After commencement of Companies Act, 2013 from 01st April
2014 Compliance requirement of Companies has been increased. Therefore it’s
difficult for the Private Company to continue and for peoples to incorporate
new Companies. The new Company law was pain for the youth. Although it allows a
single-person company to be set up, when it needs to draw in fresh investment,
it will be forced, for all practical purposes, to become a multi-share-holder
Company. However small it is, it will have to meet full secretarial Standards.
There is every reason to make compliance with the full panoply of regulation
conditional on crossing a defined threshold. Section 185 makes it hard for
owner of a clutch of privately-held Companies to shuffle capital amongst the
companies. This produces inflexibility while advancing no public interest.
Similarly clumsy attempts to prevent mischief in related party
transactions make life complex in other
Cases, too. Such legal requirements rightfully belong to the world of
Kafka, not to attempts to improve ease of doing business. Young, ambitious
Indians deserve better.
1But after 5th June, 2015 “EXEMPTION”
has been provided to Private Limited Companies. After all that exemptions
status of Private Limited Companies under Companies Act, 2013 more or less is
equal to Status in Companies Act, 1956.
The Ministry of Corporate Affairs, Government of
India issued the final notifications under Section 462 of the Companies Act,
2013 (Act), which provide exemptions under various provisions of the Act to Private
Companies and has “Removed Hurdles in the path of Small Companies”
Notification issued by MCA on 5thJune,
2015.The same is effective from the date of its notification only i.e. 5th
June, 2015.
BRIEF OF EXEMPTION TO PRIVATE LIMITED COMPANIES:
v
2Incorporation
by Single Form:
·
Entrepreneurs keen on setting up new enterprises
will be able to incorporate one by filing just one form starting 1st
May, 2015 against eight separate forms earlier, as part of the government's
drive to make it easier to do business in the country.
·
"Name availability, allotment of Director Identification Number (DIN),
company incorporation and commencement of business will now be possible through
a single form.
The new form, called INC-29, is available on
the MCA website.
This is part of the government's drive to improve India's ranking on the
globally tracked parameter of ease of doing business.
v Have been allowed to accept deposits from members without the requirement of
offer circular and creation of deposit repayment reserve etc
maximum of 100% of aggregate of its paid up capital and free reserves (which
does not include securities premium).
v Major Relax exemption has been given from filing
of board resolutions (MGT-14) with the ROC for the purposes
mentioned under Section 179(3).
v OPCs, dormant companies, small companies and
private companies having paid up share capital less than Rs. 100 crore have
been excluded for calculating the limit of 20 companies for audit by an
auditor.
__________________
1. Detailed Note on Exemption on Private Limited Companies published
separately.
2. (Complete Article on INC-29 “Integrated Process of Incorporation” will
be published Separately)
v No need to pass “Special Resolution” for the
purposes of passing of Resolution mentioned under Section 180. Example:
1. Borrow exceeding paid up capital & free reserves.
v An interested director of a private company can
now participate in the Board meeting after declaring his interest. But will not
count for the quorum.
v Loan to Director u/s 185 allowed subject to
certain conditions.
v Even if, Member is related then also he can vote
on such resolution required to be pass u/s 188 in GM.
v The exemptions relax the provisions for entering
into Related Party Transactions;
Let’s Start Discussion
on Provisions Applicable on Private Limited Company
(After Exemptions Notification, Companies Amendment Act, 2015 and
Circulars/Notifications/ amendments upto 7th July, 2015)
1.
MEANING OF PRIVATE COMPANY:
As per
Section 2(68) “Private Company” means a Company, which by its Article,-
(I) restricts the
right to transfer its shares;
(ii) Limits the
number of its members to 200; and
(Iii) prohibits
any invitation to the public to subscribe for any securities of the company;
Note: - 1. Joint holders shall be counted as one.
2. (A) Employees holding shares; and
(b) Person formerly in employment were, who members
during such employment
and still continue
to be the members shall not be counted in the limit of 200.
3.
Private Limited Company
can be incorporate with any amount of Capital it may be Rs. 2 to Rs. Infinite.
2.
INCORPORATION OF COMPANY:
India is
moving towards “ease of doing business’ regime and wants to improve its current
rank (134 out of 185 as per World Bank) in starting a business vis-à-vis global
standards.
As I have already discussed above about
Incorporation of Company by single form. It can be called “Single Step Process for
Incorporation of Company”.
Complete Article of Incorporation
through INC-29 will share separately
__________________
1.
The requirement of minimum paid-up capital has
been deleted as per the Companies (Amendment) Act, 2015 (21 of 2015), dt.
