1] PRIVATE COMPANY
DEFINITION OF PRIVATE COMPANY [SECTION 2(68)]
Private company means a company having a minimum paid up share capital as may be prescribed, and which by its articles -
(i) restricts the right to transfer its shares;
(ii) except in the case of one person company, limits the number of its members to 200.
(iii) prohibits any invitation to the public to subscribe for any securities of the company.
EXPLANATION OF SEC.2(68)
(1) In case of Section 8 company, the requirement of having minimum paid up share capital under section 2(68) shall not apply.
(2) Provided that where two or more persons hold one or more shares in a company. Jointly, they shall for the purposes of this clause be treated as a single member.
Provided further that -
(1) Persons who are in the employment of the company; and
(2) Persons who, having been formerly in the employment of the company, were members of the company. while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members.
In simple words, Present and Past employees are excluded from the limit of the number of its members.
BENEFITS / PRIVILEGES OF PRIVATE COMPANY
(1) Two or more persons may form a company. [Sec. 3(1)(b)]
(2) Kinds of share capital [Sec.43] and voting rights [Sec.47] can be provided by making a clause in memorandum and articles of association.
(3) Passing of ordinary resolution is sufficient for offering of further shares to employees. [Sec.62(1)(b)]
(4) Financial assistance can be given to its employees for purchase of or subscribing to its shares or shares in its holding company. [Sec.67(2)]
(5) Restrictions (conditions) for acceptance of deposits from members is not applicable. [Sec.73(2)]
(6) Resolutions to be passed only at the meeting of the board of directors are not required to file with the registrar. [Sec.117(3)(9)]
(7) Need not prepare a report on the Annual General Meeting. [Sec.121(1)]
(8) Need not prepare a statement by the board of its own performance and that of its committees and individual directors. [Sec.134(3)(p)]
(9) Private companies [OPC/Small/Dormant] having paid up share capital of less than 100 crore ₹ are excluded from the limits of audits by an auditor which is required to number 20. [Sec.141(3)]
(10) Need not have more than two directors. [Sec.149(1)(a)]
(11) Not required to have independent directors. [Sec. 149(4)]
(12) Not required the retirement of directors by rotation. [Sec. 152(6)]
(13) Requirement of deposit of ₹ 1,00,000 is not required to stand for directorship other than retiring directors. [Sec.160]
(14) More than one director can be appointed through a single resolution. [Sec. 162]
(15) The directorship of a private company / small company / one person company which is either a holding or a subsidiary company of a public company will not be included in determining the maximum number of directorships that a person may hold in public companies which is restricted to 10. [Sec. 165(1)]
(16) Additional grounds for disqualification, for appointment [Sec.164(3)], for vacation [Sec. 167(4)] of office of a director may be provided in the articles.
(17) Exempt from the provisions of having an audit committee constituted by the board of directors. [Sec. 177(1)]
(18) Exempt from the constitution of a nomination and remuneration committee [Sec.178(1)] as well as stakeholders relationship committee. [Sec. 178(5)]
(19) The company sells, leases or otherwise disposes of or owns more than one undertaking then special resolution is not required to exercise such power of the board. [Sec. 180]
(20) Interested director can participate in the meeting after disclosing his interest. [Sec.184(2)]
(21) If certain conditions are fulfilled under section 185 then give a loan to its director or whom the director is interested. [Sec.185]
(22) Company shall enter into any contract or arrangement with a related party and can vote on such resolution as a member of the company. [Sec. 188(1)]
(23) Provisions relating to contracts of employment with managing or whole time directors do not apply to private limited companies. [Sec. 190(4)]
(24) Approval of Central Government on variation of terms of appointment of managing director, whole time director or manager from Schedule V is not required. [Sec. 196(4) & (5)]
(25) Total managerial remuneration may exceed 11% of the net profits. [Sec. 197(1)]
(26) The central government may grant further privileges / exemptions to private companies by issuing a notification. [Sec. 462(1)]
2] ONE PERSON COMPANY
One Person Company with Companies (Incorporation) Rules, 2014
DEFINITION OF ONE PERSON COMPANY [SECTION 2(62)]
“one person company” as a company which has only one person as a member.
