New Exemption to Private / Government / Section 8 Companies vide Exemption Notifications dated 13th June 2017
Short Summary:
Article discusses exemption provided to Private Limited / Government / Section 8 Companies under Companies Act, 2013 vide Notifications dated: 13.06.2017 which are in addition to exemptions provided vide earlier notifications dated 05.06.2015.
Previously, Ministry of Corporate Affairs by notification No. G.S.R. 464(E), G.S.R. 463(E) and G.S.R. 466(E) dated 5th June, 2015 have give several exemptions to these Companies. Via Notification dated 13th June, 2017 MCA has added more exemptions by amending the notification dated 5th June, 2015.
In this Flash editorial, the author begins by referring the exemptions given by Ministry of Corporate Affairs concerning to compliance of various provisions of Companies Act, 2013 for [1]Private Limited Companies, [2]Government Companies and [3]Section 8 Companies.
The consent of Start-up / Start-up Companies has been introduced in the exemptions Notification to Private Limited Companies.
Start-up/ Start-up Companies means “a private Company incorporated under Companies Act, 1956 or the Companies Act, 2013 and recognized as start-up in accordance with the notification issued by the Department of Industrial Policy and promotion, Ministry of Commerce and Industry”
New Exemption to Companies in addition to earlier exemption- By Notification on 13th June, 2017
PRIVATE LIMITED COMPANY
| S.N | Chapter/ Section of the Act | Particular
|
Exemption Provided in MCA Notification |
| A. | Chapter 1, Proviso of clause (40) of section 2. | (40) “financial statement” in relation to a company, includes—
(i) a balance sheet as at the end of the financial year; (ii) a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year; (iii) cash flow statement for the financial year; (iv) a statement of changes in equity, if applicable; and (v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv): Provided that the financial statement, with respect to One Person Company, small company, dormant company and private Company (if such private Company is a [4]start-up) may not include the cash flow statement; |
Private Companies (if such Private Company is a Start up) No need to prepare Cash Flow Statement
|
| B. | Chapter V- Section-73(2) Clause (a) (e):
|
Earlier Private Limited Company can accept deposits from the Member after follow up the procedure mention under Section 73 Clause (a)- (e). By the exemption Clause (a) to (e) shall not applicable on following Companies.
In the exemption notification dated 5th June, 2015, in the table, for serial number 6 and the entries relating thereto, this serial number and the entries relating thereto shall be substituted, namely:- |
[5]Provision of Section 72(2) clause (a-e) shall not applicable on following Companies:
1) Which accept from its members monies not exceeding 100% percent of aggregate of the paid up share capital, free reserves and Securities Premium account; or 2) Which is a start-up, for five years from the date of its incorporation; or 3) which fulfill all of the following conditions, namely:- A. Which is not an associate or a subsidiary of any other Company; B. If the borrowing of such a company from the banks or financial institutions or anybody 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 the section. Provided that the company referred to in clause (A), (B) or (C) shall file the details of monies accepted to the Registrar in such manner as may be specified” |
C. |
Chapter VII- Section-92(2) Clause (g) :
|
1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding—
(g) remuneration of directors and key managerial personnel; |
For the purpose of Small Company Clause (g) read as under:
(g) Aggregate amount of remuneration drawn by directors. |
| D. | Chapter VII- Section-79(1) Proviso:
|
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. | Private Companies (if such Private Company is a Start up) Annual return can be sign by Director of Company if there is no Company Secretary.
|
| E. | Chapter X- Section-143 (3) (i) Proviso:
|
(3) The auditor’s report shall also state—
(i) whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls; |
Clause (i) not apply to a private Company:-
i. Which is one person Company or a Small Company; or ii. Which has turnover less than Rs. 50 Crores as per latest audited financial statement or which has aggregate borrowings from banks or financial institutions or anybody corporate at any point of time during the financial year less then Rs. 25 Crore. |
| F. | Chapter XII- Section-173 (5)
|
A One Person Company, small company, dormant company and 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: | Private Companies (if such Private Company is a Start up)
Requires holding at least 1 board meeting during each half of calendar year and the gap between the two meetings is not less than 90 days…
|
| G. | Chapter XII- Section-174 (3)
|
(3) Where at any time the number of interested directors exceeds or is equal to two- thirds of the total strength of the Board of Directors, the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time.
