Article Explains Exemption To Private Limited Companies, Public Limited Companies And Listed Companies under Companies Act, 2013, SEBI (LODR) Regulations, 2015, Companies (Meetings of Board and its powers) Rules, 2014, Companies (Specification of definitions details) Rules, 2014, Companies (Prospectus and Allotment of Securities) Rules, 2014.
Article further contains Meaning Small Company with Salient Features of Small Company, Meaning of OPC with Salient Features of One Person Company and privileges and /or exemptions available to small company and One Person Company.
|Particulars||Public Company||Private Company||Listed Company|
|Section 3 Minimum No. of Members||Minimum Seven Members||Minimum two Members||Minimum Seven Members|
Maximum No. of Members
|Public Company can have any number of Members.||Maximum number of members in a Private Company can be 200.
Persons who are in the employment of the company and persons who, having been formerly in the employment of the company, were members of the company while in that employment and have conti nued to be members after the employment ceased shall not be included in the number of member
|Listed Company can have any number of Members.|
|Clause 2(68) & Section 58(2) Freely transferability of shares||Minimum Three Directors||Shares of a Private Company are not freely transferable.||Shares of a Listed Company are freely transferable.|
|Section 23 Public Offer||Shares of a Public Company are freely transferable.||Private Companies cannot invite public to subscribe for any securities of the company.||Same as Public Company.|
|Section 149(1) Minimum No. of Director
|A public company is allowed to invite the public to subscribe for any securities of the company||Minimum Three Directors||Minimum Three Director At least 6 Directors, in case Listed entity falls in top 2000 companies (as per market capitalisation)|
|Section 149(4) – Independent Director||Every Public Company having:
(i) paid up share capital of ten crore rupees or more; or
(ii) turnover of one hundred crore rupees or more; or
(iii) which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees:
is required to appoint two directors as an Independent Directors. Where it is required to appoint a higher number of independent directors due to composition of its audit committee, such higher number of independent directors shall be applicable to it.
Exemption from appointment of ID has been provided to a Joint Venture Company, a Wholly Owned Subsidiary and Dormant Company.
|Appointment of Independent Directors is not applicable to Private Company.||Every Listed Company is required to appoint 1/3 of the total number of directors as Independent Director.
Pursuant to Regulation 17 of SEBI (LODR) Regulations, 2015, where the listed entity does not have a regular non-executive chairperson, at least half of the board of directors shall comprise of independent directors.
Where the regular non-executive chairperson is a promoter of the listed entity or is related to any promoter or person occupying management positions at the level of board of director or at one level below the board of directors, at least half of the board of directors of the listed entity shall consist of independent directors.
|Section 149(1) – Woman Director||Every public company having –
(a) paid–up share capital of one hundred crore rupees or more; or
(b) turnover of three hundred crore rupees or more:
is required to appoint one woman director.
|Appointment of Woman Directors is not applicable to Private Company.||Every Listed public Company is required to appoint woman director.
|Regulation 17 of SEBI (LODR) Regulations, 2015– Woman Independent Director||Appointment of Woman Independent Directors is not applicable to Public Company.||Appointment of Woman Independent Directors is not applicable to Private Company.||Board of directors of the top 1000 listed entities shall have at least one independent woman director by April 1, 2020.|
|Section 177 Rule 6 of the Companies (Meetings of Board and its powers) Rules, 2014– Audit Committee||Public Companies, having:-
(i) paid up Share capital of Rs 10 Crore or more;
(ii) turnover of Rs 100 Crore or more
(iii) in aggregate, outstanding loans or borrowings-or debentures or deposits exceeding Rs 50 Crore or more
shall constitute Audit Committee.
|Composition of Audit Committee is not applicable to Private Company||Every Listed Public Company is required to constitute Audit Committee.|
|Section 178 Rule 6 of the Companies (Meetings of Board and its powers) Rules, 2014– Nomination & Remuneration Committee||Public Companies, having:-
(i) paid up Share capital of Rs 10 Crore or more;
(ii) turnover of Rs 100 Crore or more;
(iii) in aggregate, outstanding loans or borrowings-or debentures or deposits exceeding Rs 50 Crore or more shall constitute Audit Committee.
