Issue 22 Full Page

Insights

Make in India

Insights – Make in India

On 13^th June, 2017, the Ministry of Company Affairs issued a notification that provided for a host of exemptions in addition to and (in some cases) modification of the principal notification issued on 5^th June, 2015. This seems to have opened up a gamut of opportunities for existing private companies, “not for profit” companies and government companies. However the maximum benefits seem to be handed out to start ups in India.

Snapshot of the exemptions

S.No	Exemption	What the 5th June 2015 notification stated	What the 13th June 2017 notification states	What it means
1.	Cash flow statement may not be prepared and included in the financial statements	This exemption was applicable to 1. Small companies, 2. One Person Companies and 3. Dormant companies	This exemption I applicable to 1. Small companies, 2. One Person Companies, 3. Dormant companies and 4. Private companies which are start ups	Start up Private companies can also avail the exemption
2.	Exemptions on complying with provisions of section 73(2)(a) to (e) relating to Deposit Circulars, Deposit repayment reserves, Deposit Insurance etc.	Applicable to 1. Private companies which accepts from its member, moneys not exceeding 100% of the paid capital + fee reserves + securities premium	Applicable to 1. Private companies that fulfil the following conditions namely (a) it is an independent private company (not an associate or subsidiary of any other company) (b) if borrowings are less than: 2 times paid up capital OR Rs. 50 crores whichever is lesser (c) has not defaulted in repaying the borrowings at the time of accepting deposits 2. For Start-ups for a period of 5 years from the date of incorporation.	Start-ups can also avail the exemptions. Certain conditions have been laid down for Private companies. Only on the compliance of these conditions, can such exemptions be availed.
3.	Disclosure of remuneration in Annual Return in Form MGT 7	Every company to disclose details of remuneration of Directors and Key Managerial Personnel (KMP)	Private companies which are small companies shall disclose the aggregate of remuneration of directors	Small Private companies need not provide the breakup of remuneration for each director. The total amount of remuneration can be stated.
4.	Signing of the Annual Return in Form MGT 7	In (i) One Person Company (OPC) and (ii) Small company. Annual return to be signed by the Company Secretary (where there is one) or by Director	1. One Person Company (OPC), 2. Small company, 3. Private company if it is a start-up, Annual return to be signed by the Company Secretary (where there is one) or by Director	Start- up Private companies have also been included to avail this facility.
5.	Statement on adequacy of internal financial controls and operating effectiveness in the Auditors Report	1. Private One person company or 2. Private small company or 3. Private company which has less than Rs. 50 crores turnover or borrowings less than Rs. 25 crores, the Auditors report to contain statement on adequacy of internal financial controls and operating effectiveness in the Auditors Report	1. Private One person company or 2. Private small company or 3. Private company which has less than Rs. 50 crores turnover or borrowings less than Rs. 25 crores, the Auditors report need not contain statement on adequacy of internal financial controls and operating effectiveness in the Auditors Report	Total exemption from such reporting
6.	At least 1 meeting of the Board in each half of the calendar year and gap between the two meetings not being more than 90 days	Applicable to 1. OPC 2. Small company 3. Dormant company	Applicable to 1. OPC 2. Small company 3. Dormant company 4. Private company which is a start-up	Start-up companies are exempt from holding the 4 Board meetings. Instead they can hold only 2 meetings in a calendar years with gap between such meetings not exceeding 90 days.
7.	Interested Director for the purpose of Quorum	Interested director not counted for the purpose of ascertaining quorum	Interested director can be counted for the purpose of quorum provided disclosure of the same in made.	The quorum provisions have been eased. This could specially be useful for small companies, private companies and start-ups which have only 2 directors and one of them is interested.

Insights – Make in India

What’s the catch?

The bag of exemption goodies, especially for private companies is not free though. The notification categorically states that the exemptions to private companies provided in both notifications shall be availed only if the private company has not defaulted in filing its financial statements and annual returns.

Conclusion

The notification provide exemptions to OPC’s, small companies and Section 8 companies as well as private start-up companies. This seems to another step towards encouraging the “Make in India” initiative by the government. The start-up initiative encourage investment, innovation, and create jobs. The Government is committed to make this initiative a scalable reality and to provide an environment for Start-ups to thrive in and flourish.