Transcript
Companies Act, 2013 has brought massive changes for private companies as barring a very few, all the exemptions which were available to private companies under the Companies Act, 1956 have been withdrawn in the Companies Act, 2013. In this article, we attempt to throw light on the impact of Companies Act, 2013 on private companies by means of comparison of the significant provisions relating to Private Companies under the Companies Act, 1956 and Companies Act, 2013. Comparison of provisions relating to PRIVATE COMPANIES under CA, 1956 and CA, 2013 Basis of Comparison Companies Act, 1956 Maximum number of members restricted to 50. Companies Act, 2013 Maximum number of members restricted to 200 .
Definition
Commencement of Business
Further issue of shares
Acceptance of Deposits from relatives of directors
Shares with differential voting rights
Appointment of KMP
Express clause in the definition was there “prohibits any invitation or acceptance of deposits from persons No specific clause on prohibition of other than its members, directors or their acceptance of deposits is there in the Relatives” [Section 3(1)(iii)] definition. [Section 2(68)] Under Companies Act, 2013, even a Under Companies Act, 1956, a Private company can Private Company cannot commence its commence its operations immediately after business or make any borrowings unless incorporation. Only public companies have to seek it files with ROC a statement that the certificate of commencement of business. (Section subscription money and minimum paid 149) up capital has been brought in. (Section 11) A private company can make further allotment only by means of Rights Issue, Provisions relating to rights issue and Preferential ESOP or Private placement/preferential allotment are not applicable to a private company. allotment and needs to comply with the [Section 81 and 81(1A)] all the provisions relating to these types of allotment. [Section 62] A private company is prohibited to accept A Private Company can accept deposits/loans from unsecured loans/deposits from relatives relatives of directors by virtue of exemption available of directors. [Section 73read with draft in the definition of private company. [Section 3(1)(iii)] rules issued thereunder] A private company has to comply with Provisions relating to issue of shares with differential the provisions contained in Section voting rights are not applicable to a private company 43 read with the rules issued there under [Section 86] to issue shares with differential voting rights. [Section 43] All companies, including private companies, having paid up capital of Rs. 5 Crores or more are required to have the following whole time KMP: Under CA, 1956, irrespective of the capital, Private Companies are not mandated to appoint 1. MD/CEO/Manager/WTD; MD/WTD/Manager etc. except Whole Time Company Secretary in case of companies having paid up 2. Company Secretary; and capital of Rs. 5 Crores or more. [Section 269 & 383A] 3. CFO [Section 203] All companies, including private Restrictions relating to giving of loans, advances or companies, are restricted from giving providing securities, guarantees to directors and loans, advances or providing securities, other interested entities are not applicable to a private guarantees to directors and other company. [Section 295] interested entities barring few exceptions. [Section 185] All companies, including private No requirement to have director resident in India. companies, must have atleast one director who has stayed in India for a
Loans to Directors
Resident Director
minimum period of 182 days during the previous calendar year. [Section 149] A person appointed as a director shall not act as a director unless he gives his In case of private companies, consent to act as consent to hold the office as director and Consent to act as director director is not mandatory to be filed with ROC. such consent has been filed with the [Section 264] Registrar within thirty days of his appointment [Section 152] At a general meeting of a company, a motion for the appointment of two or Provision relating to appointment of directors to be more persons as directors of the Appointment of 2 or more voted on individually is not applicable to a private company by a single resolution shall not directors by single resolution company which is not a subsidiary of a public be moved unless a proposal to move company. [Section 263] such a motion has first been agreed to at the meeting without any vote being cast against it. [Section 162] A person can act as director in a Private Companies are not counted for the purpose of maximum of 20 companies at any given determining the limit of 15 companies in which a Limit on number of directorship point of time out of which not more than person can act as a director at any given time. 10 should be public companies. [Section [Section 275] 165] All companies, including private companies, who are meeting eligibility criteria fixed in this regard, are required to constitute a CSR committee consisting Corporate Social Responsibility No requirement to spend on CSR activities. of at least 3 directors out of which atleast 1 must be independent director and spend at least 2 percent of average net profits on CSR activities. [Section 135] Balance Sheet Balance Sheet Statement of Profit & Loss Statement of Profit & Loss Cash flow Statement (applicable only to Cash Flow Statement (Except Contents of Financial listed companies and companies having for OPC and Small Company) Statements Turnover in excess of 50 crores or Statement of Changes in Equity borrowings in excess of 10 crores) AS 3 and Notes to accounts listing agreement Consolidation is not mandated under the Companies Act, 1956 for any company. Consolidation of Accounts Listing agreement requires consolidation for listed companies having subsidiaries. (Clause 32 of Listing agreement and AS 21)
All companies having subsidiary (s) need to prepare consolidated accounts. Subsidiary includes associate and joint ventures. (Section 129) Appointment of auditor will be for 5 years term in each appointment subject to ratification every year in AGM. Individual auditor can serve maximum 5 years and Firm for maximum 10 years followed cooling off period of 5 years. (Section 139) 20 Companies in total. Private companies cannot
Appointment of auditor happens on yearly basis at AGM. Maximum term of auditor
No limit on maximum number of years. (Section 224)
Number of Companies an auditor can audit
For Private Companies, no limit is there as Section 224(1B) is not applicable to private companies.
appoint a person as auditor if he is already auditor for 20 other companies. (Section 141) Director + CS/Manager
If no CS/Manager, then MD + Director Signing of Annual Return If no MD, then 2 directors (Section 161)
Private Company being a Small Company –CS, If no CS, then 1 Director Private Company, other than Small Company – CS + Director If no CS, then PCS + Director (Section 92)
Provisions regarding general meetings Private companies can exempt themselves from the applicability of Sections 171 to 186by mentioning so in its AOA. These sections deal with length of notice for General Meetings, explanatory statement etc.
All requirements regarding general meetings as specified in the Act are applicable to Private Companies. No exemption can be sought basis of AOA. Chairperson, if he is authorized by board or 2 Directors out of which one shall be Managing Director The Chief Executive officer, if he is a Director of the company, The chief financial officer and the company secretary of the company, wherever they are appointed. (Section 134) Except subsection (1) of Section 186, other provisions on Inter Corporate Investments/loans/Gurantees are applicable. Chairperson, if he is authorized by board or 2 Directors out of which one shall be Managing Director or by the Director where there is one Director (Section 134)
Authentication of financial statements of the company
By two directors including Managing Director , if there is one and Company Secretary , if there is one (Section 215)
Inter Corporate Investment/Loans/Guarantee Provisions of Section 372A regarding Inter Corporate Investments/Loans/Guarantee are not applicable.
Signing of Director’s Report By Chariman of the Board if he is authorized by board or by such number of directors of the board as are required to sign the balance sheet and the profit and loss account of the company by virtue of subsections (1) and (2) of section 215 (Section 217)