Exemptions for Government Companies under Companies Act, 2013– Analysis of Exemptions provided to a Government Company
Under the Companies Act, 2013
As on – February 17, 2018
| S.No | Section | Provision | Effect on Government Companies |
| The below mentioned exemptions can only be availed by a Government Company which has not defaulted in filing its Financial Statements or Annual Return with the Registrar | |||
| 1 | Chapter II, section 4 | Mandatorily using with the last word “Limited” in the case of a public limited company, or the last words “Private Limited” in the case of a private limited company | Not required to use “Limited” or “Private Limited” with its name |
| 2 | Chapter IV, section 56 | Transfer and transmission of shares | Not required to submit Form SH-4 in case of transfer of shares, if the person is acting as a nominee of the Government |
| 3 | Chapter VII, section 89 | Declaration in respect of Beneficial interest in any share | Nominees are not required to file any form |
| 4 | Chapter VII, section 90 | Investigation of Beneficial ownership in certain cases | Not applicable to a Government Company |
| 5 | Chapter VII, sub-section (2) of section 96 | Venue of the Annual General Meeting of the Company shall be the registered office of the Company or some other place within the city, town or village in which the registered office of the Company is situated | The AGM shall be held at the Registered office or such other place as may be approved by Central Government |
| 6 | Chapter VIII, second proviso to sub-section (1) of section 123 | Rules for declaration of dividend in case of inadequacy or absence of profits | Shall not apply to Wholly-owned (entire share capital is held by Government) Government company |
| 7 | Chapter VIII, sub-section (4) of section 123 | Depositing dividend in a Scheduled Bank in a separate account within 5 days of declaration | Shall not apply to Wholly-owned (entire share capital is held by Government) Government company |
| 8 | Chapter IX, section 129 | Financial Statements | Shall not apply to the extent of application of Accounting Standard 17 (Segment Reporting) to the companies engaged in defence production. |
| 9 | Chapter IX, section 129 | Financial Statements-Accounting Standard 22 or Indian Accounting Standard 12 relating to deferred tax asset or deferred tax liability | Non-applicability of provisions of Accounting Standard 22 or Indian Accounting Standard 12 relating to deferred tax asset or deferred tax liability for 7 years w.e.f 01/04/2017 to specified Government Companies. |
| 10 | Chapter IX, clause (e) of sub-section (3) of section 134 | Disclosure in Board’s report about Company’s policy on directors’ appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director, etc; | Not required to disclose |
| 11 | Chapter IX, clause (p) of sub-section (3) of section 134 | a statement indicating the manner in which formal annual evaluation has been made by the Board of its own performance and that of its committees and individual directors | Directors are evaluated by the Ministry or Department of the Central Government which is administratively in charge of the company, or, the State Government, as per its own evaluation methodology |
| 12 | Chapter XI, section 149(1)(b)and first proviso to sub-section
(1) of section 149 |
|
Can appoint more than 15 Directors |
| 13 | Chapter XI, clause (a) of sub-section (6) of section 149 | An independent director in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience | The word “Board” is replaced with “Ministry”. |
| 14 | Chapter XI, clause (c) of sub-section (6) of section 149 | who has or had no pecuniary relationship with the company, its holding, subsidiary
or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year |
No such restriction |
| 15 | Chapter XI, sub-section (5) of section 152 | Filing of consent to act as Director with Registrar | Availment of this exemption is not feasible as filing of form facilitates the DIN to be associated with MCA which is required for Annual Filings |
| 16 | Chapter XI, sub-sections (6) and (7) of section 152 | Retirement of Directors by rotation at Annual General Meeting | Directors are not required to retire by rotation if 51% or more share capital is held by the Government.