25-5-2015.
3.
ALLOTMENT OF SECURITIES (Section
42, 62):
Private Limited Company can allot the
shares by following ways:
a.
Right Issue of Shares: (Section-62)
In this option company can allot
shares only to Existing Share Holders. (It is Shortest Process of Issue of
Shares under Companies Act, 2013)
b. Preferential
Allotment of Shares: (Section 62 and 42 read with relevant
rules) in this option company can issue shares to group of Existing share
holders or group of existing shareholders and outsider.
(As per Companies (Share Capital
and Debentures) Amendment Rules, 2015 Dated 18.05.2015 in case of preferential
allotment of shares to only Existing Shareholders of the Company no need to
maintain record of Offer in PAS-5 and no need to prepare private placement
offer letter PAS-4)
c. Private
Placement of Shares: (Section 42 read with relevant rules) this
option is use by the company when company will issue shares to outsiders. (It’s
a lengthy process).
Separately
Articles has been published on above mentioned topics.
4.
ISSUE OF SHARE CERTIFICATE(Section
45-46):
i. Time
Period For Issue Of Share Certificates:
§ In case
of Incorporation: With
in a period of 2 (Two) Month from the date of Incorporation to the subscriber
of Memorandum.
§ In case
of Allotment: With in a period
of 2 (Two) Month from the date of allotment of shares.
§ In case
of Transfer: With in a period
of 1 (One) Month from the date of receipt of instrument of Transfer by the
Company
ii. Other
Points:
Ø Common seal is Optional (After Companies Amendment Act, 2015)
Ø Share Certificate should be issue under the signature of Two
Director or by a Director and Company Secretary (If any).
Ø Share Certificate Must is ‘Issued’ from
registered office only.
Ø After issue of Share Certificate, Company
should pay stamp duty on issue of share certificate as per Stamp Act of the
State.
5.
TRANSFER OF SHARES (Section
45-46):
Generally a Private Company is guided by its
Article of Association. As per Section 2(68) of Companies Act, 2013 Private
Company restricts the transfer of shares and prohibit invitation to public to
subscribe to any securities of the Company.
i. Points to be Kept in mind while transferring of shares:
a)
Transferor
should give a notice in writing for his intention to transfer his share to the
company.
b) The company in turn should notify to other members as regards the
availability of shares and the price at which such share would be available to
them.
c) Such price is generally determined by the directors or the
auditors of the company as per book value of shares.
d) The company should also intimate to the members , the time limit
within which they should communicate their option to purchase shares on
transfer
e) If none of the members comes forward to purchase shares then the
shares can be transferred to an outsider and the company will have no option,
other than to accept the transfer.
f) The Share transfer deed in FORM SH-4 duly executed
both by the transferor and the transferee
g) Stamp duty for transfer of shares in
Delhi is 25 PAISA for every Rs. 100 or part thereof.
6.
CHARGE (Section 77):
Type of Charges to be registered:
Old
Act: Section 125 specifies only 9 types of charges to be registered.
New Act: Section 77 states that Companies are required to
register ALL TYPES OF CHARGES,
with ROC within 30 days of its creation.
- within or outside India,
- on its property or assets or any of its undertakings,
- whether tangible or otherwise, and
- situated in or outside India
For Creation of Charge Form CHG-1 will be filed
with fees prescribed under Act. Form should be signed by the Company and the
Charge-holder and should be filed together with instrument creating charge.
Additional period to register the
Charge:
Section
77- ROC may on application by the company, allow the registration of charge within
300 days (30 days + additional period of 270 days). If form will file after
30 days then form will file with additional fees.
Application
to be supported by a declaration in Form CHG-10 from the CS or Director that
such belated filing will not adversely affect the rights of any creditors of
the company.
Rule 4(2) chapter VI
Time Limit for filling for Creation of Charge
Modification of charge:
Provisions of Modification of charge are
completely same as provisions of Creation of Charge. After filling form for
Modification of Charge registrar will issue certificate for modification of
charge in form CHG-3.
Any modification in the terms or conditions or
the extent or operation of any charge registered under that section also
required registration.
__________________
1.
Under Companies Act, 2013 there is also need to
Create Charge on Hypothecation of Vehicles also.
Satisfaction
of Charge:
Charge is created as security for loan or
debentures or as security for some other purpose. If the amount of loan is
repaid or debentures are fully paid or other purpose is fulfilled, there
remains no necessity of the charge. This is called satisfaction of charge.
