Compendium of Exemptions and Applicability of provisions under Companies Act, 2013 with modifications
Ministry of Corporate Affairs (‘MCA’) vide notification dated 5th June, 2015, exempted Section 8 Companies from complying with certain provisions of the Companies Act, 2013 (‘Act, 2013’ or ‘Act’ or CA 2013) as mentioned hereunder subject to the condition that the Company will ensure protection of shareholder’s interests.
Exemptions to section 8 companies from certain provisions of Companies Act, 2013 (‘Act’):
1. Definition of Company Secretary in section 2(24) of the Act is not applicable on Section 8 Companies. Therefore, Section 8 Companies are not required to appoint a qualified CS professional as its company secretary.
2. Requirement of having a minimum paid-up share capital for incorporating a private or a public company has been done away with vide the Companies (Amendment) Act, 2015. Therefore, a Section 8 company also need not comply with the same.
3. Section 149(1) of the Act shall not apply to Section 8 Company. Therefore, a Section 8 Company is not required to appoint an Independent Director. Further, for the above mentioned reason, the Audit Committee of a Section 8 Company shall not require to have Independent Directors as member of its Board.
4. Directorship in Section 8 Companies will not be counted for calculating the ceiling with respect to maximum number of directorships as prescribed under Section 165 of the Act.
5. Section 178 of the Act is not applicable to Section 8 Company. Accordingly, Section 8 Companies are not required to have a Nomination and Remuneration Committee nor a Stakeholders Relationship Committee.
Applicability of provisions of the Act to Section 8 Companies with modifications:
1. Section 8 Company cannot be amalgamated with a Company which is not a Section 8 company.
2. A Section 8 Company can hold its Annual General Meeting on a National Holiday, beyond business hours and at a place other than a place which is in the same city, town or village where the registered office of the company is situated subject to any directions in this regard given by the company in a general meeting.
3. A Section 8 company can call a General Meeting by giving at least fourteen days’ notice as against twenty-one days’ notice. Therefore, financial statements along with the auditor’s report etc. which are to be laid before the General Meeting shall be sent to every person entitled to receive such documents not at least fourteen days’ before the meeting as against twenty-one days.
4. Secretarial Standards are not applicable on a Section 8 Company
5. A member of a Section 8 Company shall not be entitled to appoint any other person as his proxy unless such other person is also a member of such company.
6. Section 118 of the Act does not apply as a whole except that minutes may be recorded within 30 days of the conclusion of the meeting in case of companies where the articles of association provide for confirmation of minutes by circulation. In other words, a Section 8 company is not required to prepare and record the minutes within thirty days of the meeting, unless the articles provide otherwise.
7. Section 160 of the Act dealing with right of persons other than retiring director to stand for directorship by serving a notice to the Company along with deposit of one lakh rupees shall not be applicable to such Section 8 companies whose articles provide for election of directors by ballot.
8. Section 8 Company can appoint more than fifteen Directors without passing a special resolution.
9. As per Section 173(1) of the Act states that Board of Directors of such company shall hold at least one meeting within every six calendar months.
10. Quorum for Board meeting of a Section 8 Company shall be either 8 members or 25% of total strength of the Board, whichever is less. However, in any case, the quorum shall not be less than two members.
11. The delegation of powers of the Board to be exercised at the meeting as per subsection (d), (e) and (f) of section 179(3) may be decided by the Board by circulation.
12. Disclosure of interest in a contract or arrangement entered into as per section 184(2) shall be applicable to a section 8 company only if the transaction with reference to section 188 on the basis of terms and conditions of the contract or arrangement exceeds one lakh rupees.
13. Register of contract and arrangements in which the directors are interested shall be maintained only if the transaction with reference to section 188 on the basis of terms and conditions of the contract or arrangement exceeds one lakh rupees.