Concessions to

Private
Companies
CA ABHISHEK S. DHAMNE
B. COM, FCA, DISA (ICAI)
[email protected]
 Concessions to Private Companies

Source?
 Section
 Circulars
 Rules
In the nature of?
 Regulatory
 Administrative
 Disclosure
Role of Auditor?
Private Company

 Small Company
 One Person Company
 Start up Company
 Other Private Company
Small Company

Means other than Public Company:

 Paid-up share capital of which does not exceed INR 50 Lakhs
 Turnover of which as per its last profit and loss account does
not exceed INR 2 Crores
 Provided that nothing in this Section shall apply to—
 a holding company or a subsidiary company;
 a company registered under Section 8; or
 a company or body corporate governed by any special Act;
One Person Company

 Minimum 1 Shareholder
 Minimum 1 Director
 The director and shareholder can be same person
 Minimum 1 Nominee
 No Need of any Minimum Share Capital
 Letters ‘OPC’ to be suffixed with the name of OPCs to distinguish it
from other companies
 OPC can have maximum Paid up share capital of Rs.50 Lakhs or
Turnover of Rs.2 Crores. Otherwise OPC need to be converted into
Private Ltd Company.
Sec 2(40) – Financial Statements

 Non-applicability of ‘Cash Flow Statements’

 OPC
 Small Company
 Dormant Company
 Start-up Private
Sec 2(76) Deemed not Related
Parties

 Section 188(1) specifies certain types of RPTs requires

 Approval of Board of Directors at Board meeting,
 Disclosure of specified matters in agenda of board meeting,
 interested director shall not remain present during discussion of related
party transactions,
 where it’s value is beyond prescribed limits, such transactions also
requires prior approval of shareholders by way of a special resolution
with prescribed details to be specified in explanatory statement annexed
to notice of general meeting.
 2(76) Holding company, subsidiary company, fellow subsidiary
company or an associate company are not considered as RP.
Section 43 Kinds of Share Capital

 Companies limited by shares

 viz. equity (including equity with differential voting rights) and preference
share capital.
 Exemption is provided to private companies from section 43, if either its
memorandum or articles of association so provides.
 Issue equity shares with differential voting rights without compliance of
conditions related thereto specified under the Companies (Share Capital
and Debentures) Rules, 2014.
Sec 47 Voting Rights

 Exemption is provided to private companies from section 47,

 if either its memorandum or articles of association so provides
 The effect could be that private companies can determine voting rights
of its equity shareholders and preference shareholders in any manner
it desires by incorporating suitable provision in its memorandum or
articles of association..
Section 62 Issue of Further Shares

 Right Issue and Preferential Allotment

 3 Days prior Notice and Minimum 15 days and Maximum 30 days offer
be kept open
 In case 90%, of the members of private Co. have given their consent in
writing or in electronic mode,
 No Notice is required of 3 days before issue of Right issue
 the period lesser than those specified (i.e. 15 – 30 days)
Section 67 Buy Back of Share

 Section 67 restricts companies to buy its own shares, except by way of

reduction of share capital or redemption of preference shares.
 Private companies are given exemption for section 67 if
 body corporate (includes foreign company, LLP) have not invested money in
share capital of the private company
 borrowings from banks or financial institution or any body corporate is less
than twice the paid-up share capital or Rs. 50 crore, whichever is lower; and
 such private company has not made default in repayment of borrowings
subsisting at the time of purchase of its own shares.
 Section 73(2) Deposits
 Deposits monitored under section 73(2)(a) to (e)
 Aforesaid Provisions are not applicable to private companies.
 Such Private Company accepts from its members monies not exceeding 100% of
aggregate of the paid-up share capital, free reserves and securities premium account;
or
 Such Private Company which is a start-up, for 5 years from date of its incorporation; or
 Which fulfils all the following conditions, namely:
 Which is not an Associate or Subsidiary Company of any other company;
 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 Rs. 50 crores, whichever is lower; and
 Such a company has not defaulted in the repayment of such borrowings subsisting at the time
of accepting deposits
 However, in all the 3 cases, the company shall file the necessary details with the RoC.
Section 92 Annual Return

 Disclosures of aggregate amount of remuneration drawn by directors

by Small Company
 Exemptions to Individual amount of remuneration drawn by directors
by Small Company
 In case of OPC, Small Co. & Private Co. (if registered as ‘Start-Up’),
the Annual Return shall be signed by
 CS, or where there is no CS by the director of the company.
Section 101 to 107 and 109

 Private companies are now given option to adopt provisions stated below or
omit the same or provide their own regulations by suitably providing for the
same in their articles of association.
 Section 101: Notice of general meetings
 Section 102: explanatory statement to be annexed to notice of general meetings
 Section 103: Quorum for general meetings
 Section 104: Chairman of general meetings
 Section 105: Proxies Section
 106: Restrictions on voting rights
 Section 107: Voting by show of hands
 Section 109: Demand for poll
Section 117 Board Resolution