As per Section 82 – Form for Satisfaction of
charge will be file in form CHG-4 within 30 days of satisfaction of charge. If company fail
to file form CHG-4 within 30 days of creation of charge then company have to go
for Condonation of delay for satisfaction of charge.
Charges Filing of Which with ROC is not necessary?
·
Guarantee
doesn’t require Registration.
·
Charge
created by operation of law need not be filed
·
Negotiable
Instrument (Hundi) is not a ‘Charge’ and registration not required.
Pledge is not required to be filed for Registration:
·
Official
Liquidator V. Viswanathan case: It was held that charge, being pledge, is not
required to be registered, in winding up, the pledge is not treated as
creditor. He is at liberty to issue necessary statutory notice to sell the
pledged property.
7.
ANNUAL RETURN (SECTION 92):
§ Every company shall prepare an annual return in
form MGT-7 containing period 1st April to 31st March.
§ Every company shall file with the Registrar a copy of the annual
return, within sixty days from the date on which the annual general meeting is
held.
Certification of Annual Return by
Company Secretary (MGT-8):
a)
All Listed Companies
b)
Every Company having:
Ø Paid-Up share capital of 10 Crore (Ten Crore) rupees or
more or
Ø Turnover of 50 Crore (fifty crore) rupees or more
Signing of annual return By
Company Secretary: Annual
Return of below mentioned company should be “SIGNED FROM’ A ‘COMPANY SECRETARY IN
PRACTICE’
a)
All Listed Companies
b)
All Public Companies
c)
Private Limited company having:
Ø Paid up share Capital Exceeding 50 lac
Ø Turnover exceeding 2 Crore
Companies EXEMPT from Signing of Annual Return
from Company Secretary:
a)
One Person Company
b)
Small company
8.
ANNUAL GENERAL MEETING (SECTION 96):
Time Period for Annual General Meeting:
·
In case of Existing Company: Annual General Meeting should be held within 15
(Fifteen) Months from the last Annual General Meeting or 6 (Six) month from the
end of financial year. Whichever is EARLIER?
·
In case of New Company: First Annual General Meeting should be held within 9 (Nine)
month from the end of financial year.
·
Time:
Annual General Meeting should be held between 9:00 A.M. to 6:00 P.M.
Notice of
Annual General Meeting:
§ General Meeting of a company may be called by giving not
less than clear twenty-one days ‘notice either in writing or through electronic
mode.
§ Every notice of a meeting shall specify the place, date,
day and the hour of the meeting and shall contain a statement of the business
to be transacted at such meeting.
§ The notice of every meeting of the company shall be given
to—
(a) Every member of the company
(b) The auditor or auditors of the company; and
(c) Every director of the company
Quorum of Annual General Meeting:
Two members personally present, shall be the Quorum for a meeting of the
company.
Place of ANNUAL General Meeting:
As per Section 96(2) AGM can be held at registered office of the Company
or any other place in the City, Town & Village where registered office of
the Company is situated.
Place of EXTRA ORDINARY General Meeting:
The EGM can be held anywhere in INDIA.
__________________
1.
Municipal Department of Company Affairs have
recognized this contingency and have advised vide circular Letter No.
1/1/80-CLV and No. 6/159/PT/64, dated 16.02.1981 that a Company can hold its
AGM within the postal Limits of the City in which registered office is situated
if it is more convenient for its shareholders.
9.
DIVIDEND (SECTION 123): Dividend is 2 (Two) type.
A.
Interim Dividend: {As
per Clause 81 of Model Articles of Company Limited by shares as Contained in
Table-F of Schedule-I of the 2013 Act}
·
Interim
dividend can only be declared by board of Directors.
·
Generally
paid in the middle of the year if Board of directors fined that profitability
of the company.
·
Board of
Directors can declare dividend out of surplus in profit and loss account at the
beginning of the year or profit during the year.
B. Final
Dividend: As per Clause 80 of
Model Articles of Company Limited by shares as Contained in Table-F of
Schedule-I of the 2013 Act}
·
Company in
Board Meeting may decide the amount of dividend which they want to recommend in
General Meeting.
·
Company
will mention the resolution for Dividend in the Notice of General Meeting.
·
Company
will hold the General Meeting:
§ Declaration of Dividend is Ordinary Business.
§ Ordinary Resolution for declaration of dividend
will be passed in the General Meeting.
·
Once
dividend is declared, it must be paid within 30 days.
