Claiming Exemptions In India: A Practical Guide For Private Companies

Under the Companies Act, 2013, private companies in India enjoy statutory exemptions that reduce compliance requirements compared to public companies. These include relaxed rules on board approvals, share transfers, ROC filings, and more. Exemptions aim to ease governance and operational flexibility, but they are not available by default – companies must meet specific conditions and maintain proper documentation to lawfully claim them.

Claiming exemptions for private companies correctly is very important for foreign business planning to set foot in the Indian market. It makes company management easier, reduces paperwork, and keeps the company compliant with Indian laws. If exemptions are claimed without proper documentation it can lead to fines, audit problems, or scrutiny from regulators. 

Let’s take a look at the key steps to claiming these exemptions in India.

Board Minutes and AoA Amendments

Any decision to invoke exemptions should be clearly documented in the board meeting minutes, referencing the applicable provision of the Companies Act or MCA notification. Where necessary, the Articles of Association should be amended to provide flexibility in matters such as share transfers, voting rights, or borrowing limits, ensuring that the company remains eligible for the exemption.

Disclosures in Financial Statements and Board Reports

Maintaining transparency is important for building a strong and reliable brand reputation. Where exemptions are relied upon, these should be noted in the financial statements and reflected in the Board’s Report. Doing so helps demonstrate compliance and mitigates regulatory risk, even if explicit disclosure is not strictly required.

ROC Filing Compliance

Some exemptions reduce ROC filing requirements, while others require submission of important forms like MGT-7 or SH-7 within 30 days of the relevant resolution. It is crucial for businesses to ensure that all filings comply with MCA timelines to avoid penalties.

Proper documentation and disclosure are essential to lawfully claiming exemptions for private companies in India. Following the above mentioned steps not only ensures adherence to the law but also fosters trust with regulators, investors, and stakeholders, which helps in long-term business growth.