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Govt proposes relaxing Companies Act for private firms

By PTI
24 June, 2014

To ease the regulatory burden for private companies including those of small size, the government today proposed relaxing certain provisions of the new Companies Act for such entities.

The proposed relaxations include certain provisions relating to prohibition on acceptance of public deposits, share capital, voting rights, further issuance of shares, appointment of auditor and director, restriction on board powers, loans to directors, related party transactions, as also appointment of top management personnel.

Through a draft notification, the Corporate Affairs Ministry has proposed as many as 13 relaxations for private companies from the various provisions of the Companies Act which came into effect at the beginning of current fiscal.

While the draft notification would be placed before each house of the Parliament, suggestions and comments are invited from the public till July 1, the Ministry said in a circular.

Among various proposals, it has been proposed that a private company be exempted from having a share capital of either equity share capital or preference share capital.

The other exemption include the requirement of every shareholder of a company having a right to vote on every resolution placed before the company, and his voting right being in proportion to the shareholding.

With regard to further issue of share capital by a private company, it has been proposed that any such offer would need to be made through a notice during a time period ‘not less than 7 days and not exceeding 15 days’. The existing provision has such a time period of not less than 15 days and not more than 30 days.

With regard to issue of shares to employees under an ESOP plan, it has been proposed that the same can be done through a ‘special resolution’ in case of private companies, as against a special resolution for others.

It has also been proposed that certain rules on ‘prohibition on acceptance of deposits from public’ would not be applicable to small private companies.

Such companies would include those “having 50 or less number of members if they accept monies from their members not exceeding 25 per cent of the aggregate paid up capital and free reserves of 100 per cent of the paid up capital, whichever is more, and which inform the details of such monies to the Registrar in the prescribed manner”.

Also, the provisions for meeting of shareholders with regard to notice, statement to be annexed with such a notice, quorum, appointment of chairman, proxies, voting restriction, voting by show of hands and demand for poll would not apply to a private company if its ‘article of association’ provides otherwise.


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Govt proposes relaxing Companies Act for private firms

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