By way of notification dated June 13, 2017, the MCA has declared some additional exemptions to a specified class of private companies from certain provisions of the Companies Act, which have been summarized below:
i. The definition of ‘Financial Statements’ under Section 2(40) has been amended to provide that a private company which is a start-up may not include cash flow statement as part of its financial statements.
ii. Section 73(2) of the Companies Act provides that companies may accept deposits from members subject to prescribed conditions, such as creation of a deposit repayment reserve account, maintenance of deposit insurance, etc. Following private companies are now exempted from complying with these requirements:
a. A private company that accepts deposits from its members not exceeding the aggregate of 100% of the paid up share capital, free reserves and securities premium account; or
b. For a period of five years from the date of incorporation for a start-up; or
c. A private company (i) which is not an associate or subsidiary company of any other company; (ii) its borrowings from banks and financial institutions is less than twice its paid up share capital or INR 50 crores (approx. USD 7.7 million), whichever is lower; and (iii) which has not defaulted in the repayment of borrowings from banks and financial institutions subsisting at the time of accepting deposits.
iii. Section 92(1)(g) provides that the annual returns prepared by a company should, inter-alia, provide details of remuneration to the directors and key managerial personnel. Pursuant to the exemption, private companies, which are small companies, are only required to provide details of the aggregate remuneration drawn by directors.
iv. As per the proviso to Section 92(1), annual return of one person companies and small companies are only required to be signed by the company secretary, or where there is no company secretary by the director of the company. This has now been made applicable to private companies which are start-ups.
v. A private company which: (i) is a one person company or a small company; or (ii) has turnover less than INR 50 crores (approx. USD 7.7 million) as per the latest audited financial statements; or (iii) has aggregate borrowings at any point of time during the financial year less than INR 25 crores (approx. USD 3.8 million), is exempt from the requirement under Section 143(5)(i) of the Companies Act of including under its auditor’s report a statement on whether the company has adequate internal financial control systems in place and operating effectiveness of such controls.
vi. Start-ups have been exempted from the requirement of holding four board meetings in a year. Such companies are required to hold only one meeting of the Board in each half of the calendar year, provided that the gap between the two meetings is not less than 90 days.
vii. Interested directors can be counted towards quorum for adjourned board meetings of private companies under Section 174(3) of the Companies Act after disclosure of their respective interest pursuant to Section 184 of the Companies Act.
Benefits of the exemptions set out above can only be availed by a private company which has not committed a default in filing its financial statements under Section 137 or annual return under Section 92 of the Companies Act.
 Means a private company recognized as a ‘start-up’ in accordance with the notification issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry