Muthu kumaran

Muthu kumaranExemptions to Private Companies (other than the subsidiary of a public company) [Issued under section 462(1) (a) & (b)]

INTRODUCTION:

MCA issued the Notification dated 5th may 2015 by which it has provided for much awaited exemptions to Private Companies. After this notification now the private companies are relieved from the stringent compliance of the act.

The Details of such exemptions are as follows…

1. DEFINITION OF RELATED PARTY RELAXED:

· Following companies will not be treated as related party to a private company to determine the related party transaction u/s 188

i. Holding  Company

ii. Subsidiary   Company

iii. Associate Company

iv. Subsidiary Company of Holding Company to which the company is also a subsidiary.

2. EXEMPTION FROM SECTION 43 AND SECTION 47:

· Section 43 (provisions relating to kind of share capital) and 47(Provisions relating to voting rights of member) of the Act not applicable where the MOA and AOA of the private company so provides.

· The provisions of MOA and AOA of private company prevails over section 43 and 47 of the Act.

3. RELAXATION FROM TIME LIMITS IN RIGHT ISSUE (section 62(1) & (2))

Sending of offer letter minimum 3 days before opening of offer AND Minimum & maximum offer period of 15 & 30 days respectively in RIGHT ISSUE can be reduced(it can be lesser than 3 days or 15 days), if 90% member gives their consent in writing/electronic mode. (The time limits cannot be increased, they can only be reduced)

4. PASSING OF RESOLUTION TO APPROVE THE ISSUE OF EMPLOYEE STOCK OPTION (section 62(1) (b))

A private Company can issue shares to its employees under a scheme of Employee Stock option by passing an Ordinary resolution. Earlier, special    resolution was required to be passed.

5. RESTRICTION ON PURCHASE OF ITS OWN SHARES/GIVING OF LOANS BY IT FOR PURCHASE OF ITS OWN SHARES RELAXED (SECTION 67)

Section 67 of the act not applicable to private company satisfying following criteria

(a)    Private company in  whose  share  capital  no  other  body corporate has invested any money,

(b)   The borrowings from banks or  financial    institutions or  anybody corporate is less than twice its paid  up share capital or Rs. 50 Crores whichever is lower; and

(c)    company is not in default in repayment of such borrowings subsisting  at the  time  of  making transactions  under this section

6.  Provisions relating to Acceptance of deposits from members relaxed (section 73(2)

Private Companies can accept deposits from its members up to 100% of its paid up share capital   and free reserves without having to comply    with   the   procedural    requirements prescribed under Section 73 (issuing circular to the members, filing copy of circular with ROC, deposits insurance, declaration for non default, maintaining repayment reserve) provided details of the deposits so accepted is filed with the ROC.

7. EXCEPTION FROM COMPLYING THE SECTIONS OF 101 TO 107 AND SECTION 109  

If anything else mentioned in AOA of private companies then AOA prevail over the sections 101-107 & 109.

101- Notice of meeting.

102- Statement to be annexed to notice.

103- Section Quorum for meetings.

104- Chairman of meetings.

105- Proxies.

106- Restriction on voting rights.

107- Voting by show of hands.

109- Demand for poll.

8. EXCEPTION FROM FILING OF FORM MGT-14 (section 117(3) (g))

Filing MGT 14 for the purposes of resolutions passed u/s 179(3) read with rule 8 of Companies (Meeting of Board & its power) Rules, 2014 is no longer applicable to private companies.

9. LIMIT FOR NO OF COMPANIES IN WHICH THE AUDITOR CAN ACT AS AN AUDITOR:  (section 141(3) (g))

· Now the current limit of 20 (Twenty) Companies following will not include:

(a)    One person companies,

(b)   Dormant companies,

(c)    Small companies, and

(d)   Private Companies having paid-up share capital less than one hundred crore rupees”.

· Limit of 20 Companies only Includes:-

(A)   Public Companies

(B)   Private Companies having paid up capital of Rs. 100 Crore or more

10. EXCEPTION FROM SECTION 160(RIGHT OF A PERSON OTHER THAN A RETIRING DIRECTORS TO STAND FOR DIRECTORSHIP)

Provisions of Section 160 (Deposit of Rs. 1 Lakhs and 14 days notice of candidature) shall not apply to a private company in case of appointment of a director in a general meeting.

11. EXCEPTION FROM SECTION 162(Appointment of directors to be voted individually)

Now more than one director can be appoint via a single resolution.

12. EXCEPTION FROM SECTION 180(Restriction on powers of the board)

Private company no needs to pass “Special Resolution for following transactions :-

  • Selling,   leasing or otherwise disposing whole or substantially the whole of undertaking of the company
  • Investing in trust securities, the amount of compensation received by it as a result of any merger or amalgamation
  • Borrowing money where the money to be borrowed exceeds the paid up capital and free reserves
  • Remitting or giving time for repayment of any debt due from a director

13.  EXCEPTION FROM SECTION 184(2) [Disclosure of interest by the director]

Now interested directors can participate in the meeting (where   the   any   contract,    transaction   or arrangement in which he is interest is to be discussed or approved) and vote in the meeting after disclosure of his interest. But He Cannot be counted in Quorum.

14. EXCEPTION FROM SECTION 185 (LOAN TO DIRECTORS):

The restriction   on giving   of loans   advances and guarantees etc.   to  directors and  other entities in  which  directors are interested  will not apply  to Private companies satisfying following criteria

(a)    No  other  body corporate has invested any money in the share capital of the company,

(b)   The borrowings from banks or  financial    institutions or  anybody corporate is less than twice its paid  up share capital or Rs. 50 Crores whichever is lower; and

(c)    Company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section.

15. APPROVAL OF RELATED PARTY TRANSACTION U/S 188 BY RELATED MEMBER

There is NO restriction on a member,   being a related party, to vote on a special resolution required to be passed u/s 188 in GM, to approve a related   party transaction.

16. EXCEPTION FROM THE SECTION 196(4&5):

  • Approval of terms and conditions and remuneration payable to M.D/WTO/MGR by board and member is not required in case of private company
  • CG approval for appointment variant from schedule V also not required.
  • Requirement of notice convening the Board/General Meeting (for appointment) shall include the terms and conditions of such appointment, remuneration payable and interest of a director in such appointment are not required.
  • Requirement   of    filing   MR 1 with ROC is not required.
  • Provision that where an appointment of M.D/WTO/MGR 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 has been removed.

NOTE:

1. While complying with above exceptions/Modifications/Adoptions, the Company should ensure that the interest of their shareholders are protected

2. The sections quoted are only with reference to the companies act,2013 only

3. This Notification is issued under section 462 of the act ( power of central government to exempt  class or classes of companies from the provisions of this Act)

More Under Company Law

Posted Under

Category : Company Law (3466)
Type : Articles (14841)
Tags : Companies Act (1934) Companies Act 2013 (1706)

0 responses to “Exemptions to Private Companies (other than subsidiary of a public company)”

  1. Rajesh,Mumbai says:

    Earlier Circular No.5 of 2015 dated 30/03/2015 clarified that Loan Received by private companies from members, directors or their relatives before 01.04.2014 is not deposit.
    Now vide above notification, The limit of 100% of Equity + Free Reserves have been prescribed to accept deposits from members. I request clarification from author as to whether this Limit will apply to fresh Loans taken after 05/06/2015 or also include loans already taken before 01/04/2014.
    Will share premium be part of free reserves ?
    Can Any CS please clarify it ?.

  2. Rashmi says:

    the notification is dated 5th June 2015 and not 5th May 2015 as mentioned above in first Para.

    also to note that it is effective from 5th June 2015 and not before.

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