Monday, 6 July 2015

13 Exemptions to Private Companies

Ministry of Corporate Affairs has issued Notification dated June 5, 2015 by which it has provided various much awaited Exemptions to Private Companies other than the subsidiary of a public company  a summary of such exemptions is as follows :-
S.No.Exemption GivenSectionMajor Impact
1.
DEFINITION OF RELATED PARTY RELAXED WITH RESPECT TO SECTION 188
Does not include Holding, Subsidiary, Associate Company and sister concern(subsidiary of holding)

2(76)
Transactions entered with them and falling under section 188 does not require compliance 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))
2.
TIME LIMITS IN RIGHT ISSUE CAN BE REDUCED
Sending of offer letter min 3 days period before opening of offer
AND
Minimum & maximum offer period of 15 & 30 days respectively
Can be reduced, if 90% member give their consent in writing/electronic mode
62(1)(a)&62(2)
In case of emergency, the mentioned time limits an be reduced with consent of shareholders.
Note:- The time limits cannot be increased, they can only be reduced.
3.
ACCEPTANCE OF DEPOSITS FROM MEMBERS MADE EASIER FOR CERTAIN PRIVATE COMPANIES
Private Companies borrowing monies from members upto aggregate limit of paid-up share capital & free-reserves need not require to comply with conditions mentioned in section 73(2)(a) to (e).
However details of money so borrowed shall be filed with ROC in manner as may be specified
73(2)(a) to (e)If Such Company borrows money from member then no need to:– Issue Circular
-File circular with ROC
-Maintain Deposit repayment reserve
-Provide deposit insurance
4.NO NEED TO FILE MGT-14 FOR BOARD RESOLUTIONS.
Any Board resolution mentioned in section 179 read with rule 8 ofCompanies (Meeting of Board & its power) Rules, 2014 is now not required to be filed with ROC.
117(3)(g)Saving in ROC filing costs
5.
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
(Position brought at par with Companies Act, 1956)
  101 to 107 &109
Private Company may override by its articles mentioned provisions.
However, a Private Company Cannot:-
1. Reduce quorum below 2
(In re- Ram Villas Press Publication Pvt. Ltd- Kerela HC)
2. Increase time limit of 48 hours for depositing proxy form (Section 105(4))
3. Reject a proxy form if it fails to comply with specific requirement of AOA (Section 105(7))
4. Restrict voting right of a member other than restrictions in section 106 (section 106(2))
6.
MAXIMUM NO. OF AUDIT IN CASE OF PRIVATE COMPANY RELAXED
Text of notification:- “Other than OPC, Dormant, Small Companies and Private Companies having paid up capital of less than Rs. 100 Crores shall be inserted after 20 Companies.”
   141(3)(g)
Limit of 20 Companies only includes:-
1. Public Companies
2. Private Companies having paid up capital of Rs. 100 crore or more
7.CANDIDATURE NOT REQUIRED FOR APPOINTMENT OF DIRECTOR AT GENERAL MEETING160Amount of Rs. 1 lakh not required to be deposited at least 14 days before GM
8.APPOINTMENT OF DIRECTORS NEED NOT TO BE VOTED INDIVIDUALLY162More than 1 director can be appointed via single resolution
9.RESTRICTIONS ON POWERS OF BOARD NOT TO APPLY180
Private Company can now without shareholder’s approval:-
1. Borrow exceeding paid up capital & free reserves.
2. Sell/lease/dispose off undertaking
10.INTERESTED DIRECTOR CAN PARTICIPATE IN BOARD MEETING AFTER DISCLOSURE OF INTEREST184Interested Director can now participate in agenda in which he is interested.
Note:- He Cannot be counted in Quorum (Section 174(3) explanation)
11.LOANS/GUARANTEE/SECURITY CAN BE GIVEN TO DIRECTOR AND PERSON IN WHOM HE IS INTERESTED BY CERTAIN PRIVATE COMPANIES
A private Company which has:-
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
  185Giving of loans/ guarantee/security to Group Companies now possible
12.RESTRICTION ON VOTING RIGHT IN GENERAL MEETING IN CASE OF RELATED PARTY TRANSACTION NOT APPLICABLE188(1) 2nd provisoMember although being related party to the concerned resolution can still cast his vote at GM.
13.SHAREHOLDER’S RATIFICATION NOT REQUIRED FOR APPOINTMENT OF MD/WTD  196(4) &(5)
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
 THESE EXEMPTIONS ARE NOT AVAILABLE TO A PRIVATE COMPANY WHICH IS A subsidiary of a public company. (section 2(71) proviso)