Under section 462 of CA, 2013 on 05/06/2015 MCA has issued exemption notification for Private Companies other than subsidiary of public companies under Companies Act, 2013
Companies Act, 2013 has brought massive changes for private companies as barring a very few, all the exemptions which were available to private companies under the Companies Act, 1956 have been withdrawn in the Companies Act, 2013 which was creating serious problems in compliance for private limited Companies and made many companies to convert into LLP.
Considering the difficulties of Trade MCA has issued exemption Notification dated 05/06/2015 under section 462 of the Companies Act 2013 (“the Act”) providing necessary exemptions to private company other than subsidiary of public companies from the provisions of Companies Act, 2013.
Summary of such exemption to private company other than subsidiary of the Public Companies from the provision of the Companies Act, 2013 is as follows :-
| S.N | Chapter/ Section of the Act | Particular | Exemption Provided in MCA Notification |
| A. |
Chapter 1, Sub-clause (viii) of clause (76) of section 2. |
Bare Act Language of Section:“related party”, with reference to a company, means- any company which is—
(A) a holding, subsidiary or an associate company of such company; or (B) a subsidiary of a holding company to |
Holding, Subsidiary and Associate Company will not cover under Related Party for the purpose of section 188. Note:- Although Holding company is excluded but Director (other than independent Director), KMP of holding company or their relative are still included in definition of Related Party. (Section 2(76)(ix)) Language of Notification: Shall not apply with respect to section 188. |
| B. |
Chapter IV, Section 43 and Section 47 |
Section 43- Kind of Capital Section – 47 Voting Right |
If anything else mentioned in MOA & AOA then MOA & AOA prevail over the section 43 and 47. Language of Notification: Shall not apply where MOA & AOA of the Private Company so provides. |
| C. | Chapter IV, Section 62(1)(a)(i) and (2) |
Bare Act Language Earlier: The offer of Right issue of shares shall be open for minimum 15 days not exceeding 30 days from the date of the offer within which offer made. |
In case 90%, of the members of a private company have given their consents in writing or in electronic mode then Offer Can Be Close Before 15 Days. Note:- The time limits cannot be increased, they can only be reduced. Language of Notification given at the end (S. No. 1) |
| D. |
Chapter IV, Section 62(1)(b): Further Issue of Share Capital |
For ESOP Special Resolution Required. |
Now for ESOP Ordinary Resolution is enough. Language of Notification The words “special resolution”, the words “ordinary resolution” shall be substituted. |
| E. |
Chapter IV- Section 67 |
Restrictions on purchase by company or giving of loans by it for purchase of its shares. |
Language of Notification given at the end (S. No. 2) |
| F. | Chapter V- Section-73(2) (a) (e): |
Earlier Private Limited Company can accept deposits from the Member after follow up the procedure mention under Section 73. |
Acceptance Of Deposits From Members Made Easier For Certain Companies
Private Limited Company can accept deposit from the Members upto 100% of aggregate of the paid up share capital and free reserves without followings: · Issue Circular · File circular with ROC · Maintain deposit repayment reserve · Provide deposit insurance Language of Notification is given at the end (Point no. 3) |
| G. | Chapter VII |
· 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. |
If anything else mentioned in AOA then AOA prevail over the section 101-107 & 109. Articles of A Private Company May Override Provisions Pertaining To 1. Content & Length of Notice 2. Explanatory Statement 3. Quorum 4. Chairman 5. Proxies 6. Restriction on Voting Rights 7. Show of Hands & Poll Language of Notification is given at the end (Point no. 4) |
| H. |
Chapter VII- Section:117 (3)(g)
|
Earlier Provision: Copy of Resolution passed in pursuance of sub-section (3) of Section 179 required to filing with ROC. |
Now there is NO NEED TO FILE FORM 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 Language of Notification Provisions of Section 117(3)(g) will not apply on Private Limited Company. |
| I. | Chapter X- Section 141 (3)(g): | Earlier Auditor can’t be appoint as auditor in more than 20 (Twenty) Companies. |
Now under the limit of 20 (Twenty) Companies following will not include: · one person companies, · dormant companies, · small companies, and · Private Companies having paid-up share capital less than one hundred crore rupees”. Limit of 20 Companies only Includes:- 1. Public Companies 2. Private Companies having paid up capital of Rs. 100 Crore or more |
| J. | Chapter XI- Section 160- |
Candidature Not Required For Appointment of Director at General Meeting |
Now there is no need to deposit Rs. 100,000/- by the Director at the time of appointment. |
| K. | Chapter XI- Section 162- | Appointment of directors Need not to be voted individually. | Now more than one director can be appoint via a single resolution. |
| L. | Chapter XII- Section 180- | Restrictions on powers of Board Not Apply |
Now there is no need to pass “Special Resolution” for the purposes of passing of Resolution mentioned under Section 180. Example: 1. Borrow exceeding paid up capital & free reserves. 2. Sell/lease/dispose off undertaking |
| M. | Chapter XII- Section 184(2) | Disclosure of interest by director. |
Now Interested directors can participate in the meeting and vote in the meeting after disclosure of his interest. Note:- He Cannot be counted in Quorum (Section 174(3) explanation) |
| N. | Chapter XII- Section 185- | Loan to Director was earlier not allowed. |
Loan to director are allowed for Private Limited Companies if its fulfill the below mentioned conditions: 1. Body Corporate should not be Shareholder 2. Not borrowed money from Bank/ Financial Institution/ Body Corporate exceeding lower of the following:- i. Twice its Paid up capital ii. Rs. 50 crore 3. No repayment default subsisting of such borrowings at time of giving loan Note: Giving of loans/ guarantee/security to Group Companies now possible. Language of Notification is given at the end (Point no. 5) |
| O. | Chapter XII- second proviso to section 188 (1): |
Bare Act Language Earlier: No member of the company shall vote on such Resolutions, to approve any contract or arrangement which may be entered into by the Company, if such member is related party. |
Restriction On Voting Right In General Meeting In Case Of Related Party Transaction Not Applicable:Now This proviso will not apply on Private Limited Company.“Even if, Member is related then also he can vote on such resolution required to be pass u/s 188 in GM. |
| P. | Chapter XIII-section 196(4) & (5): | Appointment of MD, WTD & Manager. |
Now there is no need to Pass Resolution in General Meeting for appointment of Managerial Personnel and no need to file form MR-1. Managerial Personnel can be appoint in Private limited Company without following: 1. Shareholder’s Ratification in not required. 2. Schedule V not applicable. 3. MR-1 not required to be filed 4. T&C of appointment, remuneration not mandatory to be mentioned in resolution |
| S. N. | LANGUAGE OF NOTIFICATION |
| 1. | 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 90% , of the members of a private company have given their consents in writing or in electronic mode, the periods lesser than those specified in the said sub- ¬clause or sub-section shall apply. |
| 2. | Chapter IV, section 67.Shall not apply to private companies -I. in whose share capital another body corporate has invested any money;II. 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; andIII. such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section. |
| 3. | Chapter V, clauses (a) to (e) of subsection (2) of section 73.Prohibition 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. |
| 4. | 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. |
| 5. | Chapter XII, section 185 Provisions of Section 185 not apply to a private company if its fulfill the following below mention conditions- (a) in whose share capital another body corporate has invested any money; (b) if the borrowings of such a company from 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 no default in repayment of such borrowings subsisting at the time of making transactions under this section. |
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at [email protected])
Author Bio
Dear Mr. CS Divesh Goyal, In point no 5 clause a is not correct. Correct sentence is “in whose share capital no other body corporate has invested any money” pl correct your article at point no 5
Hi
u/s 185 in case of pvt co paid up capital is considered on what date
Private company here indicate
whether private ltd company or private company
PLS CLEAR WHEN WILL BE APPLICABLE THIS NOTIFICATION FROM LAST YEAR AND FROM DATE OF NOTIFICATION
THANK YOU
CA RAHUL JAIN
If MGT-14 was not filed for a special resolution for ESOP passed in january 2015,is it required to be filed now considering an ordinary resolution is sufficient from 05/06/2015.Pls help asap.
Special resolution for ESOP was passed in January 2015 but MGT-14 was not filed.Now w.e.f. 05/06/2015,this is not required to be filed as ordinary resolution is enough.Will i have to file late MGT-14 with penalty as in january it was a special resolution.PLease help asap.
Special resolution for ESOP was passed in January 2015 but MGT-14 was not filed.Now w.e.f. 05/06/2015,this is not required to be filed.Will i have to file late MGT-14 with penalty as in january it was a special resolution.PLease help asap.
Sir,
its mains that if any private company wants to give any loan guarantee etc, shall be calculated as per section 186?
Thank you for sharing such useful information but the language notification with reference to Sec.185 and Sec.67 is contradictory in respect to body corporate as a shareholder of a Private company.
whether it is an error or has any meaning assigned to it?
Can the articles contain provisions which are contrary to the provision of sec 101 to 107 & 109 of the co act 2013
Can we start accepting deposits as per exemption provided? Also how do we notify ROC regarding the same. is the information required to be given in DPT14?
The language of notification says :- “company shall file the details of monies so accepted to the Registrar in such manner as may be specified.”
So where is the manner specified??
It is just presented before the house, thus not applicable at present.
Correct me if wrong.
Delayed MGT 14 are also not required to be filed now for private limited companies as filing includes late filing.
When will this notification come into force?
Dear Divesh,
The language of Notification for
Section 117 (3)(g) is
In section 117 of the principal Act, in sub-section (3),—
(i) in clause (g), the word ‘‘and’’ occuring at the end shall be omitted;
(ii) after clause (g), the following proviso shall be inserted, namely:—
“Provided that no person shall be entitled under section 399 to inspect or
obtain copies of such resolutions; and”.
This means only the inspection of Resolutions under Section 117 (3)(g) is ommitted not the entire Section (3)(g) and it is a generic provision applicable to Pvt and Pub. Cos.
The filing of MGT – 14 for resolutions U/s. 117 (3)(g) i.e. 179 still prevails for all Cos.
THERE IS ONE CASE IN WHICH 2 COMPANIES ARE HAVING SAME DIRECTORS, CAN ONE COMPANY GIVE LOAN TO ANOTHER COMPANY???
Language of the notification SN 5: “Provisions of Section 185 not apply to a private company if its fulfill the following below mention conditions- (a) in whose share capital another body corporate has invested any money…”
The word ‘NOT’ is missing. It should read as: “…any other body corporate is NOT a shareholder…”
GOOD DIVYESHBHAI.
Quick analysis, but clause N relating to loans to directors u/s Sec 185 one of the condition laid down in the Notification is that Sec 185 shall not apply to a private limited company in whose share capital no other body corporate invested any money. That means for claiming exemption,such private company should not have any body corporate as share holder.
It will be a good idea to consolidate all the clarifications/views as it applies to
a) private ltd co b) public ltd., and bring it as a consolidated book or publication.
Please correct in table sec 185 that body corporate should be a shareholder instead no body corporate shareholder.