8 SUGGESTIONS TO MCA TO SAVE CORPORATE ENVIRONMENT: CA NITESH MORE: email your suggestions to moreassociate@gmail OUR SUGGESTIONS ALREADY ACCEPTED & PLACED IN PARLIAMENT 1) Draft Rules placed in parliament includes an exemption to Pvt Ltd Co from filling certain Board resolutions. 2) Pvt Ltd company will not be counted for calculating 20 Co Audit limit. 3) As per verbal talk, MCA will consider suggestions. 4) Kindly email your suggestions to moreassociate@gmail PROBLEMS & SUGGESTIONS: A) Any penalty & prosecution under various Chapters: Example: a) A pvt Ltd had mistakenly accepted share application money of Rs 2 Lakh without opening separate Bank a/c. As per sec 42, company have to pay minimum penalty of Rs 2 crores. b) A small pvt Ltd had granted a loan of Rs 2 Lakhs to a concern in which director is interested. As per sec 185, each of Company & other concern have to pay minimum penalty is 5 Lakhs. Again, prosecution can also be initiated. Scenario in India & consequent problems: a) In India, small & medium private limited company & unlisted public ltd companies are just like the partnership firms incorporated by the family members & friends together. b) The process of formation, maintenance of such companies should be simple & economical. c) Kindly note that formation of companies has already decreased by at least 90% during recently. d) The complex process of raising capital, loan & maintenance of these companies will further discourage the process of formation of companies in India. e) Small & medium businessman already avoid incorporating company & wants to stay in proprietorship & partnership status as they think that company Law has become a criminal law. f) Small & medium size private Ltd cos do not have qualified staffs to comply with numerous provisions. Suggestion: In case of Private Ltd Co upto paid up capital of 5 crores or turnover upto 20 crores , the prosecution provisions should be dispensed . Penalty for these co. should not be levied more than Rs. 1 Lakh or amount of default, whichever is higher. B) Section 42 & Section 62: Example: A Pvt Ltd want to increase share capital by issuing share worth Rs 5 Lakhs. If co goes for valuation, it will cost Rs 25000 to Rs. 50000. The total procedure for issue of shares requires about 2 months. Is it cost effective for company to issue such share? Problem: Issue of such shares is not cost effective & takes so much time , hence, creating hindrances in growth of Pvt Ltd Co in India as clients now wants to stay as Firm. Suggestion (Exemptions should be based on Issue size): a) Relaxation should be given based on issue sizes. b) It is requested to exempt issue size at least upto 5 crores from requirement of valuation of shares. c) It is requested to exempt issue size at least upto 1 crores from requirement of special resolutions, separate Bank a/c. C) Chapter XII, section 185: Example: Mr X & Mrs X are directors in two private Ltd Cos namely , A Pvt Ltd & B Pvt Ltd. A pvt Ltd is having B Pvt Ltd as shareholders also. B Pvt Ltd is having surplus fund. Again, A Pvt Ltd requires fund. Even if all money belongs to Mr X & Mrs X , they are not able to transfer fund to other company. If B Pvt Ltd grant a loan to A Pvt Ltd , as per sec 185 read with draft exemption notification, each of Company & other concern have to pay minimum penalty is 5 Lakhs. Again, prosecution can also be initiated. Suggestion: Now a days, major companies in India are with corporate shareholders. The restriction of “any company in whose share capital no other body corporate has invested any money” as included in draft suggestions should be removed. D) RELIEF OF EXEMPTION NOTIFICATIONS SHOULD EXTEND TO UNLISTED CLOSELY HELD COMPANY: Some provisions would raise quantum of unnecessary procedures and prove draconian for all kinds of small companies, with limited resources. These will only disturb business environment In India. Thus we suggest the notification be made applicable to small public companies as well. E) CHAPTER III PART -I, CLAUSE (B) OF SUB-SECTION 2 OF SECTION 23: Private companies generally receive monies from closely held persons. Therefore this clause be made applicable without compliance of Part II of this Chapter. F) CHAPTER IX SUB-SECTION 3 OF SECTION 129: Private Limited companies be exempt from provisions of Consolidated Financial Statement. G) CHAPTER-XIII PROVISO TO CLAUSE (A) OF SUB SECTION 3 OF SECTION 196: Age limit of 70 years does not seem logical in this case. We suggest to remove this upper age limit. H) DISCLOSURE OF INTEREST U/S 184: Disclosure of interest u/s should only be of interest in unlisted public companies & private companies & of interest in listed co only if shareholding is more than 2%. Change of holding of a director by even 1 share in a listed company is hardly a matter of concern, but filing MBP-1 on every such change will increase tremendous paperwork for a director & for companies too.
Posted on: Mon, 21 Jul 2014 13:16:55 +0000
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