Question

On which of the following companies, the Companies Act, 2013, confers certain privileges?
(i) Private Companies
(ii) One Person Company
(ii) Small Companies
Select the correct answer form the options given below-

• A. (i), (ii) & (iii) of the above
• B. (ii) & (iii) of the above
• C. (i) of the above
• D. (i) & (iii) of the above

Answer 1

The correct option is A (i), (ii) & (iii) of the above

• Private companies under the Companies Act 1956 have been provided with various exemptions/privileges which due to implementation of Companies Act 2013 got reduced/restricted leading to difficulties in smooth functioning of business by private limited companies. Some of the privileges are:
  

1. Only two members are sufficient to form a private company.
   
2. The provisions of S.39 as to minimum subscription do not apply to a private company. It can therefore, commence; allotment of shares irrespective of the number of shares subscribed.
   
3. Since a private company is restrained from inviting capital from the public, it is not required to file a prospectus or statement in lieu of prospectus to the public.
   
4. It need not offer preference shares to the existing shareholders.

• For one person company, The most important reason for the shareholders to slot in the 'single person company' dynamics is most certainly the desire for limited liability. The liability of the share holder will be restricted to the unpaid subscription money in his name.

• Section 2(85) of the Companies Act, 2013 defines small company. A company will be considered small if paid-up share capital doesn’t exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than ten crore rupees and turnover of which as per profit and loss account for the immediately preceding financial year] does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred crore rupees. Some of the exemptions for small companies include:

1. Annual Return of the Small Company can be signed by the company secretary alone, or where there is no company secretary, by a single director of the company
   
2. A small company may hold only two board meetings in a year i.e one Board Meeting in each half of the calendar year and the gap between the two meetings is not less than ninety days
   
3. A Small company need not include cash flow statement as part of its financial statement
   
4. Companies are required to provide details of aggregate amount of remuneration drawn by directors instead of providing details of remuneration of directors and key managerial personnel of the company.