This exemption is also available to subsidiary of the above mentioned company |
| 17 | Chapter XI, section 160 | Right of persons other than retiring directors to stand for Directorship | Shall not apply to Wholly-owned (entire share capital is held by Government) Government company and also its wholly owned subsidiary |
| 18 | Chapter XI, section 162 | Appointment of Directors to be voted individually | Shall not apply to Wholly-owned (entire share capital is held by Government) Government company and also its wholly owned subsidiary |
| 19 | Chapter XI, section 163 | Option to adopt principle of Proportional Representation for Appointment of Directors | Shall not apply to Wholly-owned (entire share capital is held by Government) Government company and also its wholly owned subsidiary |
| 20 | Chapter XI, sub-section (2) of section 164. | Disqualification for not filing Financial Statements or Annual Returns or repayment of deposits, payment of interest, redemption of debentures and interest thereon, or payment of Dividend | No disqualification will be attracted to a Director of a Government Company |
| 21 | Chapter XI, section 170 | Register of Director and Key Managerial Personnel and their shareholding | Not required to be maintained by a Wholly-owned Government Company |
| 22 | Chapter XI, section 171 | Members’ Right to inspect | No such right is available to members in case of Wholly-owned Government Company |
| 23 | Chapter XII, clause (i) of subsection (4) of section 177 | Every Audit Committee is required to recommend for appointment, remuneration and terms of appointment of auditors of the company | Every Audit Committee is required to recommend for remuneration only |
| 24 | Chapter XII, sub-sections (2), (3) and (4) of section 178 | Duties of Nomination and Remuneration committee with respect to identification of directors and senior management, formulation of policy for appointment and remuneration of Directors and employees | Not required to be done by the Nomination and Remuneration committee only to the extent of Directors, but this will apply for Senior Management and Employees |
| 25 | Chapter XII, section 182 | Prohibitions and restrictions regarding political contributions | A Government Company cannot make political contributions |
| 26 | Chapter XII, section 185 | Loan to Directors, etc; | Govt Co. has to obtain approval of the Ministry or Department of the Central Government which is the administrative incharge of the Company |
| 27 | Chapter XII, section 186 | Loans and Investment by a Company- Special Resolution of shareholders has to be passed where giving of any loan or guarantee or providing any security or acquisition exceeds 60% of its paid-up capital ,free reserves and securities premium OR
100%of free reserves and securities premium account which ever is more. |
Govt Co. has to obtain approval of the Ministry or Department of the Central Government which is the administrative incharge of the Company |
| 28 | Chapter XII, first and second proviso to sub-section (1) of section 188 | Related Party transactions-approval of shareholders in case the contract/arrangement/transaction to be entered with the related parties, exceed the limits specified. |
|
| 29 | Chapter XIII, sub-sections (2), (4) and (5) of section 196 |
|
Not applicable to a Government Company |
| 30 | Chapter XIII, section 197 | Overall Maximum Managerial Remuneration and Managerial Remuneration in case of absence or inadequacy of profits | Not applicable to a Government Company |
| 31 | Chapter XIII, sub-sections (1), (2), (3) and (4) of section 203 | Appointment of Key Managerial Personnel-
|
Not applicable to a Government Company |
| 32 | Chapter XV, section 230 to 232 |
|
The word Tribunal, wherever it is appearing the the sections, will be replaced with Central Government |
| 33 | Chapter XXIX, sub-section (2) of section 439 | Non-cognizable offence- complaint in writing can be taken from Registrar, a shareholder of the company, or a person authorised by the Central Government in that behalf. | Complaint in writing can be taken a person authorised by the Central Government in that behalf. |
| 34 | Rule 18 of The Companies (Share Capital and Debenture) Rules, 2014 | Creation of charge on the properties and assets of the Company when secured debentures are issued | Not required to create any charge if the issue of debentures by a Government company is fully secured by the guarantee given by the Central Government or one or more State Government or by both |
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Availment of this exemption is not feasible as filing of form facilitates the DIN to be associated with MCA which is required for Annual Filings .. Can anybody make this little more clear this in the context of Section 152(5)
“The below mentioned exemptions can only be availed by a Government Company which has not defaulted in filing its Financial Statements or Annual Return with the Registrar”
Please provide the relevant section for this.
The same is specified in pt 5 of the notification issued on 13th June, 2017 i.e., Exemptions to Government companies under Sec 462 of Companies Act, 2013
Good article. Very useful.
very good presentation, very useful.
Brilliant article