LLP’s will help to ease the business of the LLP. Thus, the amendments in the existing laws will significantly benefit the companies for carrying out their business.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in