impact of companies act, 2013 on private companies

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  • 8/9/2019 Impact of Companies Act, 2013 on Private Companies

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    CCI ONLINE COACHING NEWS EXPERTS ARTICLES FILES FORUM JOBS FEED E-MAIL EVENTS STUDENTS NOTIFICATIONS MORE

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    their Relatives

    [Section 3(1)(iii)]

    [Section 2(68)]

    Commencement of Business

    Under Companies Act, 1956, aPrivate company cancommence its operationsimmediately afterincorporation. Only publiccompanies have to seek

    certificate of commencement of business.

    (Section 149)

    Under Companies Act, 2013,even a Private Company cannot commence its business or makeany borrowings unless it fileswith ROC a statement that thesubscription money and

    minimum paid up capital hasbeen brought in.

    (Section 11)

    Further issue of shares

    Provisions relating to rightsissue and Preferentialallotment are not applicable toa private company.

    [Section 81 and 81(1A)]

    A private company can makefurther allotment only bymeans of Rights Issue, ESOP orPrivate placement/preferentialallotment and needs to complywith the all the provisionsrelating to these types of allotment.

    [Section 62]

    Acceptance of Deposits fromrelatives of directors

    A Private Company can accept deposits/loans from relativesof directors by virtue of exemption available in thedefinition of private company.

    [Section 3(1)(iii)]

    A private company isprohibited to accept unsecuredloans/deposits from relativesof directors.

    [Section 73 read with draft rules issued thereunder]

    Shares with differentialvoting rights

    Provisions relating to issue of shares with differential votingrights are not applicable to aprivate company

    [Section 86]

    A private company has tocomply with the provisionscontained in Section 43 readwith the rules issued thereunder to issue shares withdifferential voting rights .

    [Section 43]

    Appointment of KMP

    Under CA, 1956, irrespectiveof the capital, Private

    Companies are not mandatedto appoint MD/WTD/Manageretc. except Whole TimeCompany Secretary in case of companies having paid upcapital of Rs. 5 Crores ormore.

    [Section 269 & 383A]

    All companies, including privatecompanies, having paid upcapital of Rs. 5 Crores or moreare required to have thefollowing whole time KMP:

    1. MD/CEO/Manager/WTD;

    2. Company Secretary; and

    3. CFO

    [Section 203]

    Restrictions relating to givingAll companies, including private

  • 8/9/2019 Impact of Companies Act, 2013 on Private Companies

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    Loans to Directors

    of loans, advances orproviding securities,guarantees to directors andother interested entities arenot applicable to a privatecompany.

    [Section 295]

    companies, are restricted fromgiving loans, advances orproviding securities,guarantees to directors andother interested entitiesbarring few exceptions.

    [Section 185]

    Resident Director No requirement to have

    director resident in India.

    All companies, including private

    companies, must have atleast one director who has stayed inIndia for a minimum period of 182 days during the previouscalendar year.

    [Section 149]

    Consent to act as director

    In case of private companies,consent to act as director isnot mandatory to be filed with

    ROC.

    [Section 264]

    A person appointed as adirector shall not act as adirector unless he gives hisconsent to hold the office asdirector and such consent has

    been filed with the Registrarwithin thirty days of hisappointment

    [Section 152]

    Appointment of 2 or moredirectors by single resolution

    Provision relating toappointment of directors to bevoted on individually is not applicable to a privatecompany which is not a

    subsidiary of a publiccompany.

    [Section 263]

    At a general meeting of acompany, a motion for theappointment of two or morepersons as directors of thecompany by a single resolutionshall not be moved unless aproposal to move such a

    motion has first been agreed toat the meeting without any votebeing cast against it.

    [Section 162]

    Limit on number of directorship

    Private Companies are not counted for the purpose of determining the limit of 15companies in which a personcan act as a director at anygiven time.

    [Section 275]

    A person can act as director ina maximum of 20 companies at any given point of time out of which not more than 10 shouldbe public companies.

    [Section 165]

    Corporate SocialResponsibility

    No requirement to spend onCSR activities.

    All companies, including privatecompanies, who are meetingeligibility criteria fixed in thisregard, are required toconstitute a CSR committeeconsisting of at least 3directors out of which atleast 1must be independent directorand spend at least 2% of average net profits on CSR

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    activities.

    [Section 135]

    Contents of FinancialStatements

    a. Balance Sheet

    b. Statement of Profit & Loss

    c. Cash flow Statement (applicable only to listed

    companies and companieshaving Turnover in excess of 50 crores or borrowings inexcess of 10 crores) AS 3 andlisting agreement

    a. Balance Sheet

    b. Statement of Profit & Loss

    c. Cash Flow Statement (Except for OPC and Small Company)

    d. Statement of Changes inEquity

    e. Notes to accounts

    Consolidation of Accounts

    Consolidation is not mandatedunder the Companies Act,1956 for any company.

    Listing agreement requiresconsolidation for listedcompanies having subsidiaries.

    (Clause 32 of Listingagreement and AS 21)

    a. All companies havingsubsidiary (s) need to prepareconsolidated accounts.

    b. Subsidiary includes associateand joint ventures.

    (Section 129)

    Maximum term of auditor

    Appointment of auditorhappens on yearly basis at AGM.

    No limit on maximum numberof years.

    (Section 224)

    a. Appointment of auditor willbe for 5 years term in eachappointment subject toratification every year in AGM.

    b. Individual auditor can servemaximum 5 years and Firm formaximum 10 years followedcooling off period of 5 years.

    (Section 139)

    Number of Companies anauditor can audit

    For Private Companies, nolimit is there as Section224(1B) is not applicable toprivate companies.

    a. 20 Companies in total.

    b. Private companies cannot appoint a person as auditor if he is already auditor for 20other companies.

    (Section 141)

    Director + CS/Manager

    If no CS/Manager, then

    MD + Director

    Private Company being a SmallCompany CS,

    If no CS, then

    1 Director

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    Signing of Annual Return If no MD, then

    2 directors

    (Section 161)

    Private Company, other thanSmall Company CS + Director

    If no CS, then

    PCS + Director

    (Section 92)

    Provisions regarding generalmeetings

    Private companies can exempt

    themselves from theapplicability of Sections 171 to186 by mentioning so in itsAOA. These sections deal withlength of notice for GeneralMeetings, explanatorystatement etc.

    All requirements regardinggeneral meetings as specified inthe Act are applicable toPrivate Companies. Noexemption can be sought basisof AOA.

    Authentication of financialstatements of the company

    By two directors including

    Managing Director , if there isone and Company Secretary ,if there is one

    (Section 215)

    Chairperson, if he is authorizedby board or 2 Directors out of which one shall be ManagingDirector

    The Chief Executive officer, if he is a Director of thecompany, The chief financialofficer and the companysecretary of the company,wherever they are appointed.

    (Section 134)

    Inter CorporateInvestment/Loans/Guarantee

    Provisions of Section 372Aregarding Inter CorporateInvestments/Loans/Guarantee

    are not applicable.

    Except subsection (1) of Section 186, other provisionson Inter CorporateInvestments/loans/Guranteesare applicable.

    Signing of Directors Report

    By Chariman of the Board if heis authorized by board or bysuch number of directors of the board as are required tosign the balance sheet and theprofit and loss account of thecompany by virtue of sub-sections (1) and (2) of section215

    (Section 217)

    Chairperson, if he is authorizedby board or 2 Directors out of which one shall be ManagingDirector or by the Directorwhere there is one Director

    (Section 134)

    Other Articles by - CS DHANAPAL

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