SL No

Particulars

Earlier Provision

Exemption/ Amendment

Impact

1.

Section 2(76) clause viii  Definition of Related party

As per section 2(76) clause (viii) a company enters into transaction with

·         a holding, subsidiary or an associate company of such company or;

·         A subsidiary of holding company to which it is also a subsidiary.

For the purpose of section 188 of the Act Section 2 (76) (viii) has been amended exempting a private company to enter into a transaction with its holding, subsidiary, or an associate company or a subsidiary of holding company to which it is also a subsidiary

Transaction entered with such companies as mentioned in clause (viii) of section 2 (76) will not be treated as related party and does not require the compliance of section 188.

2.

Kinds of share capital and voting rights[Section 43 and 47]

Section 43 of the Act says share capital can be of two kinds

·         Equity share capital with voting rights or with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed.

·         Preference share capital.

As per section 47 of the Act subject to provision of section 43 and 50(2)

·         Every equity shareholder has a right to vote on every resolution placed before the company and his voting rights will be in proportion to the share held by him in the company.

·         Every preference shareholder have right to vote only on resolutions placed before company which directly affects the rights attached to his preference shares, any resolution for winding up of company, repayment or reduction of its equity or preference share capital and his voting rights will be in proportion to the shares held by him.

Now in preparation of Memorandum and Article of Association section 43 &47 shall not apply if they provide so.

The provisions relating section 43 shall not apply and provision relating to voting rights of the equity and preference shareholders shall not apply.(section 47)

3.

Further issue of share capital [Section 62(1)(a)(i) & 62(2)]

When a company proposes to increase its subscribed capital by further issue to a person who at the date of the offer are holders of equity share of the company shall be sent an offer letter provided that offer shall be made by notice specifying the no. of shares offered within 15 to 30 days not exceeding beyond that from the date of offer and if it is not accepted then it shall be deemed to have been declined.

The notice referred in clause (a) (i) and sub-section 1 shall be sent to all existing shareholders at least 3 days before opening of the issue through registered post or speed post or electronic mode.[Section 62(2)]

There is a modification done by MCA in this section by inserting a proviso in clause a (i) stating that anything contained in clause a (i) & sub-section 2 shall not withstand.

Sub-section 2 provides that if 90% of the members of private company give their consent in writing or in electronic mode for period lesser than those specified.

The provision of section 62 (1) Clause a (i) & Section 62(2) shall not apply if 90% of the members of private company agree in writing for a lesser period than those specified in above mentioned sections.

4.

Further Issue of share capital

[Section 62 (1) (b)]

As per this section if a company proposes to increase its subscribed capital by issue of further shares to employees under ESOP then it is required to get approval of shareholders of the company by way of special resolution.

The word special resolution has been replaced by ordinary resolution in section 62 (1) (b).

Now private company has to pass ordinary resolution for issue of shares to its employees under ESOP.

5.

Restrictions on purchase by company or giving of loans by it for purchase of its shares

[Section 67]

As per section 67 a company limited by guarantee or shares having its share capital can buy its own shares only if consequent reduction of capital has been effected under the provision of act.

As per the amendment, provision of section 67 shall not apply if a private company fulfills the following conditions:

·         In whose share capital no other body corporate has invested any money;

·         If the borrowings of such a company from banks or financial institution is less than twice its paid up share capital or 50 crores whichever is lower; and

·         Such company is not in default in repayment of any such borrowings.

Restrictions on purchase by company or giving of loans by it for purchase of its shares shall not apply to those private companies which fulfills the conditions as per amendment.

6.

Prohibition on acceptance of deposits from public

[Section 73 (2) (a) to (e)]

As per section 73 of CA 2013  a company may, subject to the passing of a resolution in general meeting and as per companies (Acceptance of Deposits)Rule 2014 may 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 fulfillment of the following conditions:

(a) Issuance of circular to members showing the financial position of the company along with credit rating and any amount due towards any previous deposits accepted by public;

(b) Filing of copy of circular with registrar within 30 days before the date of issue of circular;

(c) Depositing such sum which shall not be less than 15% of the amount of its deposits maturing during FY and the next following FY and kept in deposit repayment reserve account;

(d) Providing such deposit insurance in the manner as may be prescribed;

(e) Certifying that the company has not made any default in repayment of any deposit or any interest on such deposits either before or after commencement of the Act;

Provisions of section 73(2) (a) to (e) shall not apply to private companies if they accept deposits from its members not exceeding 100% of its total paid up share capital and free reserves and the details of deposits so accepted should be filed to registrar in the manner as prescribed. 

Private companies can accept deposits from its members not exceeding 100% of its paid up share capital and free reserves without complying necessary procedure of section 73(2) (a) to (e).

7.

Notice of General Meeting, Explanatory Statement, Quorum, Chairman, Proxies, Voting rights restriction, Voting by show of hands & demand for poll [Section 101 to 107 & 109]

Every Company is required to comply with the provisions of Section 101 to 107 and Section 109 under Companies Act, 2013.

Private Companies can have different provisions in its Article of Association with respect to particular sections.

Provisions of respective sections shall apply unless different provision is specified in its AOA.

8.

Resolutions and agreements to be filed

[Section 117(3) (g)]

Every Company is required to pass resolution in its board meeting in pursuance Section 179 sub-section (3) and it has to be filed within 30 days of passing such resolution.

