The provisions that are not applicable or apply with modifications to a Private Limited Company are primarily governed by the MCA Exemption Notification G.S.R. 464(E) dated June 5, 2015 (as amended), provided the company is not in default of filing its financial statements (Section 137) or Annual Return (Section 92).
Here is a comprehensive list of key provisions that are not applicable or are significantly modified for a Private Limited Company:
🔑 Key Exemptions for Private Limited Companies
These exemptions provide significant relief in terms of procedural complexity and flexibility in governance and finance.
I. Financial & Borrowing Flexibility (Subject to Conditions)
| Section | Subject | Non-Applicability / Modification |
| Section 67 | Restrictions on purchase of own shares | Not Applicable, provided: (a) No other body corporate has invested in its share capital; (b) Borrowings from banks/FIs/Body Corporate are less than twice its paid-up capital OR ₹50 Crore, whichever is lower; AND (c) No default in repayment of such borrowings exists. |
| Section 73(2)(a) to (e) | Conditions for Acceptance of Deposits from Members | Not Applicable if the company accepts deposits from members not exceeding 100% of (Paid-up Share Capital + Free Reserves + Securities Premium Account). (Start-ups for 5 years and certain other Pvt Cos are also exempted). |
| Section 180 | Restrictions on Powers of Board (e.g., selling/leasing undertaking, borrowing in excess of capital) | Not Applicable. The power to exercise these acts, which requires a Special Resolution from shareholders for a Public Company, can be exercised by the Board alone in a Private Company. |
| Section 185 | Loans to Directors, etc. | Not Applicable, provided the company meets the same three conditions as listed for Section 67 above. This significantly relaxes restrictions on lending to directors/interested parties. |
| Section 188 (2nd Proviso) | Related Party Transaction (RPT) Voting Restriction | Not Applicable. A member who is a related party to the RPT can vote on the Ordinary/Special Resolution ratifying such transaction. (This restriction applies to Public Companies.) |
II. Managerial & Director Appointments
| Section | Subject | Non-Applicability / Modification |
| Section 160 | Right of a person other than retiring director to stand for directorship | Not Applicable. The requirement for a member to give notice and deposit ₹1 Lakh to propose a new director is waived. |
| Section 162 | Appointment of Directors to be Voted Individually | Not Applicable. A Private Company can appoint two or more directors by a single resolution, unless a director objects. |
| Section 196(4) & (5) | Shareholder Approval for MD/WTD Appointment | Not Applicable. The appointment and terms of a Managing Director (MD) or Whole-time Director (WTD) requires only a Board Resolution, without mandatory ratification by shareholders at the next General Meeting. |
| Section 197 | Overall Maximum Managerial Remuneration (11% limit) | Not Applicable. A Private Company is not subject to the 11% ceiling on managerial remuneration to Directors/MD/WTD/Manager. |
| Schedule V | Remuneration in case of No/Inadequate Profits | Not Applicable. The limits and conditions specified in Schedule V for paying remuneration in the absence or inadequacy of profits do not apply. |
| Section 203 | Mandatory Appointment of Key Managerial Personnel (KMP) | Not Applicable (The requirement to appoint a WTD, CFO, and CS for certain turnover/capital limits does not apply). (However, a Private Company with a paid-up capital of ₹10 Crore or more still needs to appoint a Company Secretary under the rules). |
III. Board and General Meeting Compliances
| Section | Subject | Non-Applicability / Modification |
| Section 117(3)(g) | Filing of certain Board Resolutions (e.g., in Form MGT-14) | Not Applicable. Resolutions passed by the Board under Section 179(3) (such as borrowing money, granting loans, approving financial statements, etc.) are not required to be filed with the ROC in Form MGT-14. |
| Section 174(3) (Proviso) | Quorum for Interested Director | Modification: An interested director (one who is party to a contract/arrangement) may be counted in the quorum after disclosing their interest, unlike in a Public Company where they are excluded. |
| Section 184(2) | Participation of Interested Director | Modification: An interested director is allowed to participate and vote in the Board Meeting after disclosing their interest. (This differs from a Public Company where an interested director is typically barred from participating in the discussion or voting.) |
As leveraging the exemptions under Sections 43 and 47 provides a Private Limited Company with fundamental flexibility over its capital structure.
Here is a focused note and sample drafting suggestion for Articles of Association (AoA).
📝 AoA Drafting Note: Flexible Capital Structure
The default provisions of the Companies Act, 2013, restrict companies to having only two kinds of share capital (Equity and Preference) and mandate that every equity share must carry one vote (Section 43 and 47).
However, a Private Limited Company is granted an exemption from these provisions, provided its Articles of Association (AoA) explicitly allow for the non-applicability of these sections.
🎯 Key Exemption & Impact
| Statutory Provision | Default Rule | AoA Provision Effect |
| Section 43 (Kinds of Share Capital) | Company can only issue Equity (with or without differential voting rights) and Preference share capital. | Allows the company to create hybrid instruments or shares with special rights not strictly covered by the statutory definitions of equity or preference shares. |
| Section 47 (Voting Rights) | Equity shares must carry voting rights proportionate to the paid-up capital (i.e., one share, one vote). | Allows the company to issue Equity Shares with Differential Voting Rights (DVR) without complying with the stringent conditions laid down in Rule 4 of the Companies (Share Capital and Debentures) Rules, 2014 (which requires a Special Resolution, limits the percentage of DVR shares, restricts eligibility, etc.). |
✍️ Sample AoA Clauses for Exemption
To effectively avail this exemption, your AoA must contain specific clauses:
1. Clause for Non-Applicability of Sections 43 & 47
This clause is the primary driver for the flexibility.
"Notwithstanding anything contained in the provisions of Section 43 (Kinds of Share Capital) and Section 47 (Voting Rights) of the Companies Act, 2013, the said Sections shall not apply to this Company, and the Company is authorized to issue shares of such kinds and classes, and with such differential rights as to voting, dividend, capital or otherwise, as may be determined by the Board of Directors, subject to the approval of the members by an Ordinary Resolution."
2. Clause for Issue of Differential Voting Rights (DVR)
This clause confirms the Company's authority to issue shares without adhering to the restrictive DVR rules for public companies.
"Subject to the provisions of this Article and the Memorandum of Association, the Company shall have power to issue Equity Shares with differential rights as to dividend, voting or otherwise, and the consent of the shareholders for such issue may be obtained by way of an Ordinary Resolution."
Practical Benefit for Your Blog Article:
These clauses are highly valuable for promoters of Private Limited Companies because they allow for:
Customized Shareholding: Facilitates complex founder or investor agreements by creating shares that carry, for example, high dividend rights but low voting rights (or vice versa), without the legal hurdles faced by public companies.
Simpler Process: An Ordinary Resolution suffices for most capital structuring decisions, replacing the stricter conditions and disclosure requirements associated with DVR issues under the main Act.