Ministry of Corporate Affairs (MCA”) has in continuation of earlier exemption notification dated 5th June, 2015 (“Principal Notification”) further extended exemption to Private Companies on 13th June, 2017.
MCA has substituted some of clauses of Principal Notification and inserted some new clauses to the Principal Notification.
|Sr. No.||Provisions||Exemption given in the Notification||Effect of Exemption Notification|
|1.||Chapter I, clause (40) of section 2.||A new clause 1 is inserted in principal notification and existing clause 1 of principal notification re-numbered as Clause 1A.
For the proviso, the following shall be substituted, namely:-
Provided that the financial statement, with respect to one person company, small company, dormant company and private company (if such private company is a start-up) may not include the cash flow statement;
|Cash flow statement is not mandatory for private limited companies which are start –up companies. Thus, Cash flow statement will not be required for One person Company, Small Company, Dormant Company and Private limited Company (if such Company is start-up company)|
|2.||Chapter V, clauses (a) to (e) of sub-section (2) of section 73.||Existing Clause 6 of Principal notification is substituted with following clause.
Shall not apply to a private company-
(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 fulfills 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.
|Benefit of exemption from Section 73(2) (a) – (e ) is extended in case any of three conditions specified in notification is fulfilled.
This notification will allow private companies to accept money from members without any limit in case it fulfill three conditions:Online GST Certification Course by TaxGuru & MSME- Click here to Join
i. Company is not subsidiary or associate company of any other company.
ii. Borrowings from Banks/FI/other body corporate does not exceed twice of its paid up share capital or fifty crore rupees, whichever is lower; and
iii. Company has not defaulted in the repayment of such borrowings
This is a welcome change.
|3.||Chapter Vll, clause (S) of sub- section (1) of section 92||A new clause 6A is inserted after clause 6 of principal notification.
Shall apply to private companies which are small companies, namely:-
(g) aggregate amount of remuneration drawn by directors;”.
|Requirement of details of remuneration of KMP is exempted in case of Private Limited companies and small companies.
|4.||Chapter Vll, proviso to sub-section (1) of section 92||A new clause 6B is inserted after clause 6 of principal notification.
For the proviso, the following proviso shall be substituted, namely:-
Provided that in relation to One Person Company, small company and 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.”
|Signing of Annual Return by Company Secretary is not mandatory in case the Private Company is start-up company even though that private company is not a small company.|
|5.||Chapter X, clause (i) of sub-section (3) of section 143||A new clause 6A is inserted after clause 9 of principal notification.
Shall not apply to a private company:-
(i) which is a one person company or a small company; or (ii) which has turnover less than rupees fifty crores as per latest audited financial statement or which has aggregate borrowings from banks or financial institutions or any body corporate at any point of time during the financial year less than rupees twenty five crore.”.
|Auditors Report of one person companies or small companies or private limited companies with turnover of less than 50 crore or borrowing from banks/FI or any body corporate is less than 25 crore are not required to include internal financial controls system.
|6.||Chapter Xll, sub-section (5) of section 173.||A new clause 11A is inserted after clause 11 of principal notification.
For sub-section (5), the following sub-section shall be substituted, namely:-
(5) 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 this section 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:
Provided that nothing contained in this sub-section and in section 174 shall apply to One person Company in which there is only one director on its Board of Director.
|Two Board meeting is sufficient (in every half year and with the gap of 90 days) in case of private limited company if it is a start-up company.|
|7.||Chapter Xll, sub-section(3) of section 174.||A new clause 11B is inserted after clause 11 of principal notification.
Shall apply with the exception that the interested director may also be counted towards quorum in such meeting after disclosure of his interest pursuant to Section 184.
|In case of private companies interested director also be counted for the purpose of quorum in case he discloses his interest.|
A new clause 2A has been inserted after clause 2 of principal notification which provided that exemptions to private company are available only in case the Company has filed annual return and financial statement with ROC. This is a great step taken by MCA and this will require to make ROC filing to take advantages of exemption notification.
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