The Naresh Chandra Committee on Thursday suggested the creation of a new category of companies – small private companies – which are registered as small-scale industry units with annual sales not exceeding Rs 5 crore (Rs 50 million).

Retired bureaucrat Naresh Chandra on Thursday presented his second report to Finance Minister Jaswant Singh on the regulation of private companies and partnerships, while suggesting further amendments to the Companies Act.

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Chandra panel for exemptions for small firms

The committee suggested that such small private companies can only have a single main objective to qualify for exemption specially designed for them and should have a paid up capital of not less than Rs 50 lakh (Rs 5 million) or less.

The panel has also made a number of suggestions regarding limited liability partnership (LLP) -- the recommendation to amend the Partnership Act and the Companies Act.

The committee says there is a need to enact a law to allow LLPs to form an organisation for professionals and this may later be extended to other businesses.

It has also suggested that Partnership Act be amended to provide a legal framework for registration of charges on the lines of Companies Act.

Constituted in January this year by the Department of Company Affairs, the Naresh Chandra committee was asked to suggest a scientific and rational regulatory environment conducive to the growth of the corporate sector and an effective regulatory mechanism to check exploitation by unscrupulous elements, according to an official statement in New Delhi.

Headed by Naresh Chandra, the panel comprised C R Dua, S D Irani, N V Iyer, Ashok Kapur, Rajiv Mehrishi, Kalpana Morparia, Shardul Shorff and Ashok Haldia.