New Delhi, July 31: The Naresh Chandra Committee has suggested the creation of a new category of companies called small private companies (SPC), a new law to enable professionals to form limited liability partnerships, and far-reaching amendments in the Partnership Act.
The report, which mooted changes in several provisions of the Companies Act, has proposed the creation of small private companies (SPC), a new company classification to be registered as an SSI unit with sales not exceeding Rs 5 crore and a paid-up capital and free reserves up to Rs 50 lakh.
Among the benefits such SPCs can avail themselves of is waiver of the mandatory four board meetings every year and alteration in the items which mandatorliy need board approval, Chandra told reporters here today.
Earlier, the report was presented to the finance minister.
The report also proposes a simplified exit framework for private companies by bringing in amendments to section 560 of the Companies Act. It provides a time limit of four months for exit.
On limited liability partnership, the committee notes that in an increasingly litigious market, the prospect of being a member of a partnership firm with unlimited personal liability is risky.
In order to encourage Indian professionals to participate in international business without apprehension of being subject to excessive liability, a legal framework is needed. While initially meant for professionals, this concept may later be extendend to other businesses.
Among the changes this panel has suggested in the Partnerhsip Act are provision of legal framework for registration of charges, lifting the cap on rate of interest charged payable to a partner, and ensuring that the right to sue a partnership firm should arise only from a contract made in the course of business.
Among other changes in the Companies Act is freedom to fix managerial remuneration, making shareholder agreement binding, not prosecuting those independent directors who are part-time employees and amending section 560 of the Companies Act to devise a simplified exit scheme for both public and private companies.