The (Indian) Ministry of Corporate Affairs recently issued a
notification dated 5 June, 2015 providing that various provisions
of the Companies Act, 2013 ("Companies Act") will not
apply or will apply with exceptions, modifications and adaptions to
a body to which a licence is granted under the provisions of
section 8 of the Companies Act i.e. companies with charitable
objects, etc ("Non-Profit Companies"). These
exceptions/modifications available to Non-Profit Companies have
been set out below.
The minimum paid up share capital
requirement for a public and a private company will not be
applicable to Non-Profit Companies.1
The notice for general meeting and
circulation of financial statements may be at the notice of 14 days
instead of 21 days for Non-Profit Companies.2
The requirement for holding meetings
of the board of directors will apply to Non-Profit Companies only
to the extent that the board of directors are required to hold at
least one meeting within every six calendar
The quorum requirement for meeting of
the board of directors to be one-third of its total strength or 2
directors, whichever is higher will be modified for Non-Profit
Companies to be either 8 members or 25% of its total strength,
whichever is less subject to a minimum of 2
The requirement of minimum number of
directors will not apply to Non-Profit Companies and therefore
requirement of passing of special resolution to have more than
prescribed number of directors will not be
The limit on the number of
directorships6 a person can hold will not be applicable
to directorships in Non-Profit Companies.
Section 160 of the Companies Act on
the right of persons other than retiring directors to stand for
directorships will not apply to those Non-Profit Companies whose
articles provide for election of directors by ballot.
Disclosure of interest by a director
in every contract or arrangement or proposed contract or
arrangement as per section 184(2) of the Companies Act and register
of contract or arrangement in which directors are interested to be
kept by a company as per section 189 of the Companies Act will
apply to Non-Profit Companies only if the transaction with
reference to section 188 on the basis of terms and conditions of
the contract or arrangement exceeds INR 100,000.
Provisions related to
'independent directors' will not be applicable to
Non-Profit Companies. This includes provisions related to
requirement of independent directors7; appointment of
independent directors8; manner of selection of
independent directors and maintenance of data bank of independent
The requirement under section 177(2)
of the Companies Act for an audit committee to have independent
directors forming a majority will not be applicable to Non-Profit
For Non-Profit Companies, a proviso
will be inserted in relation to Annual General Meeting10
that the time, date and place of each annual general meeting are
decided before-hand by the board of directors of the company having
regard to the directions, if any, given in this regard by such
company in its general meeting.
Section 118 of the Companies Act for
minutes of proceedings of general meeting, meeting of board of
directors and other meeting and resolutions passed by postal ballot
will not apply to Non-Profit Companies as a whole except that the
minutes may be recorded within 30 days of the conclusion of every
meeting in case of companies where the articles of association
provide for confirmation of minutes by circulation.
For Non-Profit Companies, matters
referred to in Section 179(3)(d), (e) and (f) of the Companies Act
which are 'to borrow monies'; 'to invest the funds of
the company' and 'to grant loans or give guarantee or
provide security in respect of loans' can be decided by the
board of directors by circulation instead of a meeting.
The requirement under section 178 of
the Companies Act to constitute Nomination and Remuneration
Committee and Stakeholders Relationship Committee will not be
applicable to Non-Profit Companies.
Definition of a 'company
secretary' or 'secretary' under section 2(24) of the
Companies Act will not be applicable to Non-Profit Companies.
These above mentioned relaxations for Non-Profit Companies is a
positive change as these exemptions from corporate compliances may
attract more such companies in India.
1 Section 2(68) and Section 2(71) of Companies
2 Section 101(1) and Section 136(1) of Companies
3 Section 173(1) of Companies Act.
4 Section 174(1) of Companies Act.
5 Section 149(1) and the first proviso to sub-section (1)
of Companies Act.
6 Section 165(1) of Companies Act.
7 Section 149(4), (5), (6), (7), (8), (9), (10), (11),
(12)(i) and (13) of Companies Act.
8 Proviso to Section 152(5) of Companies Act.
9 Section 150 of Companies Act.
10 Section 96(2) of Companies Act.
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The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
Whilst trade and barter have existed since early times, the modern practice of forming business relationships through the means of contract has come into existence only since the industrial revolution in the West.
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