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Position of Private and Public Limited Company - Companies Bill 2012


The existing business structure in India provides for two types of Companies, Private   and   Public. The Companies Bill 2012 has ushered some structural /operational changes in these entities. Listed below are a few key parameters for both these entities.

Particulars of Relevant

Sections under Companies Bill 2012




Maximum Number of Members

(Section 2(68)

Two hundred

No limit

The bill provides that a Private company which is a subsidiary of a Public company shall be regarded as a Public company irrespective of its articles containing provisions with respect to private companies.

Minimum number of Members

(Section 3(1)(a)(b))



Articles of association provision for entrenchment

(Section 5)

Provisions for entrenchment can be made ;

On formation of the Company


by an amendment agreed on by all members of the Company

Provisions for entrenchment can be made ;

On formation of the Company


by an amendment by a special resolution

Entrenchment clause means a provision which makes certain amendments either more difficult or impossible, i.e., inadmissible.

Minimum number of Directors

Maximum number of Directors

(Section 149/151)





One woman Director to be appointed for such class of companies as may be specified.

One director must be resident in India for at least 180 days

Independent directors as may be prescribed by CG in case of certain class of Companies.

Commencement of business

(Section 11)

A verification of its registered office is filed in 30 days of incorporation.

Declaration is filed by a director with the Registrar in 180 days of incorporation that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him and being not less than five lakh rupees in case of a public company and one lakh rupees in case of a private company on the date of making of this declaration.

Both Pvt and Public companies can commence business on filling such information with ROC and no separate Certificate of commencement of business as mentioned under 1956 Act will be required.

Issue of Shares of differential


(Section 43)



The provision on issue of shares with differential rights has been retained.

Further issue of share capital (Section 62)

First offer to persons who, at the date of the offer, are holders of equity shares of the company

Employees under a scheme of employees’ stock option, subject to special resolution passed by company

Any other person, if it is authorised by a special resolution, whether or not they include the persons referred to above if the price of such shares is determined by the valuation report of a registered valuer.

Notice period of general


(Section 101)

Mandatory 21

days’  clear notice

Mandatory 21

days’ clear notice

Shorter notice with consent of 95% members entitled to vote at such meeting can be given.

Explanatory statement

(Section 102)



material facts concerning each item of special business

nature of interest financial or otherwise of every director , manager if any , every other KMP and their relatives

any other information and facts that may enable members to understand the meaning, scope and implications of the items.

Quorum for general meetings (Section 103)

2 members personally present

 (i) 5 members personally present if the number of members as on the  

date of meeting is not more than 1000;

(ii)15 members if the number of members as on the date of meeting beyond 1000 but upto 5000;

(iii) 30 members otherwise          


Postal ballot

( Section 110)



Applies to all Companies

For all business other than ordinary business or those in respect of which Directors, Auditors have a right to be heard at a meeting.

Special notice

(Section 115)



Notice to be given by members holding not less than 1% of total voting power in a company, or

Holding shares in value upto Rs.5,00,000 as paid up

Minutes of meetings




Secretarial standards 1 &2 have been made mandatory

Minutes of all meetings of Members, Creditors, Board to be prepared and signed in 30 days of such meeting

Penalty for tampering with minutes have been provided for the first time

Transfer to reserves

(section 123)

Not applicable


Transfer is now voluntary and percentage of transfer to be determined by the Company

Transfer to Investor Protection & Education fund (section 124)

Not applicable


All shares in respect of which unpaid or unclaimed dividend has been transferred  after seven years of being unpaid/unclaimed shall also be transferred by the company in the name of Investor Education and Protection Fund

However any claimant of shares transferred above shall be entitled to claim the transfer of shares from the Fund in accordance with such procedure and on submission of such documents as may be prescribed.

