16 new Exemption to Pvt Companies-Limit of 20 Companies on Auditor also relaxed

Ministry of Corporate Affairs has issued a notification under section 462 of Companies Act ,2013 dated 05.06.2015 under which various exemptions has been given to private companies. 

One of these exemptions are related to appointment of auditor under Companies Act-2013.

Present Provision: Chapter X, Clause (g) of sub-section (3) of section 141.- Eligibility, qualifications and disqualifications of auditors

The following persons shall not be eligible for appointment as an auditor of a company, namely:—

(g) a person who is in full time employment elsewhere or a person or a partner of a firm holding appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding appointment as auditor of more than twenty companies;

Amendment :Shall apply with the modification that the words “other than one person companies, dormant companies, small companies, and private companies having paid-up share capital less than one hundred crore rupees” shall be inserted after the words “twenty companies”

Final Provision after Amendment: Section 141 (3) (g) shall be read as follows:

The following persons shall not be eligible for appointment as an auditor of a company, namely:—

(g) a person who is in full time employment elsewhere or a person or a partner of a firm holding

appointment as its auditor, if such persons or partner is at the date of such appointment or reappointment holding appointment as auditor of more  than twenty companies other than 

• one person companies, 
• dormant companies, 
• small companies, and
• private companies  having paid-up share capital less than one hundred crore rupees ;

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Chapter V, clauses (a) to (e) of subsection (2) of section 73- Prohibition on acceptance of deposits from public.

Present Provision

(1) On and after the commencement of this Act, no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter:

Provided that nothing in this sub-section shall apply to a banking company and nonbanking financial
company as defined in the Reserve Bank of India Act, 1934 and to such other company as the Central
Government may, after consultation with the Reserve Bank of India, specify in this behalf.

(2) A company may, subject to the passing of a resolution in general meeting and subject to such rules as may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members on such terms and conditions, including the provision of security, if any, or for the repayment of such deposits with interest, as may be agreed upon between the company and its members, subject to the fulfilment of the following conditions, namely:—

• (a) issuance of a circular to its members including therein a statement showing the financial position of the company, the credit rating obtained, the total number of depositors and the amount due towards deposits in respect of any previous deposits accepted by the company and such other particulars in such form and in such manner as may be prescribed;
• (b) filing a copy of the circular along with such statement with the Registrar within thirty days before the date of issue of the circular;
• (c) Depositing such sum which shall not be less than fifteen per cent. of the amount of its deposits maturing during a financial year and the financial year next following, and kept in a scheduled bank in a separate bank account to be called as deposit repayment reserve account;
• (d) providing such deposit insurance in such manner and to such extent as may be prescribed;
• (e) certifying that the company has not committed any default in the repayment of deposits accepted either before or after the commencement of this Act or payment of interest on such deposits; and 
• (f) providing security, if any for the due repayment of the amount of deposit or the interest thereon including the creation of such charge on the property or assets of the company:
• Provided that in case where a company does not secure the deposits or secures such deposits partially, then, the deposits shall be termed as ‘‘unsecured deposits’’ and shall be so quoted in every circular, form, advertisement or in any document related to invitation or acceptance of deposits.

(3) Every deposit accepted by a company under subsection (2) shall be repaid with interest in accordance with the terms and conditions of the agreement referred to in that sub-section.

(4) Where a company fails to repay the deposit or part thereof or any interest thereon under sub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company to pay the sum due or for any loss or damage incurred by him as a result of such non-payment and for such other orders as the Tribunal may deem fit.

(5) The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be used by the company for any purpose other than repayment of deposits.

Amendment /Exemption to private companies given now

Shall not apply to a private company which accepts from its members monies not exceeding one hundred percent 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.

Analysis /Impact :A threshold limit has been provided for acceptance of money from members which is not exceeding 100 % 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.

Other Major Exemptions

Chapter I, Sub clause (viii) of clause (76) of section 2- Definition of Related Party -

Amendment: Shall not apply with respect to section 188 (Related Party Transactions).

Impact/analysis: For private companies the transactions between any company which is— 

(A) a holding, subsidiary or an associate company of such company; or

(B) a subsidiary of a holding company to which it is also a subsidiary;

Shall not be treated as Related Party Transactions

Chapter IV, Section 43- Kinds of Share Capital-

The provisions related to kinds of share capital shall not apply to a private company except when memorandum or articles or association of the private company so provides.

Chapter IV, Section 47- Voting Rights -

The provisions related to Voting Rights shall no apply to a private company except when memorandum or articles or association of the private company so provides.

Chapter IV, sub clause (i) of clause (a) of sub-section (1) and sub-section (2) of section 62.- 

Further Issue of Share Capital-

(1) Where at any time, company having a share capital proposes to increase its subscribed capital by the issue of further shares, such shares shall be offered—

(a) to persons who, at the date of the offer, are holders of equity shares of the company in proportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending a letter of offer subject to the following conditions namely:—

(i) the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined;

Provided that notwithstanding anything contained in this sub clause and sub-section

(2) of this section, in case ninety percent, 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 subsection shall apply.

Chapter IV, clause (b) of sub-section (1) of section 62-

Further Issue of Share Capital -(b) to employees under a scheme of employees’ stock option, subject to special resolution  ordinary resolution passed by company and subject to such conditions as may be prescribed; 

Chapter IV, Section 67- Restrictions on purchase by company or giving of loans by it for purchase of its shares.

Shall not apply to private companies in whose share capital another body corporate has invested any money and if the borrowings of such a company from banks or financial institutions or anybody corporate is less than twice its paid up share capital or fifty crore rupees, whichever is lower; and such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section.