 Private companies are exempted from filing following Board

Resolutions with the Registrar of Companies:
 to make calls on shareholders in respect of money unpaid on their
shares;
 to authorise buy-back of securities under section 68;
 to issue securities, including debentures, whether in or outside India;
 to borrow monies;
 to invest the funds of the company;
 to grant loans or give guarantee or provide security in respect of
loans;
Section 117 Board Resolution

 to approve financial statement and the Board’s report;

 to diversify the business of the company;
 to approve amalgamation, merger or reconstruction;
 to take over a company or acquire a controlling or
substantial stake in another company;
 to make political contributions;
 to appoint or remove key managerial personnel (KMP); and
 to appoint internal auditors and secretarial auditor.
Section 141 No. of Companies to be
Audited

 Appointment or reappointment of Auditor

 holding appointment as auditor of not more than 20 companies.
 For calculating 20 companies following shall be disregarded
 one person companies,
 dormant companies,
 small companies and
 private companies having paid-up share capital less than INR 100 Crores
Section 143 IFC

 Not be applicable to a private company

 which is a one-person company; or
 a small company; or
 which has turnover less than rupees 50 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 rupees 25 crore;
Section 149 Women/Independent
Director

Private Company is not required to appoint

 Woman Director or
 an Independent Director.
Section 152 Retirement of Directors

 One third of the directors of a Private Limited

Company are not liable to retire by rotation.
Section 160 Directorship

 gives right to any person (other than a retiring director) to

propose himself or any member can propose him as
director of the company
 by sending requisite notice with deposit amount said
section is not applicable to private companies.
 Thus, private companies are free to include suitable
provision in their articles of association for eligibility of a
person (other than retiring director) to be appointed as
director of the Company.
Section 162 Appointment of
Directors

 Appointment of directors at a general meeting of a

company,
 a motion for the appointment of two or more persons as
directors of the company by a single resolution shall not
be moved unless a proposal to move such a motion has
first been agreed to at the meeting without any vote
being cast against it.
 The said provision is relaxed for private limited company
and now more than one director can be appointed via a
single resolution
Section 173 Board Meeting

 173 of the Act (‘Board Meetings’) if at least one meeting of

board has been conducted in each half of a calendar year
 and the gap between the 2 meetings is not less than 90.
 Provisions relating to Board Meetings
 Quorum are not applicable OPC in which there is only 1
director
 OPC, Small Co., Dormant Co. & Private Co. (registered as
‘Start-up’) shall be deemed to have complied with the
provisions of Sec.
Section 174 Quorum for BM

 Where at any time the number of interested directors

exceeds or is equal to 2/3rd of the total strength of board
of directors, the number of directors who are not
interested directors and present at the meeting, being not
less than 2, shall be the quorum during such time.
 For private company – Interested Director may also be
counted towards quorum in such meeting after disclosure
of his interest.
Section 184 Disclosure of Interest

 Every director of a company who is in any way, whether directly or

indirectly, concerned or interested in a contract or arrangement (or
proposed contract or arrangement) entered into or to be entered
into shall
 disclose the nature of his concern or interest at board meeting in
which the contract or arrangement is discussed and shall not
participate in such meeting.
 For Private Company – it shall apply with the exception that the
interested director may participate in such meeting after disclosure
of his interest.
Section 177 and 178 Various
Committees

 The CA 2013 has casted certain duties to the

 Audit Committee
 Nomination and Remuneration Committee and
 such committees have to be constituted by certain
class of companies.
 Private limited companies are exempted from constituting
such committees.
Section 180 Powers of BoD

 To sell, lease or otherwise dispose of the whole or substantially

the whole of the undertaking of Co.,
 To invest otherwise in trust securities the amount of
compensation received by it as a result of any merger or
amalgamation
 Restrictions on borrowings,
 to remit, or give time for the repayment of, any debt due from a
director
 All above not applicable to Pvt Ltd Companies.
Section 185 Loan to Directors

 The provisions shall not apply to a private company:

 In whose share capital no other body corporate has invested any
money,
 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 50 crore rupees, whichever is lower; and
 Such a company has no default in repayment of such borrowings
subsisting at the time of making transactions under this section.
Various Provisions

 Section 196 Certain provisions for appointment of MD, WTD or

Manager – Not applicable to Private Company.
 Section 197 Managerial Remuneration without limit
 Section 203 Appointment of KMP is not Applicable
 Section 204 Secretarial Audit not Applicable unless the private
limited company has outstanding loans and borrowings from
banks or financial institutions of INR 100 Crores.
 Rule 10(1) not required to give notice by way of advertisement
in Vernacular and English newspaper provided that the notice
has been served on all members of the private company not
less than s even days prior to closure of the register of
members or debenture holders or other securityholders.
Thank you
CA ABHISHEK DHAMNE
B. COM, FCA, DISA (ICAI)
[email protected]