Explanation.—For the purposes of this sub-section, “interested director” means a director within the meaning of sub-section (2) of section 184. |
In case of Private Limited Companies:
Interested director may also be counted towards quorum in such meeting after disclosure of his interest pursuant to section 184. |
GOVERNMENT COMPANY
S.N |
Chapter/ Section of the Act | Particular
|
Exemption Provided in MCA Notification |
| A. | Chapter VII,
Sub section (2) of section 96. |
In the exemption notification dated 5th June, 2015, in the table, for serial number 5 , the following serial no. shall be Substituted, namely:-
(2) Every annual general meeting shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not a National Holiday and shall be held either at the registered office of the company or such other place within the city, town or village in which the registered office of the Company is situate or such other place as the Central Government may approve in this behalf” Provided that the Central Government may exempt any company from the provisions of this sub-section subject to such conditions as it may impose. |
For the Government Companies Sub section (2) shall be read as follow:
In sub-section (2), for the words “such other place as the Central Government may approve in this behalf” shall be substituted” shall be substituted by “such other place within the city, town or village in which the registered office of the Company is situate or such other place as the Central Government may approve in this behalf” “The words “such other place as the Central Government may approve in this behalf” shall be substituted.
Note: Annual General Meeting of Company shall be held at registered office of the Company or such other place within the city, town or village in which the registered office of the Company is situate or such other place as the Central Government may approve in this behalf. |
| B. | Chapter XI, Sub Section (6) and (7) of Section 152 | [6]In the exemption notification dated 5th June, 2015, in the table, for serial number 15 , the following serial no. shall be Substituted, namely:-
As per Notification dated 5th June, 2015 Sub section (6) and (7) shall not apply to followings: (a) a Government Company in which the entire paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments; (b) A subsidiary of a Government company, referred to in (a) above, in which the entire paid up share capital is held by that Government company. |
As per current notification Sub Section (6) and (7) shall not apply to followings:
a) A Government company, which is not a listed company, in which not less than fifty-one per cent. of paid up share capital is held by the Central Government, or by any State Government or Governments or by the Central Government and one or more State Governments; b) A subsidiary of a Government company, referred to in (a) above.” |
| C. | Chapter XV,
Section 230 to 232. |
230. Power to compromise or make arrangements with creditors and members
231. Power of Tribunal to enforce compromise or arrangement 232. Merger and amalgamation of companies |
In Section 230, 231 and 232 the word “Tribunal” wherever it occurs, the word “Central Government” shall be substituted. |
SECTION 8 COMPANIES
S.N |
Chapter/ Section of the Act | Particular
|
Exemption Provided in MCA Notification |
| A. | Clause (b) and first proviso (1) of Section 149 | In the exemption notification dated 5th June, 2015, in the table, for serial number 8 , the following serial no. shall be Substituted, namely:-
149. (1) Every company shall have a Board of Directors consisting of individuals as directors and shall have— (b) a maximum of fifteen directors: |
This clause shall not apply to the Section 8 Company. |
| B. | Sub Section (7) of section 186 | [7]186(7) (7) No loan shall be given under this section at a rate of interest lower than the prevailing yield of one year, three year, five year or ten year Government Security closest to the tenor of the loan.
Addition of Proviso after sub section 7 |
Provided that nothing contained in this sub-section shall apply to a company in which twenty-six per cent. or more of the paid-up share capital is held by the Central Government or one or more State Governments or both, in respect of loans provided by such company for funding Industrial Research and Development projects in furtherance of its objects as stated in its memorandum of association.”. |
[1] https://taxguru.in/company-law/new-exemption-private-limited-companies.html
[2] https://taxguru.in/company-law/exemptions-government-companies-section-462-ca-2013.html
[3] https://taxguru.in/company-law/exemptions-section-8-companies-section-462-ca-2013.html
[4] Start up or Start-up Company means a private Company incorporated under Companies Act, 1956 or the Companies Act, 2013 and recognized as start-up in accordance with the notification issued by the Department of Industrial Policy and promotion, Ministry of Commerce and Industry.
[5] This exemption shall be applicable to a private company which has not committed a default in filing its financial statements under section 137 of the Act or annual return u/s 92 of the act with registrar.
[6] The exceptions, modifications and adoptions provided in column (B) of the aforesaid table shall be applicable to a Government Company which has not committed a default in filing its financial statements under Section 137 of the said Act or annual return under section 92 of the said Act with the Registrar.
[7] The exceptions, modifications and adoptions provided in column (B) of the aforesaid table shall be applicable to a Government Company which has not committed a default in filing its financial statements under Section 137 of the said Act or annual return under section 92 of the said Act with the Registrar.
(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at [email protected])
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION.
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1.will managerial remuneration limit of 11% of net profit and 5% to one director applicable to private companies?
2. For remuneration paid to a Director, is there any need to file MGT-14 and it will come in related party transaction (AOC-2) under not at arms length basis?
“Sec 8 Company is exempted from Clause (b) and first proviso (1) of Section 149” that interprets Sec 8 Company can form Board of Directors with any number of Directors or it is not required to form any board ?
Please confirm if Sec 8 company does not required to have any Board then how it will operate?
Please tell what about the exception for paramilitary forces ? Government had already given excption to C S D canteens and then it has to give C P[ C also. Both are serving the country only.
Please tell where can i find the original notification.
Some law should be brought out to convert a closely held Private Limited Company to convert to Proprietorship Company/Partnership Company.
is it applicable to FY 16-17?