PRELIMINARY

INTRODUCTION
• The Companies Act received the assent of the President of India on 29 August 2013 and was notified in the
Official Gazette on 30th August 2013 for public information stating that different dates may be appointed for
enforcement of different provisions of the Companies Act 2013 through notification.

• Section 1 came into force on 30th August 2013

• Section 98 came into force on 12th September 2013.

• Section 143 were enforced from 1th April 2014 and so on.

• The Companies Act 2013 is ruled based legislation with 470 sections and seven schedules.

• The entire Act has been divided into 29 chapters. Each chapter has at least one set of Rules.

• Its aim to improve corporate governance simplify regulations and strengthen the interest of investors.

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Title Section 1 : The Companies Act,2013

Extent Whole of India

Applicability  Companies Registered under this act or earlier Act

 Insurance Companies (except in so far as the said provisions are
inconsistent with the provisions of the Insurance Act, 1938 or the
Insurance Regulatory and Development Authority Act, 1999)
 Banking Companies (except in so far as the said provisions are
inconsistent with the provisions of the Banking Regulation Act, 1949)
 Companies producing/supplying electricity (except in so far as the
said provisions are inconsistent with the provisions of the Electricity Act,
2003)
 Company regulated by special Act, for the time being in force, except
in so far as the said provisions are inconsistent with the provisions of such
special Act, and
 such body corporate, incorporated by any Act for the time being in force,
as the Central Government may, by notification, specify in this behalf,
subject to such exceptions, modifications or adaptation, as may be
specified in the notification. Example: Food Corporation of India (FCI),
National Highway Authority of India (NHAI) etc.
Section 1 came into force at once and the
Commencement remaining provisions on different dates through Notifications.
2
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 DEFINITIONS (Section 2)
• Sections or Clauses, are ‘internal aids to construction’ and immense help in interpreting or construing the
enactment or any of its parts

(1) Abridged Means

A memorandum containing such salient features of a prospectus as may
Prospectus be specified by the Securities and Exchange Board(SEBI) by making
regulations in this behalf.

(2) Accounting Means the standards of accounting or any addendum thereto for
companies or class of companies referred to in section 133.
Standards
1st October 2018 Onwards
As per section 133(Rule 7 of the Companies Accounts Rules, 2014) the
Central Government may prescribe the standards of accounting or any
addendum thereto,
As recommended by the Institute of Chartered Accountants of India(ICAI)
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 constituted under section 3 of the Chartered Accountants Act 1949 in
consultation with and after examination of the recommendation made
by the National Financial Reporting Authority (NFRA).

Before 1st October 2018

Till the National Financial Reporting Authority is constituted under
section 132 of the Act,
The Central Government may prescribe the standards of accounting or
any addendum thereto,
as recommended by the Institute of Chartered Accountants of India in
consultation with and after examination of the recommendations made
by the National Advisory Committee on Accounting Standards
constituted under section 210A of the Companies Act, 1956

Includes the making of additions, omissions and substitutions.

(3) Alter or Alteration

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 Means
(5) Articles • The articles of association of a company as originally framed, or
• As altered from time to time, or
• Applied in pursuance of any previous company law, or
• Applied in pursuance of this Act
In relation to another company, means
(6) Associate Company A company in which that other company has a significant influence, but
which is not a subsidiary company of the company having such influence
and includes a joint venture company.

Significant Influence : control of at least twenty per cent(20%) of total

voting power, or control of or participation in business decisions under
an agreement.
Joint Venture: a joint arrangement whereby the parties that have joint
control of the arrangement have rights to the net assets of the
arrangement
Note: Shares held by a company in another company in a fiduciary
capacity shall not be counted for the purpose of determining the
relationship of associate company

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 Means
(7) Auditing Standards The standards of auditing or any addendum thereto for companies or
class of companies referred to in sub-section (10) of section 143.

As per section 143(10) the Central Government may prescribe the

standards of auditing or any addendum thereto, as recommended by the
Institute of Chartered Accountants of India, constituted under section 3
of the Chartered Accountants Act, 1949, in consultation with and after
examination of the recommendations made by the National Financial
Reporting Authority.

Means
(8) Authorised Capital such capital as is authorised by the memorandum of a company to be
or Nominal Capital the maximum amount of share capital of the company
Means
(10) Board of Directors the collective body of the directors of the company.
or Board

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 Includes a company incorporated outside India, but does not include
(11) Body corporate or
Corporation i. A co-operative society registered under any law relating to co-
operative societies and
ii. Any other body corporate (not being a company as defined in this
Act), which the Central Government may, by notification, specify in
this behalf.

Include books of account, deeds, vouchers, writings, documents,

(12) Books and Paper minutes and registers maintained on paper or in electronic form;
and Book or Paper

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(13) Books of Account Includes records maintained in respect of
• All sum of money received and expended by a company
• All sales and purchases of goods and services by the company
• The assets and liabilities of the company
• Items of the Cost U/s 148.

Means any establishment described as such by the company

(14) Branch Office
Means such part of the capital, which has been called for payment.
(15) Called up Capital
An interest or lien created on the property or assets of a company or any
(16) Charge Means of its undertakings or both as security and includes a mortgage

Means a chartered accountant as per Section 2 (1) (d) of the Chartered

(17) Chartered Accountants Act, 1949 who holds a valid certificate of practice(COP)
Accountant under sub-section (1) of section 6 of that Act;
Means an officer of a company, who has been designated as such by it.
(18) Chief Executive
Officer
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 Means a person appointed as the Chief Financial Officer of a company
(19) Chief Financial
Officer
Means a company incorporated under this Act or under any previous
(20) Company company law.
Means a company having the liability of its members limited by the
(21) Company Limited memorandum to such amount as the members may respectively
by guarantee undertake to contribute to the assets of the company in the event of its
being wound up.
Means a company having the liability of its members limited by the
(22) Company Limited memorandum to the amount, if any, unpaid on the shares respectively
by Shares held by them.
Means a person liable to contribute towards the assets of the company in
(26) Contributory the event of its being wound up.

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(27) Control Shall include the right to appoint majority of the directors or to control
the management or policy decisions exercisable by a person or persons
acting individually or in concert, directly or indirectly, including by virtue
of their shareholding or management rights or shareholders agreements
or voting agreements or in any other manner.

Includes debenture stock, bonds or any other instrument of a company

(30) Debenture evidencing a debt, whether constituting a charge on the assets of the
company or not
Provided that-
a) the instruments referred to in Chapter III-D of the Reserve Bank
of India Act, 1934; and
b) such other instrument, as may be prescribed by the Central
Government in consultation with the Reserve Bank of India,
issued by a company,
shall not be treated as debenture;

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 Means a director appointed to the Board of a company
(34) Director
Includes any interim dividend
(35) Dividend
Includes summons, notice, requisition, order, declaration, form and
(36) Document register, whether issued, sent or kept in pursuance of this Act or under
any other law for the time being in force or otherwise, maintained on
paper or in electronic form.

Means the option given to the directors, officers or employees of a

(37) Employees’ stock company or of its holding company or subsidiary company or companies,
option if any, which gives such directors, officers or employees, the benefit or
right to purchase, or to subscribe for, the shares of the company at a
future date at a pre-determined price.

Includes an engineer, a valuer, a Chartered Accountant, a Company

(38) Expert Secretary, a Cost Accountant and any other person who has the power or
authority to issue a certificate in pursuance of any law for the time being
in force.
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(40) Financial Includes
• A balance sheet as at the end of the financial year
Statement • A profit and loss account ( Income Expenditure in case of company
carrying on any activity not for profit.
• Cash flow statement for the Financial Year
• A statement of changes in equity ( if applicable)
• Any explanatory note annexed to or forming part of any document.

Note: One Person Company, Small Company Dormant Company and

Private Company (if such Private Company is startup company) may not
include the cash flow statement.

