Gurminder Dhami

Gurminder DhamiMinistry of Corporate Affairs has issued Notification dated June 5, 2015 by which it has provided various much awaited Exemptions to Private Companies other than the subsidiary of a public company  a summary of such exemptions is as follows :-

S.No. Exemption Given Section Major Impact
1.

DEFINITION OF RELATED PARTY RELAXED WITH RESPECT TO SECTION 188

Does not include Holding, Subsidiary, Associate Company and sister concern(subsidiary of holding)

 

2(76)

Transactions entered with them and falling under section 188 does not require compliance of section 188.

Note:- Although Holding company is excluded but Director(other than independent Director), KMP of holding company or their relative are still included in definition of Related Party. (Section 2(76)(ix))

2.

TIME LIMITS IN RIGHT ISSUE CAN BE REDUCED

Sending of offer letter min 3 days period before opening of offer

AND

Minimum & maximum offer period of 15 & 30 days respectively

Can be reduced, if 90% member give their consent in writing/electronic mode

62(1)(a) &62(2)

In case of emergency, the mentioned time limits an be reduced with consent of shareholders.

Note:- The time limits cannot be increased, they can only be reduced.

3.

ACCEPTANCE OF DEPOSITS FROM MEMBERS MADE EASIER FOR CERTAIN PRIVATE COMPANIES

Private Companies borrowing monies from members upto aggregate limit of paid-up share capital & free-reserves need not require to comply with conditions mentioned in section 73(2)(a) to (e).

However details of money so borrowed shall be filed with ROC in manner as may be specified

73(2)(a) to (e) If Such Company borrows money from member then no need to:– Issue Circular

-File circular with ROC

-Maintain Deposit repayment reserve

-Provide deposit insurance

4. NO NEED TO FILE MGT-14 FOR BOARD RESOLUTIONS.

Any Board resolution mentioned in section 179 read with rule 8 of Companies (Meeting of Board & its power) Rules, 2014 is now not required to be filed with ROC.

117(3)(g) Saving in ROC filing costs
5.

ARTICLES OF A PRIVATE COMPANY MAY OVERRIDE PROVISIONS PERTAINING TO

1.  Content & length of notice

2.  Explanatory Statement

3. Quorum

4. Chairman

5. Proxies

6. Restriction on voting rights

7. Show of hands & Poll

(Position brought at par with Companies Act, 1956)

  101 to 107 & 109

Private Company may override by its articles mentioned provisions.
However, a Private Company Cannot:-

1. Reduce quorum below 2

(In re- Ram Villas Press Publication Pvt. Ltd- Kerela HC)

2. Increase time limit of 48 hours for depositing proxy form (Section 105(4))

3. Reject a proxy form if it fails to comply with specific requirement of AOA (Section 105(7))

4. Restrict voting right of a member other than restrictions in section 106 (section 106(2))

6.

MAXIMUM NO. OF AUDIT IN CASE OF PRIVATE COMPANY RELAXED

Text of notification:- “Other than OPC, Dormant, Small Companies and Private Companies having paid up capital of less than Rs. 100 Crores shall be inserted after 20 Companies.”

   141(3)(g)

Limit of 20 Companies only includes:-

1. Public Companies

2. Private Companies having paid up capital of Rs. 100 crore or more

7. CANDIDATURE NOT REQUIRED FOR APPOINTMENT OF DIRECTOR AT GENERAL MEETING
160 Amount of Rs. 1 lakh not required to be deposited at least 14 days before GM
8. APPOINTMENT OF DIRECTORS NEED NOT TO BE VOTED INDIVIDUALLY
162 More than 1 director can be appointed via single resolution
9. RESTRICTIONS ON POWERS OF BOARD NOT TO APPLY 180

Private Company can now without shareholder’s approval:-

1. Borrow exceeding paid up capital & free reserves.

2. Sell/lease/dispose off undertaking

10. INTERESTED DIRECTOR CAN PARTICIPATE IN BOARD MEETING AFTER DISCLOSURE OF INTEREST 184 Interested Director can now participate in agenda in which he is interested.

Note:- He Cannot be counted in Quorum (Section 174(3) explanation)

11. LOANS/GUARANTEE/SECURITY CAN BE GIVEN TO DIRECTOR AND PERSON IN WHOM HE IS INTERESTED BY CERTAIN PRIVATE COMPANIES

A private Company which has:-

1. Body Corporate should not be Shareholder

2. Not borrowed money from Bank/ Financial Institution/ Body Corporate exceeding lower of the following:-

i.  Twice its Paid up capital

ii. Rs. 50 crore

3.      No repayment default subsisting of such borrowings at time of giving loan

  185 Giving of loans/ guarantee/security to Group Companies now possible
12. RESTRICTION ON VOTING RIGHT IN GENERAL MEETING IN CASE OF RELATED PARTY TRANSACTION NOT APPLICABLE 188(1) 2nd proviso Member although being related party to the concerned resolution can still cast his vote at GM.
13. SHAREHOLDER’S RATIFICATION NOT REQUIRED FOR APPOINTMENT OF MD/WTD   196(4) &(5)

1. Shareholder’s Ratification in not required.

2. Schedule V not applicable.

3. MR-1 not required to be filed

4. T&C of appointment, remuneration not mandatory to be mentioned in resolution

 THESE EXEMPTIONS ARE NOT AVAILABLE TO A PRIVATE COMPANY WHICH IS A subsidiary of a public company. (section 2(71) proviso)

(Author may be contacted at csgurminderdhami@gmail.com or on his mobile no. +91-8800568609- Suggestions, comments and queries solicited. )

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7 responses to “13 Exemptions to Private Companies”

  1. hariom juneja says:

    hi, I am going to increase my authorize capital by 99 lacs. can shareholder bring their unsecured loan as per new law or else only director of company can bring unsecured loan. please clarify.

  2. CS SANJAY PATARE says:

    The 5th June exemption notification has effect from the date of publication in the official gazette read with Section 462 of the Companies Amendment Act, 2015.

    Regards,

    CS Sanjay Patare
    9850170675

  3. Gurminder says:

    @ Gopalakrishna Gupta ESG: Thanks for your appreciation Sir.

    @ rk gupta : I agree with you Sir, the title should have been as such that it should have conveyed that its in draft stage. Thanks for your input.

    @ Ankit Agrawal: Ankit Ji kindly re-check i think i have written it correctly at point 11 “Body Corporate should not be Shareholder”.

  4. Ankit Agrawal says:

    In Point No. 11 you have mentioned that Body Corporate should be Shareholder (One of the Condition to get exemption u/s 185) but it should be other way round:

    Exemption to private limited Company
    1. in whose share capital no other body corporate has invested any money.
    2. Not borrowed money from Bank/ Financial Institution/ Body Corporate exceeding lower of the following:-
    i. Twice its Paid up capital
    ii. Rs. 50 crore 3.
    3.No repayment default subsisting of such borrowings at time of giving loan

  5. rk gupta says:

    The notification issued for exemptions are only in draft mode, which has to be approved by both the houses of Parliament under the provisions of section 462 (2) of Companies Act, 3013. As such, the Heading “13 exemptions to Private companies w.e.f.05.06.2015” may be reviewed, for correct information to the stakeholder.

  6. Sabin Bhaskar says:

    In point number 11 with regard to Loan to directors, the 1st conditions is “in whose share capital no other body corporate has invested any money;” ie No body corporate is a share holder.

    Am I right?

  7. Gopalakrishna Gupta ESG says:

    Very lucid and informative, I appreciate people who work for general public like us.

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