Applicability of sub‑section (1A) to Government companies incorporated as private limited companies ‑ Proposal for granting exemption - Companies Law - Circular : No. 36/75

Circular : No. 36/75 [32/6/75 ‑ CL ‑ III], dated 3 ‑ 12 ‑ 1975. Subject:- Applicability of sub ‑ section (1A) to Government companies incorporated as private limited companies ‑ Proposal for granting exemption Several Government companies which were private companies until February 1, 1975 have already become public companies by virtue of the turnover criterion brought in by new sub‑section (1A) of section 43A. Representations have been received from some of the Government companies, Bureau of Public Enterprises, Standing Committee of Public Enterprises, etc., for exempting Government companies incorporated as private limited companies from the operation of sub‑section (1A) of section 43A under section 620 so that they can preserve the status quo ante of a Government private company as on February 1, 1975. As per opinion expressed by the Department of Legal Affairs, while there is no bar to exempting Government companies from the operation of sub-section (1A) of section 43A, there is no scope for exempting Government companies which have become public companies by the operation of section 43A with retrospective effect, so as to enable them to be reconverted into private company status. Hence, even if a notification under section 620 is issued granting such an exemption, the same would not be available to all existing Government/private companies, but may be available only to those companies which may become public companies by the turnover criteria adopted under sub‑section (1A) of section 43A in future or Government companies that may be incorporated as private companies in future. The Department of Company Affairs have already notified exemption in favour of Government companies generally from the operation of some of the important sections and intends to give exemption from other important sections after complying with the provisions of sub‑section (2) of section 620. These exemptions relate to inter‑corporate investments, inter‑corporate loans, contracts in which directors are interested, investments, managerial appointments and remuneration and other provisions, viz., sections 187C, 198, 259, 268, 297, 309, 310, 311, 370, 372, 387 and 388. The question of granting exemption to the Government companies from the provisions of sections 255, 256, 257 and 258 is also under active consideration of the Department. Hence, it should not be so very important now whether a Government company becomes a public company or continues to remain a private company under section 43A insofar as the day‑to‑day operations are concerned. Having regard to what has been stated above, it is hoped that the Government companies which have become public companies by the operation of law and are likely to become as such in future will not be confronted with insurmountable difficulties for complying with the various provisions of the law applicable to public companies to the extent to which such provisions are attracted.