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Regarding new provisions of Section 43A(2A) of the Companies Act, 1956

I am directed to refer to your letter No.TC/43A(2A)/3854 dated 23.1.2002 addressed to the Regional Director, Kanpur and copy endorsed to this Department and to say that fixing of time limit for getting conversion by deemed public company to private limited company under Section 43A(2A) of the Companies Act, 1956 may not be feasible.

General Circular No. 23/2002

F.No. 17/26/2002-C.L.V

Government of India

Ministry of Finance and Company Affairs

Department of Company Affairs

5th floor, A’ Wing, Shastri Bhavan,

Dr. R.P. Road, New Delhi.

Dated 30th of September, 2002

To

All Regional Directors

All Registrars of Companies

The Registrar of NCT of Delhi and Haryana has sought a clarification on the applicability of Section 43A(2A) on the erstwhile deemed public companies (when Section 43A was in operation prior to the Companies (Amendment) Act, 2000, which came into force w.e.f. 13.12.2000), to those public companies which are subsidiaries of foreign body corporates. The matter has been examined in the Department.

2. After amendment of the erstwhile Section 43A, since the provisions of Section 4 of the Companies Act are independent, a private company, being a subsidiary of a foreign body corporate, which, if incorporated in India, would not be a public company.  As such, these deemed public companies are entitled to revert back to their initial status of private limited companies as the effect of Section 43A has been nullified by the amendment referred to.

3. Section 4(7) of the Act was an exemption available to Indian private companies when foreign body corporates were holding 100% share in them to retain their “private” status. After amendment of Section 43A, such exemption is not required. Therefore, applications under Section 43A(2A) shall be dealt with independent of section 4(7) of the Act. The legal position in the above circumstances would be that a private company would be the subsidiary of another private limited company even if the holding company happens to be a foreign body corporate and these companies do not need the exemption provided in Section 4(7) of the Act. Therefore, the private company status of such companies is a statutory one, and takes effect automatically. All that the company is required to do is to make an application to the Registrar that the company has become a private company and there upon the Registrar shall substitute the words “private limited” in lieu of the words “public limited”.

4. Since no time limit has been prescribed in the statute for the companies to revert back, the Department has already issued a departmental circular no. 3/2002 dated 24.7.2002 (F.No.17/4/2002-CL.V) (Copy Enclosed) wherein it has been clarified that those companies which do not approach the Registrar of Companies seeking reversion back to private company status, are deemed to have chosen to remain as public companies.

5. In the circumstances, it is hereby clarified, that in cases falling in the above paragraphs, the Registrar is required to make the necessary corrections in the certificate of incorporation within 4 weeks as from the date of receipt of application from the company as provided in Section 43A(2A) of the Act.

(E. Selvaraj)

Joint Director (T)

Copy for information to :-

All Chambers of Commerce,

FICCI, ICAI, ICSI, ICWAI, ASSOCHAM

(COPY)

Departmental Circular No.3/2002
No.17/4/2002-CL.V

Government of India

Ministry of Finance and Company Affairs

Department of Company Affairs
5th Floor, “A” Wing, Shastri Bhavan,

Dr. Rajendra Prasad Road, New Delhi-110 001.

Dated 24th July, 2002

To

Registrar of Companies

NCT of Delhi and Haryana,

New Delhi.

Subject:- Regarding new provisions of Section 43A(2A) of the Companies Act, 1956.

Sir,

I am directed to refer to your letter No.TC/43A(2A)/3854 dated 23.1.2002 addressed to the Regional Director, Kanpur and copy endorsed to this Department and to say that fixing of time limit for getting conversion by deemed public company to private limited company under Section 43A(2A) of the Companies Act, 1956 may not be feasible.  If a public company, which had become a deemed public company under Section 43A of the Companies Act when it was in force, does not approach for re-conversion , it is deemed to have chosen to remain as a public company.

Your faithfully,

Sd/-

(Thakur Sharan)

Under Secretary to the Govt. of India

(Te: 3389796)

Categories: Company Law
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