Procedural exemptions to private companies

In this post, we would like to examine some of the procedural exemptions provided to private companies that were made applicable through a notification with effect from 5th June, 2015.

Reducing the time to respond to notices for further issue of share capital under Section 62 of the Companies Act

Apparently providing greater flexibility, this exemption provides for a reduction in the time limit to respond to a notice if ninety percent of the members of the company provide their consent for this change. So, if there are 100 members and 90 of them agree that there should be five days only to respond to a notice accepting/declining an offer, then it may be implemented. This helps cut down the time period and benefits smaller companies with immediate capital requirements, which can close investment transactions at a faster rate.

Ordinary resolution for Employee Stock Options

The law to issue stock options is governed by Section 62 (1)(b) of the Act and by Rule 12 of the Companies (Share Capital and Debentures) Rules, 2014. Private companies now requires to pass only an ordinary resolution to issue further share capital through employee stock options instead of a special resolution.This means, it requires approvals from fewer members to get a veto on the vote relating to employee stock option issues.

Appointment of Auditor

Under the new Companies act, an auditor cannot be associated with more than 20 companies. The notification in June now provides  clarity that in order to arrive at this figure of 20, entities in the form of a one-person companies, dormant companies, small companies, and private companies with a paid-up share capital of less than INR 100 crore maybe excluded.

Credits: Your Story

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