IMPORTANT
One person company is a type of private company as per section 2(68) and 3(1)(c) of the act.
[RULE 3]
(1) Only a natural person who is an Indian citizen whether resident in India or otherwise
(a) shall be eligible to incorporate a one person company;
(b) shall be a nominee for the sole member of a one person company.
(2) A natural person shall not be a member of more than one person company at any point of time and the said person shall not be a nominee of more than one person company.
(3) Where a natural person, being a member in One Person Company in accordance with this rule becomes a member in another such Company by virtue of his being a nominee in that One Person Company, such person shall meet the eligibility criteria specified in sub rule (2) within a period of one hundred and eighty days.
(4) No minor shall become a member or nominee of the One Person Company or can hold shares with beneficial interest.
(5) Such Company cannot be incorporated or converted into a company under section 8 of the Act.
(6) Such Company cannot carry out Non-Banking Financial Investment activities including investment in securities of any body corporate.
NOMINATION BY THE SUBSCRIBER OR MEMBER OF ONE PERSON COMPANY [RULE 4]
(1) The subscriber to the Memorandum of a one person company shall nominate a person, after obtaining prior written consent of such person, who shall, in the event of the subscribers death or his in capacity to contract, become the member of that one person company.
(2) Name of the nominee mentioned in the memorandum and nomination details along with consent of such nominees shall be filled in Form No. INC-32 (SPICe+) as a declaration & The said form along with fee shall be filled with the registrar at the time of incorporation of the company along with its e-memorandum and e-articles.
(3) The person nominated by the subscriber or member of a one person company may withdraw his consent by giving a notice in writing to such sole member and to the one person company.
Provided that the sole member shall nominate another person as a nominee within 15 days of the receipt of the notice of withdrawal and shall send an intimation of such nomination in writing to the company, along with the written consent of such other persons or nominated in which shall be filled in form of declaration in Form No. INC-4.
(4) The company shall within 30 days of receipt of the notice of withdrawal of consent file with the registrar, a notice of such withdrawal of consent and the intimation of the name of another person nominated by the sole member in Form No. INC-4 along with the fee and written consent of such another person so nominated in the form of a declaration in Form No. INC-4.
(5) The subscriber or member of a one person company may, by intimation in writing to the company, change the name of a person nominated by him at any time for any reason including in case of death or incapacity to contract of nominee and nominate another person after obtaining the consent of such another person and his declaration shall be filled in Form No. INC-4.
Provided that the company shall, on the receipt of such intimation, file with the registrar, a notice of such change in Form No. INC-4 along with fee and with the particulars of consent of new nominee in for a declaration in Form No. INC-4 within 30 days of receipt of intimation of the change.
(6) Where the sole member of one person company ceases to be the member in the event of death or incapacity to contract and his nominee becomes the member of such one person company, such new members are nominate within 15 days of becoming member, a person who shall in the event of his death or his incapacity to contract become the member of such company, and the company shall file with the registrar an intimation of such cessation and nomination in Form No. INC-4 along with the fee provided, within 30 days of the change in membership and with the particulars of consent of the person so nominated in form of declaration in Form No. INC-4.
BENEFITS / PRIVILEGES OPC
Basically OPC is a private company with a sole member to use the suffix OPC with their name.
Hence there are exemptions or relaxations given to OPC from various compliance requirements as under -
(1) Not required cash flow statement. [Sec.2(40)]
(2) Ordinary or special resolution of Annual General Meeting or any other meeting shall be sufficient to enter in the Minutes Book and such date shall be deemed to be the date of the meeting. [Sec.122(3) & 122(4)]
(3) Financial statements and board reports can be signed by only one director. [Sec.134(1)]
(4) Board report contains only -
(i) explanations or comments by the board on every qualification.
