Additional Exemptions to Private Companies

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Additional Exemptions Provided to Private Companies

Through its Notification dated 13th June 2017, the Ministry of Corporate Affairs (MCA), Govt. of India has granted additional exemptions of Companies Act, 2013 to private companies. This is in addition to exemptions already granted by MCA to private companies through its earlier notification dated 5th June 2015.

The new Notification can be downloaded from here: Gazette of India – 13 June 2017

The additional exemptions are listed as following:

1.      Section 2(40): Financial Statements

 Before

Financial Statement included: Balance Sheet, P/L Account, Cash Flow Statement, Statement of Change in Equity if applicable and Explanatory Statement annexed to these documents.

After Exemption

Private Company that is recognized as a start-up company by the Department of Industrial Policy and Promotion need NOT include Cash Flow Statement in their financial statements.

 

2.      Section 73(3)(I): Prohibition on Acceptance of Deposits

Before

Earlier Private Limited Companies accepted deposits from the members after following the procedure mentioned under Section 73 Clause (a) to (e).

After Exemption

The exemption provided to Private companies for accepting Deposits has been expanded to include:

a)      A start-up, for five years from the date of its incorporation

b)      A Private Company that:

  • Is not an associate or a subsidiary company of any other company.
  • Has borrowings from banks or financial institutions or any body corporate which is less than twice its paid-up share capital or 50 crore rupees, whichever is lower.
  • Has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits.

 

3.      Section 92(1)(G): Annual Return

Before

Earlier this section read as, Remuneration of directors and KMP.

After Exemption

Small Companies need to provide ONLY aggregate amount of remuneration drawn by the directors and KMP.

 

4.      Proviso to Section 92(1): Annual Return

Before

Earlier in case of One Person Company and Small Company, the annual return was to be signed by the company secretary, or where there is no company secretary, by the director of the company.

After Exemption

The Annual Return of One Person Company, Small Company and Private Company can be signed by the company secretary, or where there is no company secretary, by the director of the company.

 

5.      Section 143 (I): Powers and Duties of Auditors and Auditing Standards

Before

Earlier under Section 143(i) it was stated “whether the company has adequate internal financial controls system in place and the operating effectiveness of such controls”.

After Exemption

The Auditor need not comment on the Internal Financial Controls of the Company if:

  • It is a one person company or a small company; or
  • which has turnover of less than rupees fifty crores as per latest audited 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 Rs. 25 crore.

 

6.      Section 173(5): Meetings of Board

Before

Earlier One-Person Company, Small Company and Dormant Company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days.

After Exemption

Private Company is required to conduct a minimum of one Board Meeting in each half of a calendar year and the gap between the two Board Meetings should not be less than 90 days.

 

7.      Section 174(3): Quorum for Meetings of Board

Before

Earlier, Interested Directors were not counted for the purpose of quorum.

After Exemption

An interested Director can also be counted for Quorum after they disclose their interest.

 

Note: All exemptions provided to a Private Company stands withdrawn if they fail to file their financial statements or Annual Returns with the Registrar of Companies.