Page 37 - Banking Finance June 2017

ARTICLE

capital). Also, a company which is registered u/s 8 of the Financial statement:
Act cannot be classified as a small company, i.e., a limited The Company is not required to include the Cash Flow State-
company which has charitable or other objectives (as speci- ment as a part of its financial statement.
fied u/s 8 (1) (a)) and intends to utilise its income for pro-
moting its objectives without making the payment of any Auditor regulations:
dividends to its members cannot be considered to be a small The provision regarding mandatory rotation of the auditor
company. In case a company or the body corporate is gov- or the maximum term of an auditor being 5 years in case of
erned by a special Act which is passed by the government, an individual and 10 years in case of a firm of auditors is
it cannot fall under the category of small company. also not applicable.

A company which is eligible to be known as a small com-
Merger Process:
pany in one particular year might not be eligible to have
The merger process of more small companies has to be
the status of a small company in the subsequent year. This
approved on a fast track basis. Such merger also requires
status is determined on the basis of the Annual return which
the approval of
is filed after the end of every financial year. This form needs
to have an attached certificate (refer Form no MGT 7) which Y Official liquidator;
certifies the company to be a small company. Y Registrar of Companies (ROC);
Y Members holding 90% of the total number of shares (or
If the company is no longer a small company; along with
more); and
the change in status, the benefits which are accorded to a
small company are also withdrawn. The moot question which Y Majority of creditors who represent 9/10th in value of
remains unanswered here is regarding the benefits which the creditors or class of creditors of the respective com-
are accorded to a small company. These benefits have been panies which are indicated in the meeting convened by
the company by giving a notice of 21 days along with
given in order to ensure that the interests of such compa-
the scheme to its creditors for the purpose, or have
nies are protected from the consequences of regulations
otherwise been approved in writing.
designed to balance the interests of the stakeholders of
large corporate blocs.
Consolidated financial statements:
Exemptions & Benefits As per S. 129 (3), it appears that small companies are not

Most of the benefits which are available to the small com- required to prepare consolidated financial statements. But,
panies are the same as those which are available to a one the small companies which have an associate company or
person company. However, all the privileges which are avail- joint venture have to prepare the consolidated financial
able to a one person company are not available to a small statements.
company. The benefits which are accorded to a small com-
pany are: Fees u/s. 403 of Companies Act, 2013:
Fees for filings and other formalities u/s. 403 of the Compa-
Signatures in the Annual returns: nies Act, 2013 is also comparatively lower for the small com-
Company Secretary (CS) alone, or when there is no CS, a panies.
single director of the company can sign the annual returns
of the Company. But since a small company need not have New Companies Act will be a
a CS, this section empowers the director to sign and
authorise the annual returns. Gamechanger
Initially, there were some misgivings about the new Com-
Board meetings: panies Act, which replaces an outdated legislation with more
It may hold only two board meetings in an year. There streamlined rules. Apparently, Union Corporate Affairs Min-
should be a minimum gap of 90 days between the two meet- ister Sachin Pilot seems to have worked harder on industry
ings and they can be held in each half of the calendar year. captains to view the new law as an investment opportunity

BANKING FINANCE | JUNE | 2017 | 37

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