India: Companies Act, 2013- Exemption/ Relaxations To Private Companies

The Government has notified several changes and relaxations in the applicability of the provisions of the Companies Act, 2013 ('the Act') to private companies vide notification dated June 5, 2015. The key changes are highlighted below:

a. Related Party Transactions

Definition of related party under Section 2(76)(viii) for the purpose of Section 188 has been relaxed to exclude a private company in respect of compliance of related party contracts with its holding, subsidiary or an associate company under Section 188 of the Companies Act, 2013.

In addition, Section 188 of the Companies Act imposes some restrictions on shareholders considered to be related parties. Related parties cannot vote at general shareholders' meetings regarding a resolution to approve any contract or arrangement between the company and the related party.

Pursuant to the notification, this restriction will not apply to private companies.

b. Kinds of Share Capital and Voting Rights

Private companies have now been exempted from application of Section 43 and Section 47 of the Act, which deals with kinds of share capital and voting rights, respectively, if memorandum or articles of the Company so provide. This means that private companies can now issue shares with differential rights with full flexibility to structuring their securities even without voting rights.

c. Rights issue

Section 62(1)(a)(i) of the Companies Act provides that time period for rights offer shall not be less than 15 days and not more 30 days. Private company can now reduce the time period of rights offer than that prescribed under Section 62(1)(a)(i), if the 90 (ninety) percent of the members of a private company have given their consent in writing or in electronic mode. Furthermore, the requirement of sending the notice 3 days prior to opening of the issue, by way of specified means, under rights issue is now exempted for private companies.

Section 62(1)(b) of the Companies Act provides that where a company intends to increase its share capital by the issue of further shares can do so by offering shares to employees under a scheme of employees' stock option (ESOP). Before the amendment, such further issue of shares by a company was to be done by passing a special resolution. Now, private companies can make further issues of shares under ESOP scheme only by passing of ordinary resolution.

d. Restrictions on purchase by company of its shares

Under Section67(1) of the Companies Act, a company was not allowed to buy its own shares unless it results in consequent reduction of share capital of the company. With the notification now exempting private companies from the application of Section 67, private companies can now buy its own shares without consequent reduction in share capital provided:

  1. no other body corporate has invested money in share capital of such private company;
  2. the borrowings of such private company from banks or financial institutions or anybody corporate is not equal to or more than twice its paid up share capital or fifty crore rupees, whichever is lower; and
  3. such private company is not in default in repayment of such borrowings subsisting at the time of making transactions under Section 67 of the Act.

However, there is ambiguity as to whether a private company can buy its own shares as there is no similar exemption provided to private companies under Section 66 (Reduction of Capital) and Section 68 (Buyback of Shares). In our view, the only objective achieved by this amendment is provision of financial assistance by a private company to purchase its own shares.

e. Acceptance of deposits from member

Section 73(2) allows acceptance of deposits by a company from its members with approval by way of ordinary resolution and subject to fulfilment of certain conditions prescribed under clauses (a) to (e) like issuance of circular including a statement showing financial position of the company, creation of a deposit repayment reserve account, obtaining deposit insurance, obtaining a certificate from the directors that the company has not defaulted in repayment of deposits accepted, etc.

Private companies have now been exempted from the conditions in clauses (a) to (e) of Section 73(2) in relation to deposits taken from members provided that the amount of deposit accepted by the private company does not exceed 100% of aggregate of paid-up capital and free reserves of such private company and the relevant filings with the Registrar of Companies has been made.

f. Management and Administration

Private companies have now been provided with an option to exclude the applicability of Sections 101 to 107 and Section 109 by providing for exclusions in its Articles of Association. Section 101 to 107 and Section 109 deals with procedure of conducting of general meetings by the companies, which are length of service of notice of meeting, explanatory statement, quorum, chairperson of the meetings, proxies, restriction on voting rights, voting by show of hands and demand for poll.