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 Means the period ending on the 31st day of March every year.
(41) Financial Year And where it has been incorporated on or after the 1st day of January of a
year, the period ending on the 31st day of March of the following year.

Provided that where a company or body corporate, which is a holding

company or a subsidiary or associate company of a company
incorporated outside India and is required to follow a different financial
year for consolidation of its accounts outside India, the Central
Government may, on an application made by that company or body
corporate in such form and manner as may be prescribed, allow any
period as its financial year, whether or not that period is a year.

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 Means such reserves which, as per the latest audited balance sheet of a
(43) Free Reserves company are available for the distribution as dividend.
Provided that
(1) Any amount representing unrealized gains, notional gains or
revaluation of assets, whether shown as a reserve or the otherwise
or.
(2) Any change in carrying amount of an asset or of a liability recognized
in equity including surplus in profit and loss amount on
measurement of the asset or the liability at fair value.
Shall not be treated as free reserves.

Means any company in which not less than 51% of the paid-up share
(45) Government capital( Total Voting Power) is held by the Central Government, or by any
Company State Government or Governments, or partly by the Central Government
and partly by one or more State Governments, and includes a company
which is a subsidiary company of such a Government company

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 In relation to one or more other companies, means a company of which
(46) Holding Company such companies are subsidiary companies.
Explanation. — For the purposes of this clause, the expression
"company" includes any body corporate
Means such capital as the company issues from time to time for
(50) Issued Capital subscription.
Means
(51) Key Managerial i. The Chief Executive Officer or the managing director or the
Personal manager;
ii. The company secretary;
iii. The whole-time director;
iv. The Chief Financial Officer;
v. Such other officer, not more than one level below the directors
who is in whole-time employment, designated as key
managerial personnel by the Board; and
vi. Such other officer as may be prescribed*;

Note: *However, till now no other officer has been prescribed.

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 Means a company which has any of its Securities listed on any recognized stock
(52) Listed Company exchange.
Provided that such class of companies, which have listed or intend to list such class
of securities as may be prescribed in consultation with the Securities Exchange
Board(SEBI) , Shall not be considered as listed companies.

Rule 2A of Companies ( Specification of definition details) Rules 2014 provides for

the Companies not to considered as listed companies namely

(a) Public Companies which have not listed their equity shares on recognized
stock exchange but have listed their-
i. Non Convertible debt securities issued on private placement basis in term of
SEBI (Issue and listing of Debt Securities) Regulation 2008 or
ii. Non Convertible redeemable preference shares issued on private placement
basis in terms of SEBI ( Issue and Listing of Non Convertible Redeemable
Preference Shares) Regulation 2013 or
iii. Both categories of (i) and (ii) above

(b) Private Companies which have listed their Non- Convertible debt securities on
private placement basis on a recognized stock exchange in terms of SEBI (Issue and
listing of Debt Securities) Regulation 2008 .

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 (c ) Public Companies which have not listed their equity shares on a recognized
stock exchange but whose equity shares are listed on a stock exchange in a
jurisdiction in section 23(3) of the Act.

Means an individual who, subject to the superintendence, control and

(53) Manager direction of the Board of Directors, has the management of the whole, or
substantially the whole, of the affairs of a company, and includes a
director or any other person occupying the position of a manager, by
whatever name called, whether under a contract of service or not.

(54) Managing Director oMeans

A director who, by virtue of the articles of a company or
o an agreement with the company or
o a resolution passed in its general meeting, or
o by its Board of Directors,
is entrusted with substantial powers of management of the affairs of the
company and includes a director occupying the position of managing
director, by whatever name called.

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(55) Member Means
1. The subscriber to the memorandum of the company who shall be
deemed to have agreed to become member of the company, and on
its registration, shall be entered as member in its register of
members;
2. Every other person who agrees in writing to become a member of
the company and whose name is entered in the register of members
of the company;
3. Every person holding shares of the company and whose name is
entered as a beneficial owner in the records of a depository.