10. BOOKS OF ACCOUNT TO BE KEPT:
Every Company shall prepare and Keep At Its
Registered Office
·
Books of Account and · other relevant Books and Papers and
·
Financial Statement for every financial
year which give a true and fair view of the state of the affairs of the Company
including that of its branch office or offices, if any
Place of keeping of Books of Accounts:
Company
can keep all or any of the books of account aforesaid at Place Other Then
Registered Office (but in INDIA) of the Company by following procedure:
·
Board of Director of the Company will
pass a Board Resolution.· Within 7 days of passing of resolution company will file form AOC-5 with ROC.
11. FINANCIAL YEAR:
In case of
newly incorporate company:
v If
Company incorporated ON OR AFTER 1st January of a year, the
period ending on the 31st day of March of FOLLOWING Year.
v If
Company incorporated ON OR BEFORE 1st January of a year, the
period ending on the 31st day of March of that Year.
In case of
old incorporate company:
§ Financial
year means the period ending on the 31st Day of March every year.
12. FINANCIAL STATEMENT:
§ A
Balance Sheet
§ A
profit and Loss account (or Income and expenditure account)
§ Cash
Flow Statement
§ A
statement of changes in equity (If applicable)
§ Any
explanatory note attached to,
[The
State changes in equity is applicable for Companies to which the AS applies]
Cash Flow Statement not required to be prepared by the companies:
§ One
Person Company; of§ Small Company; or
§ Dormant Company.
Authentication of Financial Statement:
In case of Private Company Financial statement
should be signed by the Two Directors of the Company.
§ After
the signatures, it should be submitted to the auditor for his report thereon.
§ When
financial statement signed by two directors, such directors should
be present at the meeting and should sign the accounts at the meeting.
(I.e. should be signed at the meeting itself and not later).
Circulation
of Financial Statement 134(7):
To whom:
§ Every
Member of the Company
§ To
every trustee for the debenture-holder of any debentures issued by the Company
and
§ To
all persons other than such member of trustee, being the person so entitled.
Time
period of circulation (Section 136):
§ The
financial statement (including consolidated financial statement, if any)
auditor’s report and every other documents required by law to be annexed or
attached to financial statements, which are to be laid before a company in its
general meeting shall be sent “Not Less Than 21 (Twenty One) days before the
date of the Meeting.
13. DIRECTOR REPORT:
A. Signing of Director’s Report:
As per Section 134(6) Board Report and annexure
thereto shall be signed by
·
its ‘CHAIRPERSON’ if he is authorized by
Board of director; Where he is not so authorized by,
·
At least 2 (Two) Director, one of whom shall be a
Managing Director.
·
If there is no Managing Director then by Two
Directors.
B. Basis of Board Report:
The Board’s Report shall be prepared based on “STAND ALONE FINANCIAL STATEMENT OF THE COMPANY”
But the Board’s Report shall contain a Separate section wherein a report
on the performance and financial position of each:
·
Subsidiary
·
Associate
·
Joint venture companies, including in the
consolidated financial statement is presented.
If anyone
wants article and draft copy of Director Report mail me at csdivehsgoyal@gmail.com
C. Approval of Board Report:
·
Approval of Board’s Report shall be done in Meeting
of the Board of Director Only. {179(3)}
·
Approval of Board’s Report shall not be done by
“Circulation Resolution”, or “by Committee”. {179(3)}
·
Meeting of Board of directors can’t be done by
“Video Conferencing”.
__________________
1.
Even if the Company will hold AGM on shorter
notice, Company has to circulate financial statement along with relevant
document at least before 21 days of Meeting.
14. AUDITOR:
Appointment of FIRST AUDITOR:
·
The First auditor of a company shall be appointed by the Board of
Directors within 30 (Thirty) Days of the Date of Incorporation of a
company. The auditor so appointed, shall
hold office until the conclusion of
the first annual general meeting.
·
In case of appointment of First auditor by Board of Director of company
pursuant to section 139(6), company is not required to file any form. But it’s
advisable to file form for the same in e- form ADT-1.
Appointment of auditor at First Annual General Meeting (AGM):
Every company shall at First
Annual General meeting (AGM) appoint an individual or firm as an Auditor to
hold office from the conclusion of that meeting till the conclusion of the
sixth (6th) Annual General Meeting (AGM).
Ø The duration of auditor of company
will be term of consecutive Five (5) years each for Individual and Two terms of
Consecutive Five (5) years in case of Auditor Firm.
** BUT the provision of 5 Year and 10 year will not
applicable on One Person Company and Small Companies as per Rule-5 the
Companies (Audit and Auditor) Rules, 2014.
Limit of Audits:
An auditor can be appointing as
statutory auditor in 20 Companies. While reckoning the limit in 20 Companies in
which a person can be appointed as Statutory Auditor, the following shall be
excluded.
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