Exemption to Private Companies under Section 462 of Companies Act, 2013

MCA has provided exemption to Private Companies other than subsidiary of public companies under section 462 of the Companies Act 2013 as follows:

1) RELATED PARTY TRANSACTIONS

The definition of related parties under Section 2(76)(viii) not to include the following w.r.t a private company:

a) Holding Company

b) Subsidiary Company

c) Associate Company

d) Fellow subsidiaries

2) PARTICIPATION OF INTERESTED DIRECTORS

Section 184(2) to apply on private companies with the exception that interested directors can participate and vote on matters in which they are interested after providing the disclosure of interest.

3) PARTICIPATION OF RELATED SHAREHOLDERS

Second proviso to Section 188(1) not to apply on private company which states that no member of the company shall vote on such special resolution, to approve any contract or arrangement which may be entered in to by the company, if such member is a related party.

4)  OF SHARE CAPITAL AND VOTING RIGHTS

 Section 43 and 47 of the Act, dealing with kinds of share capital and voting rights respectively, shall not apply to private companies if Memorandum and Articles of Association so provide.

5) RELAXATION IN PROVISIONS OF RIGHT ISSUE

With respect to Section 62, the notification provides that if 90% of members of a private company provide their    consent in writing or in electronic mode, then the company can:

a) Disregard the limit on time period of offer may be;

b) Dispatch notice of a less than 3 days prior to the opening of the issue.

Note: The time limits cannot be increased, they can only be reduced. –

6) LENDING AGAINST THE SHARES OF THE COMPANY

Section 67(1) clearly prohibits buy back of shares and lending against its own shares by a   company. The notification provides exemption to private company from lending against  its own shares subject to the following:

a) there is no body corporate shareholder in the lending/guaranteeing company;

b) the lending company’s aggregate borrowings from other bodies corporate or banks or financial institutions is less than to:

i) twice of net worth of company; or

ii) Rs 50 crores

Whichever is lower;

c) Such a company is not in default in repayment of such borrowings subsisting at the time of making transactions under this section.

7) ACCEPTANCE OF DEPOSITS FROM MEMBERS

Earlier Private Limited Company could accept deposits from the Member after follow up the procedure mention under Section 73. –

Now Private Limited Company can accept deposit from the Members upto 100% of  aggregate of the paid up share capital and free reserves without the followings:

a) Issuance of Circular

b) Filing of circular with ROC

c) Maintaining deposit repayment reserve

d) Providing deposit insurance

8) GENERAL MEETING PROVISIONS (SECTIONS 101 TO 107 AND 109)

If anything else mentioned in AOA then AOA prevail over the section 101-107 & 109.

a) Content & Length of Notice (Section 101)

b) Explanatory Statement (section 102)

c) Quorum (Section 103)

d) Chairman (Section 104)

e) Proxies (Section 105)

f) Restriction on Voting Rights (Section 106)

g) Show of Hands & Poll (Sections 107 and 109)

9) FILING OF FORM MGT-14 FOR BOARD RESOLUTIONS (SECTION 117(3)(G))

Now there is NO NEED TO FILE FORM MGT-14 for the purposes of resolutions passed u/s 179(3) read with rule 8 of Companies (Meeting of Board & its power) Rules, 2014 – After a complete year of filing MGT-14 with the MCA, the private companies are now exempt from such filing with respect to board resolutions.

10) RELIEF IN LIMITS OF STATUTORY AUDIT

Earlier Auditor can’t be appoint as auditor in more than 20 (Twenty) Companies.

Section 141(3)(g) permitted the audit of 20 companies per partner of an audit firm. Now under the limit of 20 (Twenty) Companies following will not include 2013.

a) One person companies;

b) Dormant companies;

c) Small companies;

d) Private companies having a paid up share capital of less than 100 crores.

11) CANDIDATURE NOT REQUIRED FOR APPOINTMENT OF DIRECTOR AT GENERAL MEETING

Section 160 dealing with any person other than a retiring director or any member of the company to propose candidature of such person for directorship along with deposit of    Rs. 1 lac shall not apply on private company. It means Now there is no need to deposit Rs.      100,000/- by the Director at the time of appointment

12) APPOINTMENT of Directors vide single resolution (Section 162)

Appointment of directors needs not to be voted individually in private company. Accordingly, more than one director can be appointed via single resolution in private company.

13) NO RESTRICTION ON POWERS OF BOARD

Section 180 of the Act has been finally aligned with its corresponding section of the erstwhile Act, 1956, i.e., Section 293. The Board of private companies shall now be free to address and decide upon matters mentioned under Section 180 and the requirement for  shareholders’ approval has been dispensed with.

Following are the matters are prescribed under Section 180:

a) Selling, leasing or otherwise disposing whole or substantially the whole of undertaking of the company;

b) Investing the compensation amount received by it as a result of any merger or amalgamation;

c) Borrowing money in excess of its paid up capital and free reserves;

d) Remitting or giving time for repayment of any debt due from a director.

14) RELAXATION IN LOAN TO DIRECTORS

Loan to directors under Section 185 are allowed for private company if it fulfills the below mentioned conditions:

a) Body Corporate should not be Shareholder

b)Not borrowed money from Bank/ Financial Institution/ Body Corporate exceeding lower of the following:-

i) Twice it’s paid up capital

ii) Rs. 50  crores

c)  No repayment default subsisting of such borrowings at time of giving loan.

15) Appointment of MD, WTD and Manager

Now there is no need to Pass Resolution in General Meeting for appointment of      Managerial Personnel and no need to file form MR-1. Managerial Personnel can be    appointed in Private limited Company without:

a)  Shareholders’ ratification;

b)  Schedule V not applicable.

c)  Filing of MR-1 with ROC;

d) No need to mention Terms & Conditions of appointment and remuneration in the resolution.