Feb 17, 2015

MCA amends definition of Small Company and section 186 by issuing ROD

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According to section 2(85), a company may be treated as a ‘small company’ if it meets either of the conditions provided therein i.e. paid-up capital or turnover, thereby making the other limit unrestricted or inconsequential as certain companies which, though, meet only one of the criteria but exceed the other, are also getting classified as ‘small companies’;
 
Moreover in the absence of provisions under section 186 , providing exemption to a banking company or an insurance company or a housing finance company making acquisition of securities in its ordinary course of business, such companies were facing difficulty in acquisition of securities in their ordinary course of business
 
Therefore vide the Companies (Removal of Difficulties) Order, 2015 dated 16th February 2015, MCA amended section 2(85) and 186 in the below given manner:
 
Sec. 2(85)
In sub-clause (i), for the word “or” occurring at the end, the word “and” shall be substituted
Text of existing sub-section is given below
‘‘small company’’ means a company, other than a public company,—

  1. paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; or
  2. turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty crore rupees:
 
Sec 186.
In sub-section (11)(b) after item (iii), the following item shall be inserted, namely
“(iv) made by a banking company or an insurance company or a housing finance company, making acquisition of securities in the ordinary course of its business.”.
 
Text of existing sub-section is given below

(11) Nothing contained in this section, except sub-section (1), shall apply —

(b) to any acquisition —

  1. made by a non-banking financial company registered under Chapter IIIB of the Reserve Bank of India Act, 1934 and whose principal business is acquisition of securities:
    Provided that exemption to non-banking financial company shall be in respect of its investment and lending activities;
  2. made by a company whose principal business is the acquisition of securities;
  3. of shares allotted in pursuance of clause (a) of sub-section (1) of section 62.
 
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