|Composition of Nomination & Remuneration Committee is not applicable to Private Company.||Every Listed Public Company is required to constitute Nomination & Remuneration Committee.|
|Regulation 21 of SEBI (LODR) Regulations, 2015 – Risk Management Committee||Not applicable||Not applicable||Applicable to top 1000 listed Entities, determined on the basis of market capitalisation, as at the end of the immediate previous financial year.|
|Section 139 Rule 5 Rotation of Auditor||Public Company having paid up share capital of less than ten crore and public borrowings from financial institutions, banks or public deposits of less than fifty crores may appoint an individual as auditor for more than one term of five consecutive years; and an audit firm as auditor for more than two terms of five consecutive years.||Private Company having paid up share capital of less than fifty crore and public borrowings from financial institutions, banks or public deposits of less than fifty crores may appoint an individual as auditor for more than one term of five consecutive years; and an audit firm as auditor for more than two terms of five consecutive years.
|Listed Company can appoint an individual as auditor for one term of five consecutive years; and an audit firm as auditor for two terms of five consecutive years.
Such Auditor shall not be eligible for re-appointment as auditor in the same company for five years from the completion of his term
|Rule 2A of Companies (Specification of definitions details) Rules, 2014– Definition of Listed Companies||Following companies shall not be treated as Listed Company:
(i) Public Companies which, issued Non-Convertible Debentures (NCDs) or Non- convertible Redeemable Preference Shares on Private Placement basis in terms of specified SEBI Regulations;
(ii) Public Companies which have not listed their Equity Shares on a recognised Stock Exchange but whose Equity Shares are listed on stock exchange in permissible foreign jurisdiction. (effective from 1.04.2021)
|Private Companies which, issued Non-Convertible Debentures (NCDs) or Non- convertible Redeemable Preference Shares on Private Placement basis in terms of specified SEBI Regulations & listed the same shall not be considered as listed company.(effective from 1.04.2021)||–|
|Rule 9A Companies (Prospectus and Allotment of Securities) Rules, 2014– Issue of securities in dematerialised form by Unlisted public companies||Every unlisted public company shall –
(i) Issue the securities only in dematerialised form; and
(ii)Facilitate dematerialisation of all its existing securities
Every unlisted public company making any offer for issue of any securities or buyback of securities or issue of bonus shares or rights offer shall ensure that before making such offer, entire holding of securities of its promoters, directors, key managerial personnel has been dematerialised in accordance with provisions of the Depositories Act 1996 and regulations made there under.
Public Company is required to file PAS-6 Reconciliation of Share Capital Audit Report on a half yearly basis with ROC.
|Facilitation of Demat facility is not required in case of Private Companies.||Listed Company shall:
(i) Issue the securities only in dematerialised form
(ii) Facilitate dematerialisation of all its existing securities
(iii)ensure that hundred percent of shareholding of promoter(s) and promoter group is in dematerialized form and the same is maintained on a continuous basis in the manner as specified by the Board.
Listed Company is required to file Reconciliation of Share Capital Audit Report with Stock Exchange on quarterly basis. [SEBI (Depository & Participants) Regulations, 2018]
|Transfer of shares held in physical mode||On or after 02.10.2018, Every holder of securities of an unlisted public company who intends to transfer securities shall get such securities dematerialised before the transfer.||Private Company can transfer the share in physical mode.||Pursuant to Regulation 40 of SEBI (LODR) Regulations, 2015, except in case of transmission or transposition of securities, requests for effecting transfer of securities shall not be processed unless the securities are held in the dematerialised form with a depository.|
|Section 2(76)(viii)- Related Party||In case of Public Companies following shall be treated as Related Party:
(i) a holding, subsidiary or an associate company of such company;
(ii) a subsidiary of a holding company to which it is also a subsidiary;
(iii) an investing company or the venture of the Company .
|For Private Companies, it is not applicable.||Same as applicable to Public Company.|
|Section 188(1) – Related Party Transaction||No member shall vote on any resolution if such member is a related party.||In case of Pvt. Company, related parties can vote on any resolution.||Same as applicable to Public Company.|
|Section 62(1)(a) – Right Issue||Public Companies proposes to increase its paid up share capital by issue of further shares, such shares shall be offered on right basis to the existing shareholders by way of offer letter specifying the number of shares and the time period of not less than 15 days and not more than 30 days from the date of offer, within which the offer if not accepted shall be deemed to have been declined.
Notice shall be dispatched through registered post or speed post or through electronic mode or courier or any other mode having proof of delivery to all the existing shareholders at least three days before the opening of the issue.
|Private Company upon receiving the consent of 90% of its members in writing or in electronic mode, may prescribe for lesser period for sending the offer Letter of Right Issue. It can also provide lesser time period for subscription of Right issue.
|Listed Companies are required to comply with the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 in addition to Section 62(1)(a) of Companies Act, 2013.|
|Section 43 – Kinds of Share Capital and
47 – Voting Rights.
|Public Companies are required to comply with Section 43 and 47 of the Companies Act, 2013.||Section 43 and 47 are not applicable to a Private Company if the Articles or Memorandum of the Company so provides.
