Privileges, Concessions to private companies

The Ministry of Corporate Affairs has issued a notification to give exemptions to private companies under the Companies Act to improve ease of doing business in India.

Some important exemptions that have been provided in the Notification with respect to the private companies are that the transactions between any company which is holding, subsidiary or an associate of such company and subsidiary of holding shall not be treated as Related Party Transactions. With the removal of restrictions on the powers of Board, it would be easy for the private companies to operate their business.

The Notification provides that the interested directors of a private company may participate in such meeting wherein contract or arrangement or proposed contract or arrangement entered into or to be entered into is discussed after disclosure of interest. Also, the member of a private company can vote on such resolution, to approve any contract or arrangement which may be entered into by the company, if such member is a related party.

Further, Loan to Directors etc., may be provided by a private company in whose share capital another body corporate has invested any money and if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower, and such a company has no default in repayment of such borrowing subsisting at the time of making transactions under this section.

Now, a big relief to the private companies which will help in the capital formation is that the companies can accept deposits from members which is not exceeding 100 % of aggregate of the paid up share capital and free reserves.

The private companies need not file with the Registrar the resolutions passed by the Board with respect to Section 179 (3) which will in turn help the private companies to reduce cost of compliance.

For appointment of managing director, whole-time director or manager by a private company, there is no requirement that the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at its meeting and by the Central Government in case such appointment is at variance to the conditions specified in that Schedule.

The Private company can have its own regulations in its article of association for the following sections of companies Act, 2013:- 

 Section 101 – Notice of general meetings 
 Section 102 – Explanatory Statement 
 Section 103 – Quorum for meeting 
 Section 104 – chairman of meetings 
 Section 105 – Proxies 
 Section 106 – Restriction of voting rights 
 Section 107 – Voting by show of hands 
 Section 109 – demand for poll

When to file form MGT 14 under Companies Act 2013

Passing of below mention Resolutions necessitates filing form MGT 14. The resolution should be filed with ROC within 30 days of passing the resolution.

Section- 8

For a company registered under Section- 8 to convert itself into a company of any other kind or alteration of its Memorandum or Articles

Section – 12

Shifting of Registered Office address

Section-13 

Alteration in MOA.

Section - 14

Alteration in Article.

Section 13(8)

A company, which has raised money from public through Prospectus and still has any unutilized amount out of the money so raised, shall not Change its objects for which it raised the money through prospectus unless a special Resolution is passed by the company.

Section 27(1)

A company shall not, at any time, vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued, except subject to the approval of, or except subject to an authority given by the company in general meeting by way of special resolution.

Section 48(1)

Where a share capital of the company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or by means of a special resolution passed at a separate meeting of the holders of the issued shares of that class.

Section 54

Issue of Sweat Equity Shares.

Section 62(1) (c)

Preferential allotment of shares.

Section 65

Conversion of Unlimited company into limited company.

Section 66(1)

Reduction of Share Capital.

Section 67(3) (b)

Special resolution for approving scheme for the purchase of fully-paid shares for the benefit of employees.

Section 68(2)(b)

Buy Back of Shares.

Section 71(1)

A company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption: Provided that the issue of debentures with an option to convert such debentures into shares, wholly or partly, shall be approved by a special resolution passed at a general meeting.

Section 76

Inviting deposits from person other then members.

Section-94

Keep registers at any other place in India.

Section 140(1)

The auditor appointed under section 139 may be removed from his office before the expiry of his term only by a special resolution of the company, May appoint more than 15 directors by passing of Special resolution.

Section- 149(10)

Re-appointment of Independent Director.

Section 165(2)

Subject to the provisions of sub-section (1), the members of a company may, by special resolution, specify any lesser number of companies in which a director of the company may act as directors.

Section- 180

The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution, namely-

1. To sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company or where the company owns more than one undertaking, of the whole or substantially the whole of any of such undertakings. 
2. to invest otherwise in trust securities the amount of compensation received by it as a result of any merger or amalgamation. 
3. to borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed aggregate of its paid-up share capital and free reserves, apart from temporary loans obtained from the company’s bankers in the ordinary course of business. 
4. to remit, or give time for the repayment of, any debt due from a director.

Section- 185

For approving scheme for giving of loan to MD or WTD.

Section- 188

To enter into related party transaction with the company if paid up capital of company exceed Rs.10/- Crore.

Section- 186(3)

Loan& Investment by company exceeding 60% of paid up share capital or 100% of free reserve. 

Section- 196

Appointment of a person as Managerial Personnel if, the age of Person is exceeding 70 year.

Schedule V

Payment of remuneration to Managerial personnel if, profits of company are Inadequate.

Section 271(1)(b)

Special Resolution for winding up of the company by Tribunal.

Section 304(b)

Special Resolution for winding up of company

AS PER SECTION 179(3)

The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:—these resolutions are also necessary to file in MGT-14.