Private companies are exempted from filing of board resolution in pursuance of section 179(3). Section 117 (3) shall not apply.

Now private companies are no longer required to file e-form MGT-14 for resolution passed by Board in pursuance of section 179(3).

9.

Eligibility, qualification and disqualification of Auditors

[Section 141(3) (g)]

A person who is in full time employment or partner of a firm is auditor of more than 20 companies than such person is not eligible for appointment as an auditor in any other firm.

Section 141 (3)(g) has been modified by MCA which says that OPC, dormant companies, Small companies & Private companies having paid up share capital less than 100 crores are excluded while calculating the limit of 20 companies.

OPC, Dormant companies, small companies, and private companies having paid up share capital less than 100 crores are excluded from the limit of 20 companies in which a person can be appointed as an auditor.

10.

Right of person other than retiring directors to stand for directorship

[Section 160]

A person who is not a retiring director shall be eligible for appointment to the office of a director at any general meeting if he or some members proposes him as a director and a notice in writing under his hand signifying his candidature as a director shall be left at the registered office of the company prior to 14 days before meeting, along with deposit of rupees one lakh or such higher amount which shall be refunded to such person or member if the person proposed gets elected as a director or gets more than 25% of the total valid votes cast either by show of hands or on poll on such resolution.  The company shall inform its members of the candidature of the person for the office of director in the prescribed manner.

The provisions of section 160 of the Act shall not apply.

Now notice for candidature or depositing Rs.1 Lakh for the purpose of appointment of director at general meeting shall not be applicable on private companies.

11.

Appointment of Directors to be voted individually

[Section 162]

As per section 162(1) at a general meeting 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 motion has been first agreed to at the meeting without any voting.

Section 162(2) says a resolution moved in contravention of 162(1) shall be void.

The provisions of section 162 shall not apply to private companies.

Now by a single resolution two or more person can be appointed as director.

12.

Restrictions on powers of Board

[Section 180]

As per section 180 of the Act every company is required to obtain shareholders’ approval by passing special resolution in the general meeting.

The provisions of section 180 shall not apply.

Now private companies does not require to obtain shareholders’ approval by special resolution for sell/Lease/ dispose off undertaking; borrowing money where it exceeds the paid up capital and free reserves.

13.

Disclosure of interest by director

[Section 184(2)]

As per section 184(2) Every director of a company who is whether directly or indirectly,

concerned or interested in a contract or arrangement or proposed contract or arrangement

entered into or to be entered into:

(a) With a body corporate in which such director or such director in association with any other director, holds more than 2% shareholding of that body

corporate, or is a promoter, manager, CEO of that body corporate; or

(b) with a firm or other entity in which, such director is a partner, owner or member shall disclose his concern or interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting.

Where any director who is not so concerned or interested at the time of entering into such contract or arrangement, if he becomes concerned or interested after the contract or arrangement is entered into, then he shall disclose his interest at the first meeting of the Board held after he becomes so interested.

Section 184(2) shall be applicable to private companies with the exception that the interested director may participate in meeting after disclosure of his interest.

Now interested director can participate in such meeting in which the contract he is interested in is to be discussed after he discloses his interest.

14.

Loans to directors

[Section 185]

As per section 185 no company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested [defined in explanation to section 185(1)] or give any guarantee or provide any security in connection with any loan taken by him or such other person.

Rule 10 of Companies(Meeting of Board and its Power) Rules, 2014 exempt the following from this section:

·         Any guarantee given by holding company in respect of any loan made to its wholly owned subsidiary company.

·         Where any loan made by holding company to its wholly owned subsidiary company.

·         Any guarantee given by holding company in respect of any loan made by any financial institution to its subsidiary.

The loan above made should be utilized by subsidiary company for its principal business activities.

Section 185 shall not apply to private companies which fulfill certain conditions:

·         No body corporate has invested money in its share capital;

·         If the borrowings of such a company from banks or financial institution is less than twice its paid up share capital or 50 crores whichever is lower; and

·         Such company is not in default in repayment of any such borrowings.

Restrictions on giving of loans advances or guarantees to directors and other entities in which directors are interested shall not apply to those private companies which fulfill the conditions as per amendment.

15.

Related Party Transaction

[Section 188(1) Second proviso]

As per second proviso of sub-section 1 of section 188 no member of the company shall vote on such special resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party.

Section 188(1) second proviso shall not apply to private companies.

Now even if the member is a related party he can vote on such resolution to approve any contract or arrangement.

16.

Appointment of Managing director, Whole time director or Manager

[Section 196 (4) & (5)]

As per section 196(4) Subject to the provisions of section 197 and Schedule V, appointment of managerial personnel shall be subject to approval by shareholders by passing a resolution at the next general meeting of the company and by the Central Government in case such appointment is at variance to the conditions specified in Schedule V.

As per Section 196(5), where an appointment of managerial personnel is not approved by the company at a general meeting, any act done by him before such approval shall not be deemed to be invalid.

The provision of Section 196 (4) & (5) shall not be applicable to private companies.

(a)Schedule V is not applicable.

(b)Shareholders’ approval/Ratification is not required.

(c)Terms of appointment, remuneration is not required to be mentioned in resolution.