Deemed public companies consequent upon increase in average annual turnover from Rs. 10 crore to Rs. 25 crore - Companies Law - CIRCULAR NO. 7/99

CIRCULAR NO. 7/99 [F NO. 1/8/99-CL-V], DATED 25-5-1999, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS Subject:- Deemed public companies consequent upon increase in average annual turnover from Rs. 10 crore to Rs. 25 crore 1. As per sub-section (1A) of section 43 A of the Companies Act, 1956, where the average annual turnover of a private company is not, during the relevant period, i.e., during three consecutive financial years, less than such amount as may be prescribed, the private company shall become, on the expiry of three months from the last day of the period of three consecutive financial years during which the private company had the said average annual turnover, a public company. The ceiling of average annual turnover under sub-section (1A) of section 43A is prescribed by the Central Government from time to time under rule 4C of the Companies (Central Government's) General Rules and Forms, 1956. 2. This ceiling criterion of average annual turnover for the 'relevant period' which was Rs. 10 crore has been raised to Rs. 25 crore by this Department by amending the above said rule through Notification No. GSR 130(E) dated 23rd February, 1999. 3. Consequent on this upward revision of the average annual turnover criterion, a query has been raised as to the effect of the increase in the ceiling of average annual turnover with effect from 23rd February, 1999 on companies whose average annual turnover for three consecutive financial years was beyond Rs. 10 crore or more (but was less than Rs. 25 crore) before it became a public company on the expiry of three months from the last day of the three consecutive financial years under the old criterion of Rs. 10 crore ceiling. 4. In this connection, it is to be noted that for determining the date from which a private company shall become a public company consequent upon increase in the ceiling of average annual turnover, 23rd November, 1998 which is three months earlier to 23rd February, 1999 will be the material date. It is, therefore, clarified that a private company whose last date during the period from 23rd November, 1998 to 22nd February, 1999 and its average annual turnover for three consecutive financial years was Rs. 10 crore or more but less than Rs. 25 crore, shall not become a deemed public company by virtue of sub-section (1A) of section 43A.