Exemptions to Private Limited Companies u/s 462 of the Act - PowerPoint Presentation

1. Exemptions to Private Limited Companies u/s 462 of the Act By C. S. KelkarPartner C. S. Kelkar & Associates,Company Secretaries

2. Exemptions provided by the Companies Amendment Act, 2015 Minimum paid-up capital requirement withdrawnSection – 11 relating to Commencement of Business omitted. Common Seal is optionalRelated Party transactions can be approved by passing Ordinary Resolution. Special Resolution not required.before declaring dividend for the year, previous year(s) losses and depreciation not provided in earlier years should be set off against profits of current year.

3. MCA has come out with a Notification dated 05.06.2015 which exempts Private Companies from certain provisions of Companies Act, 2013

4. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 2(76)Section 2(76)(viii) shall not apply with respect to Section 188. Definition of Related Party relaxed with respect to Related Party Transactions Now, the definition does not include Holding, Subsidiary, Associate Company and Fellow Subsidiaries Transactions entered with  Holding, Subsidiary, Associate Company and  Fellow-Subsidiaries falling under section 188 does not require compliance of section 188. Note:- Although Holding Company is excluded but Directors (other than independent Director), KMPs of Holding Company or their relatives are still included in definition of Related Party. (Section 2(76)(ix))

5. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 43 & 47 Shall not apply to Company Section 43 relating to Kinds of Share Capital and Section 47 relating to Voting Rights shall not apply to a Private Company. Specific provision in the Memorandum & Articles of association required.Private Companies can have different types of Shares Capital – Other than Equity and Preference. Hybrid Instrument is possible with different dividend rate, voting rights etc.One Share need not carry One Vote.

6. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 62 (1)(a)(i)& 62(2) TIME LIMITS IN RIGHT ISSUE CAN BE REDUCED sending of offer letter min 3 days period  before opening of offerANDMinimum & maximum offer period of 15 & 30 days respectivelyCan be reduced, if 90% of the members give their consent in writing / electronic mode In case of emergency, the mentioned time limits can be reduced with consent of 90% shareholders.Note:- The time limits cannot be increased, they can only be reduced.

7. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 62 (1) (b) Words  ”Special Resolution” to be substituted with "Ordinary Resolution“. ESOP Scheme can be approved by passing Ordinary Resolution.

8. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 67Provisions related to restriction on purchase of own shares by Company shall not apply to Private Companies In whose share capital no other body corporate has invested any money If the borrowing of such a company from banks / financial institutions / body corporate is less than twice its paid up capital or 50 Crores whichever is lessSuch company has not defaulted in repayment of such borrowing subsisting on the date of transaction The Companies fulfilling the criteria mentioned here, can buy its own shares and also can provide loan to purchase its own shares. Note: Investment by a body corporate, even in one equity share, will disqualify a private company from availing this exemption.

9. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 73(2)(a) to (e)Acceptance of deposits from members made easier for certain private companies Private Companies borrowing monies from members up to aggregate limit of paid-up share capital & free-reserves are not required 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 specifiedIf Such Company borrows money from member then, it need notIssue CircularFile circular with ROCMaintain deposit repayment reserveProvide deposit insuranceCredit rating not required Note: Approval of members by way of “Ordinary Resolution” is required to accept deposit from members.

10. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 101 to 107 &109Articles of a private company may override provisions pertaining to Content & length of noticeExplanatory StatementQuorumChairmanProxiesRestriction on voting rightsShow of hands & Poll (Position brought at par with Companies Act, 1956)Specific provisions in the Articles of Association required to give overriding effect.Note: Such overriding provisions in the Articles of Association will override Secretarial Standards as well.

11. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 117(3)(g)Shall not apply Any Board resolution mentioned in section 179(3)(g) read with rule 8 of Companies (Meeting of Board & its power) Rules, 2014 is now not required to be filed with ROC in Form MGT 14. E.g. resolutions to borrow, to invest, approving balance sheet /directors report, to note disclosure of interest by directors, to appoint internal auditor, to issue shares etc. not required to be filed with ROC.

12. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 141(3)(g)Shall apply with the modification that the words “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.” Shall be inserted after the words twenty companies Limit of 20 Companies only includes:- Public CompaniesPrivate Companies having paid up capital of Rs. 100 crore or more

13. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 160Shall not apply to Private Company. Amount of Rs. 1 lakh not required to be deposited at least 14 days before GM. Note: 14 days notice is required u/s 111 of the Act.

14. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 162Shall not apply to Private Company. More than 1 director can be appointed via single resolution

15. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 184(2)Shall apply with the exception that The interested director can participate in such meeting after disclosure of interestInterested Director can now participate in agenda in which he is interested. Poser – can he be counted in Quorum (Section 174(3)

16. Exemptions GivenSection of the ActExemptions GivenMajor Impact Section 185Shall not apply to Private Companies In whose share capital no other body corporate has invested any money If the borrowing of such a company from banks / financial institutions / body corporate is less than twice its paid up capital or 50 Crores whichever is lessSuch company has not defaulted in repayment of such borrowing subsisting on the date of transaction Giving of loans/ guarantee/security to directors, relatives of directors, group companies is now possible

17. Exemptions GivenSection of the ActExemptions GivenMajor Impact 2nd Proviso to Section 188(1)Restriction on voting right in general meeting in case of related party transaction not applicableA member although being a related party to the concerned resolution can still cast his vote at GM.

18. Exemptions GivenSection of the ActExemptions GivenMajor Impact 196(4) &(5)Shareholder’s ratification not required for appointment of MD/WTDShareholder’s Ratification not requiredSchedule V not applicable.A Foreign National can be appointed as MD / WTD without CG approvalMR-1 not required to be filedT&C of appointment, remuneration not mandatory to be mentioned in resolution

19. 19Any Queries….

20. 20Thank You!!!Contact DetailsCS C. S. KelkarCell: +91-98225 02145Email: csk@kelkarcs.com Website: www.kelkarcs.com