Deemed Public Company ‑ Private limited company becoming public limited company by virtue of sub‑section (1A) ‑ Applicability of sections 198, 269, 317 and 370 - Companies Law - Letter : No. 32/13/75‑CL‑III,

Letter : No. 32/13/75 ‑ CL ‑ III, dated 25 ‑ 6 ‑ 1975. Subject:- Deemed Public Company ‑ Private limited company becoming public limited company by virtue of sub ‑ section (1A) ‑ Applicability of sections 198, 269, 317 and 370 Queries : 1. Consequent upon becoming a deemed public limited company under the amended section 43A, will it be necessary for the company to get an approval from the Central Government for the continuation of the appointment of its managing whole‑time directors already in position, or, on the analogy of the provisions contained in sub‑section (2) of section 269 applicable to an existing company , the present tenure of the continuing directors may remain undisturbed and the approval of the Central Government will be necessary for any new appointment or reappointment only on expiry of the existing tenure of the continuing directors ? 2. What will be the position if the orders appointing them only say that their appointment is until further orders and no fixed tenure is indicated there against ? In such a case, would it be correct to assume that in terms of section 317 they can continue for a period of five years from the date of company becoming a deemed public company ? 3. Have the companies, having losses or inadequate profits, on becoming deemed public limited under section 43A to apply for approval for minimum remuneration to be paid to their managing/whole‑time directors ? If so, what is the time limit within which such applications should be submitted by such companies after their coming within the purview of section 43A ? 4. What would be the position of loans and advances already given in excess of the limits laid down in section 370(1) in case companies becoming deemed public limited companies under section 43A ? Would it be correct to assume that the past loans and advances would not be affected though for future loans and advances they will have to seek necessary approval from the Central Government apart from complying with other formalities as laid down ? Answers : 1 2. This existing appointment of managing director or the whole‑time director would not require the approval of the Central Government now, but it will be necessary at the time of the next appointment. In case the existing appointment is for an indefinite period, i.e., until further orders, then unless the appointment is terminated earlier, the period of appointment will be taken as five years from the date of the company becoming a public company. 3. In the event of inadequacy of profit, the company can pay the minimum remuneration after obtaining the approval of the Central Government under section 198(3) and the application for the purpose has to be made within a reasonable time from the date of the company becoming a public company under section 43A. 4. On the principle underlying the provisions of section 370(5) the company will have to recover the loans taken or withdraw the guarantee within a period of six months from the date of becoming a public company.