Exemptions to a Private Company - Companies Act 2013
Exemptions
to Private Companies
Exemptions
to Private Companies: The exemptions enjoyed by a private company are dealt
with mainly by following two notification:
1. G.S.R. 464( E ) dated 5th
June 2015;&
2. G.S.R. 583 (E) dated 13th June 2017
The
exemptions have been explained in – Did you know? format.
1. Did you know that a member can vote on a resolution
for according members approval, even if such member is a Related Party.
Explanation:
As per exemption notification G.S.R. 464( E ) dated 5th June 2015,
in Section 188 (1), second proviso, where depending on the transaction value,
prior approval of the members is required, a member can vote, even if such
member is a related party, as second proviso to section 188(1) is not
applicable to a private company.
2. Did you know that - any body corporate
which is holding, subsidiary, fellow subsidiary, associate, eligible investor
& venturer company in respect of such private company are not considered
related parties.
Explanation:
As per exemption notification G.S.R. 464(E) dated 5th June 2015, Section
2(76) (viii), is not applicable to a private company, with respect to section
188
3. Did you know that whereas companies can
have only two kinds of capital – equity (with or without differential voting
rights) and preference capital, but this is not applicable to a private company
which has an enabling Memorandum and Articles of Association?
Explanation:
As per exemption notification G.S.R. 464(E) dated 5th June 2015, Section
43, is not applicable to a private company, if Memorandum and Articles so
provide.
4. Did you know that members can have disproportionate
voting rights even with same capital? Some members can be restricted from
voting on certain resolutions?
Explanation:
As per exemption notification G.S.R. 464(E) dated 5th June 2015, Section
43, is not applicable to a private company, if Memorandum and Articles so
provide.
5. Did you know that in case of Right
issue, notice can be given lesser than 3 days before opening of the offer and
the offer may be kept open for lesser than 15 days if 90 percent of the members in writing or
electronically so consent?
Explanation:
As per exemption notification G.S.R. 464 (E) dated 5th June 2015, time
periods prescribed under Sections 62 (1)
(a) (i) and 62 (2) may thus be reduced.
6. Did you know that Restrictions on
Purchase by Company or Giving of Loans by it for Purchase of its Shares are not
applicable to a private company if it satisfies certain conditions?
Explanation: As per exemption
notification G.S.R. 464 (E) dated 5th June 2015, Section 67 shall
not apply to a private company-
(a) in whose share capital no
other body corporate has invested any money;
(b) if the borrowings of such a
company from banks or financial institutions or any body corporate is less than
twice its paid up share capital or fifty crore rupees, whichever is lower; and
(c) such a company is not in
default in repayment of such borrowings subsisting at the time of making
transactions under this section. - Notification dated 5th June, 2015.
7. Did you know that a private company can offer further shares to
employees under a scheme of employees' stock option instead of going for the
right issue, if approved by the members by an ordinary resolution as against
special resolution required by other companies?
Explanation:
As per exemption notification G.S.R. 464(E) dated 5th June 2015, Section
62(1)(b) shall require only an ordinary resolution and not special resolution.
The relaxation with respect to other conditions of section 62 (1) (b) is not
provided.
8. Did you know that in
case of private company - which accepts from its members monies, the formalities
and conditions are quite relaxed?
Explanation:
As per exemption notification G.S.R. 464( E ) dated 5th June 2015,
as further amended by notification
no. G.S.R. (583E) dated 13th June 2017 - Clause (a) to (e) of
Sub-section 2 of Section 73 shall not apply to private Companies -
(A)
which accepts from its members monies not exceeding one hundred per cent. of
aggregate of the paid up share capital, free reserves and securities premium
account; or
(B)
which is a start-up, for five years from the date of its incorporation; or
(C)
which fulfils all of the following conditions, namely:-
(a)
which is not an associate or a subsidiary company of any other company;
(b)
if the borrowings of such a company from banks or financial institutions or any
body corporate is less than twice of its paid up share capital or fifty crore
rupees, whichever is lower; and
(c)
such a company has not defaulted in the repayment of such borrowings subsisting
at the time of accepting deposits under this section:
Provided
that the company referred to in clauses (A), (B) or (C) shall file the details
of monies accepted to the Registrar in such manner as may be specified."
- Notification Dated 13th June,
2017
9. Did
you know that private companies may provide otherwise in respect of the
following through its Articles?
·
Notice of meetings
·
Explanatory Statement
·
Quorum of Meetings
·
Chairman of Meetings
·
Proxies
·
Restriction on voting rights
·
Voting by show of hands;
·
Demand of poll
Explanation:
As per exemption notification G.S.R. 464( E ) dated 5th June 2015, in
case of private company –
Sections 101-107 and 109 shall apply, unless otherwise specified in respective
sections or the articles of the company provide otherwise.
