The government proposes to strengthen the NCLT framework, implement the e-courts system and alternate methods of debt resolution and special framework for MSMEs.
This year’s budget was most-awaited because of what it could do to bring the economy back on track . The budget has addressed several key concerns and multiple other aspects, specifically from the perspective of providing ease of doing business in India and inviting more investments.
For startups, the tax holiday and capital gain exemption have been extended till March, 2022. To provide additional benefits to innovators, the restrictions on the paid-up capital and turnover of One Person Companies (OPCs) have been removed. Also, the director’s residency criteria have been reduced from 182 days to 120 days. Now, NRIs will be allowed to incorporate OPCs in India. These relaxations will help the entrepreneurs to structure their boot-strapped entities as OPC and encourage NRIs to invest in India independent of any local support as was mandated earlier.
The Ministry of Corporate Affairs will have MCA21 Version 3.0 with data analytics, artificial intelligence, and machine learning-driven system with additional modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management. This module will provide ease of incorporation of companies and meeting other MCA mandated compliances. The idea is to have a comprehensive, secured and user-friendly online system that can ensure no requirement of physical interaction with the Registrar of Companies in the entire process of incorporation.
A change in the definition
The other crucial announcement is the proposed change in the definition of ‘Small Companies’ by increasing their thresholds for paid-up capital up to Rs 2 crore and turnover up to Rs 20 crore. This decision aims to benefit more than 2 lakh companies by reducing their day-to-day compliance requirements and corresponding cost, consequently promoting small scale businesses.
The decriminalising of the Limited Liability Partnership Act, 2008, in line with the recent decriminalization of the Companies Act, 2013, aims at reducing the burden of NCLTs for procedural and technical compoundable offences. These changes were also proposed in the Report of the Company Law Committee on Decriminalisation of the LLP Act. This will provide ease in the day-to-day management and allow altering of the various methods to shy away from consequences of the acts or omissions of regulatory compliances.
The government proposes to strengthen the NCLT framework, implement the e-courts system and alternate methods of debt resolution and special framework for MSMEs. This will help the companies to have a quicker resolution in a timely manner and help to reduce the litigation costs.
Announcements about various sectors
- Setting up a fintech hub at GIFT will boost the momentum of the usage of technology in the financial world.
- Increase in FDI in insurance companies from 49% to 74%. This comes with a rider that the majority of the directors and key personnel should be resident Indian and 50% of board members to be independent.
- For the automobile sector, the vehicle scrappage scheme has been announced where commercial vehicles that are 15 years or older and personal vehicles more than 20 years old can be scrapped. This can boost sales in the sector.
- To reduce the compliance burden on small charitable trusts running educational institutions and hospitals, there is a blanket exemption from compliances for those receiving Rs 1 crore. This has now been increased to Rs 5 crore to allow more flexibility in carrying additional charitable activities and simultaneously lessen the compliance burden.
The government has approved a policy for disinvestment in all non-strategic and strategic sectors by classifying sectors in these two categories, keeping only four areas (atomic energy, space and defence; transport and telecommunication; power, petroleum, coal and other minerals; and banking, insurance and financial services) under strategic sectors, which will have a minimum presence of public sector enterprises and in non-strategic sectors, the public sector enterprises will be privatized or merged or closed. This will create opportunities for private players in diverse sectors to focus on the avenues being created in the process.
This budget gives a boost to the overall process of doing business in India and creating new business opportunities domestically.
(The writer is Partner, Corporate Practice, Singh & Associates)