DRAFT SUGGESTIONS
1) In India, small & medium private limited company & unlisted
2) The
PROBLEMS & SUGGESTION:
A) Relevant Sec 117(3), 179(3), Rule 8 of Chapter XII& other Sections & other Rules: Private Ltd Co having paid up capital upto 50 crores should be exempted from filling requirement of MGT 14
B) Any penalty & prosecution under various Chapters: In case of Private Ltd Co upto paid up capital of 50 crores , the prosecution provisions should not be applicable. Penalty should not be levied more than Rs. 1 Lakh
C) CHAPTER III, Part II: Section 42, Chapter IV, clause (a) of sub-section (1) of section 62) and sub-section (2) of section 62:
1) Requirement of Separate Bank Account and Valuation of Shares seems to be create additional hardship & is almost impracticable for small private Ltd Cos & small unlisted public Ltd companies .
2) These companies usually receive the money only from closely held persons.
3) Such requirements will unnecessary increase their cost of raising capital & further complex the process to raise capital.
4) These will discourage the process of formation of companies in India.
5) In India the private limited company are just like the partnership firms incorporated by the family members together.
6) Kindly note that formation of companies has already decreased by at least 90% during recently.
Suggestion : It is requested to exempt Pvt Ltd & unlisted public Ltd co companies having paid up capital of less than 50 crores or 100 crores of turnover from such requirements.
D) Chapter XII, section 185:
1) In private limited & unlisted public companies, shareholders are mostly closely held group companies also.
2) It is almost impossible to find a company without corporate shareholdings.
3) It should not be applicable companies having for paid up capital upto 50 crores.
Suggestion :It shall not apply to Private companies & unlisted public companies-
(a) which have borrowings from banks or financial institutions or any bodies corporate not more than twice of their paid up capital or Rs. 50 crore, whichever is more; and
(b) in whose share capital no other body corporate has invested any money”.
E) Chapter V, sub-section (2) of section 73: Suggestion :
1) Borrowing from members should be allowed upto twice of Net worth. Banks also allow these companies to borrow until they maintain debt equity ratio of 2:1.
2) It shall not apply to private companies & unlisted public companies having 50 or less number of members if they accept monies from their members not exceeding two hundred per cent of aggregate of the paid up capital and free reserves and which inform the details of such monies to the Registrar in the prescribed manner.
3) These companies should also be exempted from filing quarterly forms etc. as it is well disclosed in audit report as per the requirement of AS-18.
Prepared by: CA Nitesh More & CA Sanjay Agarwal
Warm Regards
"Team" CA.Nitesh More | FCA, |
Visit our blog: caniteshmore.blogspot.com
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COMMENTS AS SENT TO MCA
Sir, we have following suggestions in respect of above notification:
Ref to SN
Chapter/Sec No/Sub Section(s) in the Companies Act 2013
Our Suggestion
2
Chapter IV, clause (a) of sub-section (1) of section 62) and sub-section (2) of section 62
Requirement of Separate Bank Account, Special Resolution and Valuation of Shares seems to be impracticable as the private company will be receiving the money only from closely held persons. Such an requirement will just increase operational and compliance complicacy on them. Please try to exempt them from such requirements.
4
Chapter V, sub-section (2) of section 73
Private companies should be exempted from requirement of this section in whole. Further they should also be exempted from filing quarterly forms etc. as it is well disclosed in audit report as per the requirement of AS-18. They are the entities entirely dependent on their shareholders and directors for day to day business requirement and finance need. They cannot go to banks and institutions every time. Hence they should be allowed full liberty in respect of borrowing from shareholders and directors as was in 1956 Act. Please try to ease compliance part for private companies.
10
Chapter XII, section 185
In private limited companies, shareholders are mostly closely held group, even if they are body corporate. Hence, the requirement for exemption with no body corporate shareholders seems to be impracticable. Hence, you are requested to exempt this section to private limited companies, unconditionally.
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