(ii) reservation or adverse remark or disclaimer made by the auditor in his report. [Sec.134(4)]
(5) Only one director is sufficient on the board. [Sec.149(1)]
(6) Required to hold at least one meeting of the board of directors in each half of a calendar year and the gap between the two meetings should not be less than 90 days. [Sec. 173(5)]
(7) Not applicable provisions of meetings to OPC
(i) Meetings of board [Sec.173]
(ii) Quorum for meetings of board [Sec.174]
(8) Annual return need not be signed by a CS in practice. [Sec.92(1)]
(9) Need not hold Annual General Meeting [Sec.96(1)] and prepare a report on Annual General Meeting [Sec. 121(1).
3] PUBLIC COMPANY
DEFINITION OF PUBLIC COMPANY [SEC.2(71)]
Public company means a company which is not a private company and has a minimum paid up share capital as may be prescribed. [Sec.2(71)]
Seven or more members are required to form a Public Limited Company. [Sec.3(1)(a)].
IMPORTANT
(1) A company which is a subsidiary of a company, not being a private company shall be deemed to be a public company for the purpose of the act even where such subsidiary company continues to be a private company in its articles.
(2) A public limited company should have at least 3 Directors.
(3) Public limited companies can offer shares and debentures to the general public through an invitation and deal on a stock exchange.
4] SMALL COMPANY
DEFINITION OF SMALL COMPANY [SECTION 2(85)]
“small company’’ means a company, other than a public company,—
(i) paid-up share capital of which does not exceed fifty lakh four crore rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees; and
(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore forty crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees:
Provided that nothing in this clause shall apply to —
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act;
Important Circular dated 15 September 2022:
G.S.R. 700(E).— In exercise of the powers conferred by sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Specification of Definition Details) Rules, 2014, namely:-
“Clause (t): For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees four crore and rupees forty crore respectively.”.
5] GOVERNMENT COMPANY
DEFINITION OF GOVERNMENT COMPANY [SECTION 2(45)]
“Government company” means any company in which not less than fifty-one per cent. of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is a subsidiary company of such a Government company;
EXPLANATION OF SEC.2(45)
For the purposes of this clause, the “paid up share capital ” shall be construed as “total voting power ”, where shares with differential voting rights have been issued.
IMPORTANT POINT
The name of all government companies shall end with the word ‘Limited’ be it public or private company. The word state is allowed in the name.
6] FOREIGN COMPANY
DEFINITION OF FOREIGN COMPANY [SECTION 2(45)]
“Foreign company” means any company or body corporate incorporated outside India which —
(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
(b) conducts any business activity in India in any other manner.
7] HOLDING COMPANY
DEFINITION OF HOLDING COMPANY [SECTION 2(46)]
“Holding Company”, in relation to one or more other companies, means a company of which such companies are subsidiary companies;
EXPLANATION OF SEC.2(46)
For the purposes of this clause, the expression “company ” includes any body corporate.
IMPORTANT POINT
1) It should be noted that holding and subsidiary companies are incorporated companies and which are separate legal entities.
2) A relationship of holding company and subsidiary company can be established between an Indian company and a foreign company.
8] SUBSIDIARY COMPANY
DEFINITION OF SUBSIDIARY COMPANY [SECTION 2(87)]
“Subsidiary company” or “subsidiary”, in relation to any other company (that is to say the holding company), means a company in which the holding company —
(i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power either at its own or together with one or more of its subsidiary companies:
Provided that
such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed.
EXPLANATION OF SEC.2(87)
For the purposes of this clause,—
(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;
(b) the composition of a company’s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the Directors;
(c) the expression “company” includes any body corporate;
(d) “layer” in relation to a holding company means its subsidiary or subsidiaries;
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