Exemptions to Private Companies in India
Key Exemptions Available to Private Companies in India
1. No Minimum Paid-up Capital Requirement
Earlier there was a requirement for a minimum paid-up capital (₹1 lakh for private companies), but now no minimum capital is prescribed for private companies.
2. No Requirement to Hold Annual General Meeting (AGM) in the First Year
Private companies are not required to hold their first AGM within 6 months of incorporation or before 15 months after incorporation.
Subsequent AGMs must be held but with more relaxed time frames compared to public companies.
3. Relaxed Compliance on Board Meetings
Private companies need to hold at least 2 board meetings in a year with a gap of not more than 120 days between two meetings (compared to minimum 4 meetings for public companies).
4. No Requirement to Appoint Independent Directors
Private companies are exempted from appointing independent directors, which are mandatory for certain classes of public companies.
5. Exemption from Certain Financial Reporting and Audit Norms
Smaller private companies may be exempted from mandatory audit if they meet thresholds under the Companies (Auditor’s Report) Order.
Also, private companies are exempt from certain detailed disclosures and reporting requirements applicable to public companies.
6. No Requirement to File Quarterly Financial Results with the Registrar
Unlike listed public companies, private companies don’t have to file quarterly financial results.
7. No Requirement to Hold Extraordinary General Meeting (EGM) for Some Cases
Private companies have more flexibility regarding calling EGMs compared to public companies.
8. Exemption from Creating Debenture Redemption Reserve (DRR)
Private companies issuing debentures are not required to create a DRR (which is mandatory for public companies).
9. Relaxed Provisions for Share Transfer
Private companies can impose restrictions on the transfer of shares, unlike public companies which must allow free transferability.
10. No Need to Hold Annual Return in Prescribed Format for Small Companies
Small private companies can file simpler annual returns under certain conditions.
Summary Table of Some Major Exemptions
| Compliance Area | Public Company | Private Company |
|---|---|---|
| Minimum paid-up capital | Not less than ₹5 lakh (varies) | No minimum capital required |
| Annual General Meeting (AGM) | Mandatory | Relaxed timeline in 1st year |
| Number of Board Meetings | Minimum 4 per year | Minimum 2 per year |
| Independent Directors | Mandatory for certain companies | Not required |
| Debenture Redemption Reserve | Mandatory for debentures | Not mandatory |
| Transfer of Shares | Freely transferable | Can be restricted |
| Filing Quarterly Financials | Mandatory for listed | Not required |
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