A Private Company is free to decide the Voting Rights on its shares.
|Listed Companies are required to comply with section 43 and 47.|
|Section 62(1)(b) – ESOP||A Public Company can issue shares to its employees under Employee Stock Option Scheme by passing Special Resolution.||A Private Company can issue shares to its employees under Employee Stock Option Scheme by passing Ordinary Resolution instead of Special Resolution.
|Listed Companies are required to comply with the SEBI (Share Based Employee Benefits) Regulations, 2014 in addition to Section 62(1)(b) of Companies Act, 2013.|
|Section 67 – Restrictions on Purchase by Company or Giving of Loans by it for Purchase of its Shares||There are two restrictions on purchase by company of its shares or for giving of loans by the company for purchase of its shares.
(i) have power to buy its own shares unless the consequent reduction of share capital is effected
(ii) shall give whether directly or indirectly and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or in connection with, a purchase or subscription made or to be made, by any person of or for any shares in the company or in its holding company.
|The restrictions 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 its paid up share capital or fifty crore rupees, whichever is lower; and
(c) such company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section.
|Same as applicable to Public Company|
|Section 73(2)(a) to (e)- Prohibition on acceptance of deposits from public||Public Companies which accept deposit from its members are required to issue circular to its members and file its copy to Registrar. It is also required to deposit at least 20% of the deposit maturing in the following financial year on or before 30th April and also certify that there is no earlier default regarding it or 5 years have elapsed since the default has been made good.||Private company which accepts deposit from its members (monies not exceeding one hundred per cent of aggregate of the paid up share capital and free reserves) is not required to comply with 73(2)(a) to (e)and such company shall file the details of monies so accepted to the Registrar in such manner as may be prescribed.||Same as applicable to Public Companies.|
|Section 136 – Right of Member to Copies of Audited Financial Statement||Public Companies are not required to place financial statements, consolidated financial statements of the Company and separate audited accounts of its subsidiaries on its website, if any||Private Companies are not required to place financial statements, consolidated financial statements of the Company and separate audited accounts of its subsidiaries on its website, if any||Listed Companies are required to place financial statements, consolidated financial statements of the Company and separate audited accounts of its subsidiaries on its website, if any|
|Section. 160- Right of Persons Other than Retiring Directors to Stand for Directorship||In case a person other than retiring directors stands for directorship at General Meeting, Notice (signifying his candidature as a director) and deposit of Rs 1 Lac, is required.
Requirements of deposit of amount shall not apply in case of appointment of IDs and director recommended by NRC/BOD.
|Such notice and deposit of fees in not required in case of Private Company||Same as applicable to Public Companies.|
|Section 180- Power of Boards||The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution, namely:—
(a) to sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company or where the company owns more than one undertaking, of the whole or substantially the whole of any of such undertakings.
(b) to invest otherwise in trust securities the amount of compensation received by it as a result of any merger or amalgamation;
(c) to borrow money, where the money to be borrowed,
together with the money already borrowed by the company will exceed aggregate of its paid-up share capital, free reserves and securities premium, apart from temporary loans obtained from the company’s bankers in the ordinary course of business.
(d) to remit, or give time for the repayment of, any debt due from a director.
|Since Section 180 is not applicable to Private Companies,
Powers mentioned in the Section 180 can be exercised by the Board Resolution only.
|Same as applicable to Public Companies.|
|Section 184(2)- Disclosure of Interest by Directors||Every director of a company who is in any way, whether directly or indirectly, concerned or interested in a contract or arrangement or proposed contract or arrangement entered into or to be entered into-
a. with a body corporate in which such director or such director in association with any other director holds more than 2% shareholding of that body corporate or is a promoter, manager, Chief Executive Officer of that body corporate; or
b. with a firm or other entity in which, such director is a partner, owner or member, as the case may be shall disclose the nature of his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting.
|Sec. 184(2) shall apply to private Companies with an exception that interested director may participate in such meeting after disclosure of his interest.
|Same as applicable to Public Company.|
|Sec. 196(4) and (5) – Appointment of MD/WTD/Manager||Appointment of managerial personnel is subject to the approval by the Board, shareholders and also by the Central Government if the appointment is in variance with the conditions as specified in Schedule V.
