Relief for Private Limited Companies, Further exemptions issued by MCA

Exemptions to Private Companies

Now, it is easy to incorporate a private company, because MCA grants some exemptions to Private Company.MCA issued notifications of exemptions to private company on June 5, 2015.The exemptions are as follows:

ü  Compliance Burden Reduced:

Filing of any of the 14 items of Board Resolutions in MGT 14 Waived for Private Companies

Now, there is no need to file Board Resolution with Registrar of Companies. Therefore, after incorporation Form MGT-14 is not required to be filed with Registrar of Company for passing Board Resolution. The resolution of the board will still be required. All that is exempted is the need to file a resolution with the Registrar. MGT 14 is required to be filed only in case of Special Resolution

ü  Participation of Interested Directors:

The directors of a private company must refrain from participating in a board meeting where a matter in which they are interested is to be discussed. The final notification thankfully retains the same with the condition that an interested director may participate only after disclosure of such person’s interest. Interested Director can now participate in agenda in which he is interested. He cannot be counted in Quorum

ü  Restriction on Powers of Board not Applicable in case you are a Private Limited Company:

The exercise of borrowing powers by private companies will not require any special resolution to be passed

ü  Loans by Private Companies:

Giving Loans to Sister Concerns is really difficult as per Companies Act 2013. There is a restriction on lending limit by Private Companies. It is important to note that earlier as per Companies Act 1956, there was no limit for lending to sister concerns or to those in which Directors have interest. Even banks find it difficult to treat Guarantees and collaterals from related parties.

A partial exemption has been given to Private Limited Companies giving loan to sister concerns on satisfying with the below mentioned conditions;

 1. Body Corporate should not be Shareholder in Private Limited Company which is lending loans to Related Entities

2. The lending company’s aggregate borrowings from other bodies corporate or banks or financial institutions is limited to lower of;

a. Twice of Net worth

b. Rs. 50 crores

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

Can Give loans/ guarantee/security to Group Companies now.

ü  Deposits From Members:

Private Companies borrowing monies from members upto aggregate limit of paid-up share capital & free-reserves need not require to comply with conditions mentioned in section 73(2)(a) to (e). which shows If Such Company borrows money from member then no need to:

– Issue Circular -File circular with ROC

 -Maintain Deposit repayment reserve

-Provide deposit insurance.

However details of money so borrowed shall be filed with ROC in manner as may be specified.

ü  Limit on Company Audits:

The limit of 20 on company audits will now exclude all one person companies, dormant companies, small companies, and private companies having a paid up share capital of less than Rs. 100 crores.

ü  Right of Persons Other Than Retiring Directors to Stand for Directorship

ü  Appointment of Directors No Longer to be Voted Individually:

             More than 1 director can be appointed via single resolution

ü  Relaxation Withdrawn in Case of Related Party Transactions:

Does not include Holding, Subsidiary, Associate Company and sister concern(subsidiary of holding). Transactions entered with them and falling under section 188 does not require compliance of section 188. Note:- Although Holding company is excluded but Director(other than independent Director), KMP of holding company or their relative are still included in definition of Related Party. (Section 2(76)(ix).

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