The Ministry of Corporate Affairs has notified 5 June 2015 exempting private limited companies from the provisions of the Companies Act 2013 (the Act). The gist of the said notification is as below:
- Section 2(40)- Financial Statements: Start-ups (only those registered and recognised as start-up in accordance with the notification issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry) are exempted from preparation of Cash Flow Statements as required under clause 40 of section 2 of the Act.
- Section73- Prohibition on acceptance of deposits from public: The provisions pertaining to prohibition on acceptance of deposits from public shall not be applicable to a private company:
- Which accepts from its members monies not exceeding 100 percent of its paid-up share capital, free reserves and securities premium account; or
- Which is a registered and recognised Start-up Company for five years from the date of incorporation; or
Which fulfils the following conditions:
- Which is not an associate or a subsidiary company of other company or
- if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid-up share capital or fifty crore rupees, whichever is lower; and
- such a company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under this section.
3. Section 92(1)-Annual Return Exemption of ‘certification’ from Practicing Company Secretary, on the Annual Return to be filed with the Registrar of Companies, for registered and recognised Start-up Company, OPC and small companies (defined under Companies Act). 4. Section 143-Powers and duties of auditors and auditing standards The requirement of report on internal financial controls by statutory auditors is exempted in case of private company:
- which is a one-person company or a small company; or
- which has turnover fifty crore rupees as per financial statement or which has aggregate borrowings from banks or financial institutions or any body corporate at any point of time during the financial year less than rupees twenty-five crore
5. Section 173- Meetings of Board If registered and recognised Start-up Companies hold at least one meeting of the Board of Directors in each half of calendar year and the gap between the two meetings is not less than ninety days, it shall be deemed to have complied with the provisions of minimum number of meetings as required to be held under section 173 of the Act. 6. Section 174-Quorum for meetings of Board. Henceforth, the interested director may also be counted for the purpose of quorum in such meeting where the director is interested on any agenda item. However, the Director shall give disclosure of his interest as required under section 184. Source Exemption to Section 8 Companies under section 462 of CA, 2013 The Ministry of Corporate Affairs has notified 5 June 2015 exempting section 8 companies from the provisions of the Companies Act 2013 (the Act). The gist of the said notification is as below: 1. Section 149-Company to have Board of Directors In case of section 8 Companies, there are no threshold limit to have maximum directors and also these companies are exempted from passing special resolution to increase the directors beyond 15 in number. 2. Section 186(7)- Loan and Investment by Company The restriction on rate of interest shall not be applicable to the following companies in which:
- 26% of the paid-up share capital is held by the State/Central government
- the loans provided by the company are for funding R&D projects.