Punishment for failure  to distribute dividends

(Section 127)

Not applicable

Where a dividend has been declared by a company but has not been paid or the warrant in respect thereof has not been posted within thirty days from the date of declaration

- every director of the company shall, if he is knowingly a party to the default, be punishable with imprisonment which may upto 2 years and with fine of Rs 1000 for every day during which such default continues       and

the company shall be liable to pay simple interest at the rate of 18% per annum during the period for which such default continues

Corporate Social responsibility

(Section 135 )



Every company having net worth of rupees five hundred crore or more, or

-turnover  of rupees one thousand crore or more or

-net profit of rupees five crore or more to constitute CSR committee.

Board of every such company to ensure that at least 2% of its average net profit made during immediately preceding 3 years is spent for CSR or explanation  given for any reason of inability to do so in the Board report.

Committee to have at least three members and one independent director.

Company to give preference to local areas around it where it operates.

Appointment of auditors

(Section 139)



Every company shall, at the first AGM appoint an individual / firm to hold office from the conclusion of that meeting till the conclusion of its sixth annual general meeting

Such appointment to be ratified by members at every AGM

Removal, resignation  of auditor  and giving  of special notice

(Section 140)



The auditor appointed under section 139 may be removed from his office before the expiry of his term by a special resolution and previous approval of the Central Government.

Maximum number of Directorships

(section 165)



No person shall hold office as a director, including any alternate directorship, in more than 20 companies.

maximum number of public companies in which a person can be a director shall not exceed  10

For reckoning the limit of public companies in which a person can be appointed as director, directorship in private companies that are either holding or subsidiary company of a public company shall be included.

Vacation  of office  of Director

(Section 167)



The office of a director shall become vacant in case he is absent from all the Board meetings held during twelve months even with leave of absence of the Board.

Disqualifications  for

appointment of  Director

(Section 164)



Disqualifications on the lines of present section 274(1)(g) also extend to Private companies.

Meetings of the Board

(Section 173)



Every company shall hold a minimum number of four meetings every year.

Not more than 120 days shall intervene between two consecutive meetings of the Board.

Audit committee


 Not Applicable

 Not Applicable

As of now the bill prescribes it for  listed  companies only

Restriction on power of Board (Section 180)



The Board of Directors of a company shall exercise the following powers only with the consent of the company by a special resolution

-to sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company

-to invest otherwise in trust securities the amount of compensation received by it as a result of any merger or amalgamation

-to borrow money, where the money to be borrowed, together with the money already borrowed by the company will exceed  aggregate of its paid-up share capital and free reserves, apart from temporary loans obtained from the company’s bankers in the ordinary course of business.

Interested Director not to participate in board meetings

(Section 184)



Any director of a company directly or indirectly, concerned or interested in an executed / proposed contract or arrangement shall disclose the nature of his interest at the meeting of the Board in which the contract or arrangement is discussed and shall not participate in such meeting.

Loans to Directors or any other person in whom the director is interested.

(Section 185)



No company shall, directly or indirectly, advance any loan/ give any guarantee, provide any security, in connection with any loan taken by Director or any other person in whom the director is interested.

Any other person in whom director is interested”  means—

(a) any director of the lending company, its holding company or any partner or relative of any such director;

(b) any firm in which any such director or relative is a partner;

(c) any private company of which any such director is a director or member;

(d)any body corporate at a general meeting of which not less than 25% of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or

(e)Any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

Restriction on non cash transactions by directors

(Section 192)



A company shall not enter into specified non cash transactions by which a director of the company Holding /subsidiary

Associate company or person connected with him acquire assets for consideration other than Cash, or vice versa.

Loan and Investment by company

(Section 186)



A company not to make investment through not more than two layers of investment


No company shall directly or  indirectly —

give any loan to any person or other body corporate

give any guarantee or provide security in connection with a loan to any other body corporate or person; and

acquire by way of subscription, purchase or otherwise, the securities of any other body corporate

Exceeding 60% of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account, whichever is more.



The synopsis has been compiled with a view to highlight certain important operational changes brought about by the Companies Bill 2012.The compilation must not be taken as an exhaustive coverage nor should it be used in place of professional advice. Although it has been endeavored to provide accurate information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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Category Corporate Law   Report

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