1. To make calls on shareholders in respect of money unpaid on their shares. 
2. To authorize buy-back of securities under section 68.
3. To issue securities, including debentures, whether in or outside India; 
4. To borrow monies; 
5. To invest the funds of the company; 
6. To grant loans or give guarantee or provide security in respect of loans; 
7. To approve financial statement and the Board’s report; 
8. To diversify the business of the company; 
9. To approve amalgamation, merger or reconstruction; 
10. Take over a company or acquire a controlling or substantial stake in another company; 
11. Any other matter which may be prescribed.

In addition to the items mention above the following resolutions should also to be filed with ROC in MGT-14 per Rule 8 of Companies (Meetings of Board and its Powers), Rules 2014-

1. To make political contributions. 
2. To appoint or remove key managerial personnel (KMP) 
3. To take note of appointment(s) or removal(s) of one level below the Key Management Personnel; 
4. To appoint internal auditors and secretarial auditor; 
5. To take note of the disclosure of director’s interest and shareholding; 
6. To buy, sell investments held by the company (other than trade investments), constituting 5% or more of the paid up share capital and free reserves of the investee company; 
7. To invite or accept or renew public deposits and related matters; 
8. To review or change the terms and conditions of public deposit; 
9. To approve quarterly, half yearly and annual financial statements or financial results as the case may be.

Items 3, 5, 6, 7, 8 and 9 have been omitted vide Companies (Meetings of Board and its Powers) Amendment Rules, 2015

Resolutions required to be Filed Under Companies Act,2013 in form MGT 14

Section 117(3) of the Companies Act 2013 specifies the list of resolutions that should be filed with the ROC along with Explanatory statement if any within 30 days of passing such resolution through filing of Form MGT 14.

List of Resolutions/Agreements given in Section 117(3)

1. Special Resolutions;
2. Resolutions which have been agreed to by all the members of a company, but which, if not so agreed to, would not have been effective for their purpose unless they had been passed as special resolutions;
3. Any resolution of the Board of Directors of a company or agreement executed by a company, relating to the appointment, re-appointment or renewal of the appointment, or variation of the terms of appointment, of a Managing Director;
4. Resolutions or agreements which have been agreed to by any class of members but which, if not so agreed to, would not have been effective for their purpose unless they had been passed by a specified majority or otherwise in some particular manner; and all resolutions or agreements which effectively bind such class of members though not agreed to by all those members;
5. Resolutions passed by a company according consent to the exercise by its Board of directors of any of the powers under clause (a) and clause (c) of sub-section (1) of section 180;
6. Resolutions requiring a company to be wound up voluntarily passed in pursuance of section 304;
7. Resolutions passed in pursuance of sub-section (3) of section 179 as listed below; and
8. Any other resolution or agreement as may be prescribed and placed in the public domain.

List of Resolutions given in Section 179(3)

1. to make calls on shareholders in respect of money unpaid on their shares; 
2. to authorise buy-back of securities under section 68; 
3. to issue securities, including debentures, whether in or outside India; 
4. to borrow monies; 
5. to invest the funds of the company; 
6. to grant loans or give guarantee or provide security in respect of loans; 
7. to approve financial statement and the Board’s report; 
8. to diversify the business of the company; 
9. to approve amalgamation, merger or reconstruction; 
10. to take over a company or acquire a controlling or substantial stake in another company; 
11. any other matter which may be prescribed (PRESCRIBED IN RULE 8 OF Companies (Meetings of Board and its Powers) Rules, 2014

List of Resolutions given in rule 8(5) read with Section 179(3)

1. to make political contributions; 
2. to appoint or remove key managerial personnel (KMP); 
3. to take note of appointment or removal of one level below the Key Management Personnel; *
4. to appoint internal auditors and secretarial auditor;
5. to take note of the disclosure of director’s interest and shareholding; *
6. to buy, sell investments held by the company (other than trade investments), constituting five percent or more of the paid up share capital and free reserves of the investee company; *
7. to invite or accept or renew public deposits and related matters; *
8. to review or change the terms and conditions of public deposit; *
9. to approve quarterly, half yearly and annual financial statements or financial results as the case may be. *

Vide circular issued on 5 June 2015 Private companies have been given certain privileges and hence Section 179 does not apply to Private companies and there is no need to file form MGT-14 for above listed resolutions.

Change in the address of statutory registers

As per rule 15(6) of Companies (Management and Administration) Rules, 2014 [Chapter-7 ], a copy of the proposed special resolution in advance to be filed with the registrar as required in accordance with first proviso of sub-section (1) of section 94, shall be filed with the Registrar, at least one day before the date of general meeting of the company in Form No. MGT.14.

* Please note that vide Companies (Meetings of Board and its Powers) Amendment Rules, 2015 dated 18-Mar-2015 Govt. has omitted the certain events from compulsory filing of MGT.14 those items are struck off from the above list.