Further, where an appointment of a managerial personnel is not approved by the company at a general meeting, any act done by him before such approval shall not be deemed to be invalid.
|Such provisions are not applicable to Private Companies.
Appointment of a MD/WTD/Manager will not require the approval by resolution at a general meeting of the company.
|Same as applicable to Public Company.|
|Sec. 117(3) – Resolutions and Agreements to be filed||Public Companies are required to file the Resolutions passed in pursuance to Section 179(3) (Powers of Board) to the Registrar.||Private Companies are not required to file the Resolutions passed in pursuance to Section 179(3) (Powers of Board) to the Registrar.||Same as applicable to Public Company.|
|SEBI Regulations [(SAST), (PIT), (LODR), (ICDR) etc.]||Not applicable||Not applicable||Applicable|
Small Company means a Company having:
> paid-up share capital of which does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees and
> turnover of which as per profit and loss account for the immediately preceding financial year does not exceed twenty crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees.
> Only a private company can be classified as a small company.
> Holding company, subsidiary company, charitable company and company governed by any Special Act cannot be classified as a small company.
> With gradual growth of business, if a company cross any of the thresholds provided, either for paid-up capital or turnover, the company must give up the status of the small company and the benefits granted for such companies.
One Person Company (OPC)
One Person Company means a company which has only one person as a member.
Salient Features of One Person Company:
> Only a natural person who is an Indian citizen (Resident in India or otherwise) shall be eligible to incorporate a One Person Company & become nominee for the sole member of a One Person Company.
> “Resident in India” means a person who has stayed in India for a period of not less than one hundred and twenty days during the immediately preceding financial year.
> A natural person shall not be member of more than a One OPC at any point of time and the said person shall not be a nominee of more than a One OPC.
> Minor cannot become member or nominee of the One Person Company or cannot hold share with beneficial interest.
> OPC Company cannot be incorporated or converted into a company under Section-8 of the Act, 2013.
> OPC have only 1 Director and it can have maximum 15 Director.
> OPC Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any Body Corporates.
> The memorandum of One Person Company shall indicate the name of the other person (nominee), with his prior written consent in the Form No. lNC-3, who shall, in the event of the subscriber’s death or his incapacity to contract become the member of the company.
|Meetings of the Board||A small company & OPC shall hold only two board meetings in a year instead of fulfilling the requirement of four meetings in a year like other companies, i.e. A small company may hold one Board Meeting in each half of the calendar year with a minimum gap of ninety days between the two meetings.|
|Mandatory rotation of auditors as per Section 139(2) of the Companies Act, 2013||Provisions regarding mandatory rotation of auditor/maximum term of auditor being 5 years in case of an individual and 10 years in case of a firm of auditors is not applicable to a small company & OPC as per section 139(2) of the Companies Act, 2013.|
|Cash Flow Statement||A Small company & OPC need not include cash flow statement as part of its financial statement|
|Internal Financial Controls||An Auditor of small companies & OPC are not required to report on the adequacy of the internal financial controls and its operating effectiveness in the auditor’s report.|
|Signing of Annual Return||The annual return of a small company & OPC can be signed by the company secretary alone, or where there is no company secretary, by a single director of the company.|
|Matters to be included in Board’s Report||Small companies & OPC are exempted from including the matters to be included in the Board’s report as per Rule 8 of Companies (Accounts) Rules, 2014, such as contracts or arrangements with related parties, highlights of performance of subsidiaries/associates/joint venture, Conservation of Energy, Technology Absorption, Foreign Exchange Earning & Outgo, Change in the nature of business etc.
Instead the Board’s report shall include the matter stated in Rule 8A of Companies (Accounts) Rules, 2014.
|Lesser penalties for Small Companies under Section 446 B of the Companies Act, 2013||If a small company & OPC fails to comply with the provisions of section 92(5), section 117(2) or section 137(3), such company and officer in default of such company shall be liable to a penalty which shall not be more than one half of the penalty specified in such sections.|
|Professional Certification for e-forms to be filed with MCA||The e-forms filed by small companies & OPC are not required to be pre-certified by the Chartered Accountant or the Company Secretary or as the case may be the Cost Accountant, in whole-time practice.|
|Annual return||Small companies & OPC are required to provide details of aggregate amount of remuneration drawn by directors instead of providing details of remuneration of directors and key managerial personnel of the company.|
|Applicability of Companies (Auditor’s Report) Order, 2016||CARO is not applicable to Small Company & OPC|
|Applicability of SS- 1 & 2||Secretarial Standard -1 & 2 is not applicable to OPC|
|Annual general meeting||OPC need not be hold an AGM.|