10. Did
you know that Board resolutions passed under section 179 (3) need not be filed
in MGT -14?
Explanation:
As per exemption notification G.S.R. 464( E ) dated 5th June 2015, in
case of private company –
Section 117 (3) (g) shall not apply.
11. Did you know that a private company may appoint as auditor-
a person who is in full time employment elsewhere or a person or a partner of a
firm holding appointment as its auditor, if such persons or partner is at the
date of such appointment or reappointment holding appointment as auditor of
more than twenty companies, if it has paid up capital of less than Rs. 100
crores?
Explanation:
As per exemption notification G.S.R. 464( E ) dated 5th June 2015, in
case of private company, in case of private
company - in clause (g) of sub-section 3 after the words twenty
companies", the following words shall be inserted;
"other
than one person companies, dormant companies, small companies and private
companies having paid-up share capital less than one hundred crore rupee".
12. Did you know that in a private company, the Board
has more powers and less restrictions:
Explanation:
As per exemption notification G.S.R. 464(E) dated 5th June 2015, in
case of private company, section 160, 162 and 180 shall not apply.
Section 160: Right of a person other
than retiring directors to stand for directorship;
Section 162: Appointment of
directors to be voted individually
Section 180: Restrictions on Powers
of the Board. Board to do certain acts only with consent of the members.
13. Did
you know that interested directors in a private company may participate in
Board Meeting after disclosure of interest?
Explanation:
As per exemption notification G.S.R. 464(E) dated 5th June 2015 (sec
184) read with Vide
notification no. G.S.R. (583E) dated 13th June 2017 (sec 174),
in case of private company, section 184 (2) shall not apply to the effect that an
interested director may participate after disclosure of his interest.
14. Did you know that a private company can
give loan to directors, etc., if:
In
its share capital, no other body corporate has invested any money;
-
If its
borrowings from banks or financial institutions or any body corporate is less
than twice its paid up capital or Rs. Fifty crores whichever is lower; and
-
Such
company has not defaulted in making repayment of such borrowings subsisting at
the time of making transaction under this section.?
Explanation:
As per exemption notification G.S.R. 464(E) dated 5th June 2015, in
case of private company, section 185 shall not apply if all the above conditions
are satisfied.
15. Did
you know that in a private company, remuneration and terms and conditions of
appointment of managerial personnel (MD/WTD/Manager need not require approval
of shareholders or the Central Government.
Explanation:
As per exemption notification G.S.R. 464(E) dated 5th June 2015, in
case of private company, section 196 (4) and (5) shall not apply.
16. Did
you know:
As
per notification dated 13th June 2017:
1. Financial
statements may not include cash flow statement if such private company is a
start up
Explanation: Vide notification no. G.S.R. (583E) dated 13th
June 2017, proviso to definition of financial statement has been amended - Section
2(40)
2. Vide
notification no. G.S.R. 583 (E) dated 13th June 2017, in case of a
private co which is a small company, vide section 92 (1) (g), aggregate
remuneration drawn by directors need be given instead of remuneration of
directors and KMP in annual return.
3. Vide
notification no. G.S.R. 583 (E) dated 13th June 2017, vide first proviso
to section 92 (1), in case of a Private company (if such private company is a
start-up), the annual return shall be signed by the company secretary, or where
there is no company secretary, by the director of the company.
4. Vide
notification no. G.S.R. 583 (E) dated 13th June 2017, inclusion in the Auditors Report of adequacy of internal
financial controls with reference to financial statements in place and the
operating effectiveness of such controls vide section 143 (3)
(i) is not applicable in
case of a Private co. which is a small company or one person company or (ii) which has turnover less than
rupees fifty crores as per latest audited financial statement
and which has aggregate borrowings
from banks or financial institutions or any body corporate at any point of time
during the financial year less Rs. 25 crores.
5. Vide
notification no. G.S.R. 583 (E) dated 13th June 2017,a One Person Company, small company,
dormant company and a private company (if such private company is a start-up)
shall be deemed to have complied with the provisions of section 174 if at least
one meeting of the Board of Directors has been conducted in each half of a
calendar year and the gap between the two meetings is not less than ninety
days.
Pre- conditions for exemption;
1.
Notification dated 5th
June 2015 states that the Company shall ensure that the interest of the shareholders
are protected; and
2. Notification dated 13th
June 2017,
states that the exemption shall be available to a private company which has not
defaulted in filing of its financial statements under sec 137 or annual return
under section 92 with the Registrar.
The Blogger , CS Brajesh Tiwary can be reached at - LFORLAW@YAHOO.COM,
M - 8588828190
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