Govt further relaxes norms for companies
In a raft of changes to make it easier for businesses to operate in the country, the government has relaxed norms for private companies including those pertaining to related party transactions, acceptance of deposits and auditor appointments.
Compliance requirements under the Companies Act, 2013, have also been made for government, nidhi and not-for-profit or Section 8 companies. Relaxing the norms for the four categories of companies, the Corporate Affairs Ministry has come out with four separate notifications issued on June 5. The latest move comes close on the heels of the Ministry setting up an eight-member panel to address issues related to the new companies law and suggest necessary changes.
Through the latest notifications, as many as 16 changes or clarifications have been notified with respect to private companies and it is around 30 for government companies. In a significant move, the Ministry has said that Section 188 of the Act -- that is about related party transactions -- would not be applicable on private companies. Section 188 of the Act requires companies to get consent from its board of directors before entering into a related party transaction even for activities such as sale, purchase or supply of any goods or materials and leasing of property.
With regard to rules for acceptance of deposits, the Ministry has said it would not be applicable on a private entity which “accepts from its members monies not exceeding one hundred per cent of aggregate of the <g data-gr-id="23">paid up</g> share capital and free reserves”. However, such companies should file the details of <g data-gr-id="29">amount</g> accepted to the Registrar.
Other norms, including those related to requirements for appointment of auditors, giving loans to directors, providing loans for purchase of a private company’s shares, standing for directorship and issue of share capital, have been eased. With respect to government companies, the Ministry has made about 30 changes related to various requirements. These pertain to board evaluation, appointment of directors and conduct of annual general meetings (AGMs), among others.