A private company was allowed to lay down its own procedure in respect of conduct of its general meetings under the Companies Act, 1956. Now the same position has been restored under the Companies Act, 2013.

g. Filing of board resolutions

All companies are required to file copies of board resolution under Section 117(3)(g) of the Act passed in relation to matters prescribed under section 179(3) of the Act. These matters were:

  • calls on shareholders in respect of money unpaid on their shares;
  • buy-back of securities;
  • issuance of securities, including debentures, whether in or outside India;
  • borrowing of monies;
  • investment of funds of the company;
  • granting of loans or giving guarantee or providing security in respect of loans;
  • approval of financial statement and the Board's report;
  • diversification of business of the company;
  • amalgamation, merger or reconstruction;
  • Takeover of a company or acquiring a controlling or substantial stake in another company;
  • Additional matters as may be prescribed.

Now, Section 117(3)(g) of the Act will not apply to private companies, hence, a private company will not be required to file copies of board resolution in relation to all of the matters mentioned above with the Registrar of Companies.

h. Number of company audits

For the purpose of limit on number of companies of which audits can be taken at a time by the auditor under Section 141(3)(g) of the Companies Act, which is 20, all one person companies, dormant companies, small companies, and private companies having a paid up share capital of less than INR 100 crores will be excluded.

i. Appointment of directors to be voted individually

Provisions of Section 162 which provided for the manner of appointing of two or more were to be voted individually will now not apply to private companies.

j. Restrictions on powers of Board

Section 180(1) of the Act which provided that board may exercise its power in relation to the following matters, only with the consent of members by way of special resolution:

  1. Sale, lease or disposal of the whole or substantially whole of the undertaking of the company;
  2. Investment of the amount of compensation received by the company as a result of merger or amalgamation in trust securities;
  3. Borrowing money exceeding the aggregate of the company's paid-up share capital and free reserves; and
  4. Remittance or granting time for the repayment of, any debt due from a director

Now, there is no need for a private company to pass special/ ordinary resolution for exercising powers under Section 180 of the Companies Act.

k. Interested Directors

Section 184(2) provided that directors of a company will refrain from participating in a board meeting for matters in which they are interested. Interested director in a private company can now participate in board meetings after disclosure of his interest.

l. Loans by private companies

A partial exemption from Section 185 has now been given to private companies giving a loan, providing a guarantee or offering a security in connection with a loan taken by director(s) or by any persons/ entities in which the director(s) have an interest.

There are 3 cumulative conditions for availing the exemption:

  1. There is no body corporate shareholder in the lending/ guaranteeing company;
  2. The lending company's aggregate borrowings from other bodies corporate or banks or financial institutions is limited to two times the paid-up share capital of the company or INR 50 crores whichever is lower;
  3. No default in repayment of such borrowings is pending by the lending company.

m. Appointment of managerial persons

Section 196(4) and (5) of the Act prescribes the procedure and approval requirements for appointment of managing director, manager or wholetime director and requires companies to comply with the provisions of Section 197 and Schedule V with respect to remuneration payable to such personnel. The provision requires board approval followed by approval of members in the next general meeting for appointment of such personnel and filing of return of appointment of such personnel within 60 days from the date of such appointment.

Private companies are now exempted from the above requirements.

Link: - mptions_to_private_companies_0506201 5.pdf

[Source: Notification no. G.S.R 464(E) dated June 5, 2015]

Similarly, the MCA has issued following exemption/ relaxation notifications:

  • For Government companies, the MCA has issued Notification no G.S.R 463(E) dated June 5, 2015
  • For Nidhi companies, the MCA has issued Notification no G.S.R 465(E) dated June 5, 2015
  • For Not-for-Profit companies (also known as Section 8 companies), the MCA has issued Notification no. G.S.R 466(E) dated June 5, 2015.

Originally published on Lexology, August 18 2015.

© 2015, Vaish Associates, Advocates,
All rights reserved with Vaish Associates, Advocates, 10, Hailey Road, Flat No. 5-7, New Delhi-110001, India.

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Vinay Vaish, Partner, Vaish Associates Advocates
Similar Articles
Relevancy Powered by MondaqAI
Samvad Partners
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Samvad Partners
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions