CS Kashif Ali

cs kashif aliThe Ministry of Corporate Affairs has relaxed norms for private companies including those pertaining to related party transactions, acceptance of deposits and auditor appointments. The Ministry has issued much awaited notification on 5th June 2015 providing exemptions to private companies.

Our team has compiled the exemptions and their effects , these are as follow:

S. No. Chapter/Section number/Sub-section(s)in the Companies Act,2013 Exceptions/ Modifications /Adaptations Effect
1. Chapter I, sub-clause (viii) of clause (76) of section 2 Shall not apply with respect to section 188. Change in definition of ‘Related Party’ now onwards the following class of companies are not covered under the definition of related parties :2(76) (viii) any company which is—

(A) a holding, subsidiary or an associate company of such company; or

(B) a subsidiary of a holding company to which it is also a subsidiary;

2. Chapter IV, section 43 and section 4 7 Shall not apply where memorandum or articles of association of the private company so provides Section 43 talks about ‘Kind of Share Capital’ and section 47 talks about ‘Voting Rights’.Now AOA of Private Company can have relaxed provisions w.r.t. these sections.
3. Chapter IV, sub-clause (i) of clause (a) of sub-section (1) and sub-section (2) of section 62 Shall apply with following modifications:-In clause (a), in sub-clause (i), the following proviso shall be inserted, namely:-

Provided that notwithstanding anything contained in this sub-clause and sub-section (2) of this section, in case ninety per cent. of the members of a private company have given their consent in writing or in electronic mode, the periods lesser than those specified in the said sub -clause or sub-section shall apply

Section 67(1) provides that in case of further issue of shares the shares must be offered to existing equity share holders and company need to offer these shares by way of sending notice and limiting a time minimum 15 days and maximum 30 days to accept or reject the offer.Now with the consent of 90% members, a Private Company can fix period lesser than the prescribed period of 15 days.
4. .Chapter IV, clause (b) of sub-section (1) of section 62 In clause (b), for the words “special resolution”, the words “ordinary resolution” shall be substituted. Now a private company can issues ESOP by passing ‘Ordinary Resolution’ instead of ‘Special Resolution’
5. Chapter IV, section 67 Shall not apply to private companies -(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

Restrictions are removed on purchase by private company or giving of loans by it for purchase of its shares.
6. Chapter V, clauses (a) to (e) of sub- section (2) of section 73. Shall not apply to a private company which accepts from its members monies not exceeding one hundred per cent. of aggregate of the paid up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified. Now a private company may accept deposit from its members without following conditions mentioned under section 73(2)(a) to (e)
7. Chapter VII, sections 101 to 107 and section 109 Shall apply unless otherwise specified in respective sections or the articles of the company provide otherwise Now a private company may have different provisions in its AOA for the following sections;101-Notice of Meeting

102- Statement to be annexed to notice

103-Quorum of Meeting

104- Chairman of the Meeting

105- Proxies

106-Restraiction on voting rights

107- Voting by show of hands

8. Chapter VII, clause (g) of sub-section (3) of section 117 Shall not apply. A private company is not required to file E-form MGT 14 for resolutions passed under section 179(3) e.g. resolutions passed to approve financial statements etc.
9. Chapter X, Clause (g) of sub-section (3) of section 141. Shall apply with the modification that the words “other than one person companies, dormant companies, small companies and private companies having paid-up share capital less than one hundred crore rupees” shall be inserted after the words “twenty companies”. Specified Private Companies are excluded from the limit of 20 Companies.Now there is no limit for Chartered Accountants to be appointed as statutory auditor of a Private Company having paid up capital less than 100 crore.
10. Chapter XI, section 160. Shall not apply. The whole section 160 shall not apply it mean that no need to deposit Rs. 1 Lac by person desirous to be appointed as director in General Meeting.
11. Chapter XI, section 162. Shall not apply. More than 1 director can be appointed through one resolution.
12. Chapter XII, section 180. Shall not apply. Now there is no restrictions on powers of Board. Therefore no need to pass ‘special resolution’ for borrowing in excess of paid up capital etc.
13. Chapter XII, sub-section (2) of section 184. Shall apply with the exception that the interested director may participate in such meeting after disclosure of his interest. Now a interested director can participate in resolution in which he is interested.
14. Chapter XII, section 185 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 of its paid up share capital or fifty crore rupees, whichever is lower; and

(c) such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section.

Now specified private company can give loan to its directors and related parties.
15. Chapter XII, second proviso to subsection (1) of section 188 Shall not apply Now a interested members can vote on resolutions in which he is a related party
16. Chapter XIII, sub-sections (4) and (5) of section 196. Shall not apply Now appointment of a MD WTD or Manager can be made in board meeting, requirement of consent of members in next general meetings is no longer required.

You can download copy of this notification from the following link:


(Compiled by – KASHIF ALI & ASSOCIATES, Company Secretaries, 268, Business India Complex, Uday Park, New Delhi-110049, Call us : +91 9718483209)

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  1. Chandrashekhar B. Prabhumirashi says:

    I have queries over the Related Party Transactions.

    Query No. 1:- Whether the private limited company is required to report the transactions entered into between Related Parties during the Financial Year 2014-15?

    Query No. 2:- CARO (Companies Auditor’s Report Order) is still requiring the same requirement as stated above for the Financial Year 2014-15 in case of Private Limited Company? or whether is done away with the exemptions granted to such companies?

  2. A Kedia says:

    Please clarify whether these exemptions are effective from the date the Act came into effect, i.e. 1st April 2014, or from the date of the current Notification

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