Means the memorandum of association of a company as originally

(56) Memorandum framed or as altered from time to time in pursuance of any previous
company law or of this Act.

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 Means
(57) Net Worth (Add) Aggregate Value of the paid-up share capital and all reserves
created out of the profits, securities premium account and debit or credit
balance of profit and loss account,

(Less) after deducting the aggregate value of the accumulated losses,

deferred expenditure and miscellaneous expenditure not written off, as
per the audited balance sheet,

but does not include reserves created out of revaluation of assets, write-
back of depreciation and amalgamation

Means a notification published in the Official Gazette and the expression

(58) Notification “notify” shall be construed accordingly.

Includes any director, manager or key managerial personnel or any

(59) Officer person in accordance with whose directions or instructions the Board of
Directors or any one or more of the directors is or are accustomed to act.

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(60) Officer who is in Following officers of a company, namely:-
default i. Whole-time director (WTD)
ii. Key managerial personnel (KMP)
iii. where there is no key managerial personnel, such director or directors as
specified by the Board in this behalf and who has or have given his or
their consent in writing to the Board to such specification, or all the
directors, if no director is so specified
iv. Any person who, under the immediate authority of the Board or any key
managerial personnel, is charged with any responsibility including
maintenance, filing or distribution of accounts or records, authorises,
actively participates in, knowingly permits, or knowingly fails to take
active steps to prevent, any default.
v. Any person in accordance with whose advice, directions or instructions
the Board of Directors of the company is accustomed to act, other than a
person who gives advice to the Board in a professional capacity.
vi. Every director, in respect of a contravention of any of the provisions of
this Act, who is aware of such contravention by virtue of the receipt by
him of any proceedings of the Board or participation in such proceedings
without objecting to the same, or where such contravention had taken
place with his consent or connivance.
vii. In respect of the issue or transfer of any shares of a company, the share
transfer agents, registrars and merchant bankers to the issue or transfer.

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 Means
(62) One Person A company which has only one person as a member.
Company
(63) Ordinary or Special Means an ordinary resolution, or as the case may be, special resolution
referred to in section 114 (Ordinary and Special Resolution).
Resolution
Means such aggregate amount of money credited as paid-up as is
(64) Paid Up Share equivalent to the amount received as paid-up in respect of shares issued
Capital or Share Capital and also includes any amount credited as paid-up in respect of shares of
the company, but does not include any other amount received in respect
Paid Up of such shares, by whatever name called

Means voting by post or through any electronic mode.

(65) Postal ballot
Means prescribed by rules made under this Act.
(66) Prescribed

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 Means
(68) Private Company A company having a minimum paid-up share capital as may be
prescribed*(Nothing has been Prescribed so far), and which by its articles,-
1. Restricts the right to transfer its shares
2. Except in case of One Person Company, limits the number of its
members to two hundred:
Provided that where two or more persons hold one or more
shares in a company jointly, they shall, for the purposes of this
clause, be treated as a single member
Provided further that—
a. persons who are in the employment of the company; and
b. persons who, having been formerly in the employment of
the company, were members of the company while in that
employment and have continued to be members after the
employment ceased,
shall not be included in the number of members and

3. Prohibits any invitation to the public to subscribe for any securities

of the company

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 Means a person—
(69) Promoter a. Who has been named as such in a prospectus or is identified by the
company in the annual return referred to in section 92, or

b. Who has control over the affairs of the company, directly or indirectly
whether as a shareholder, director or otherwise or

c. In accordance with whose advice, directions or instructions the Board

of Directors of the company is accustomed to act.
Means any document described or issued as a prospectus and includes a
(70) Prospectus red herring prospectus or shelf prospectus or any notice, circular,
advertisement or other document inviting offers from the public for the
subscription or purchase of any securities of a body corporate
Means a company which—
(71) Public Company a. Is not a private company; and
b. Has a minimum paid-up share capital as may be prescribed*(Nothing has
been Prescribed so far)

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 Provided that a company which is a subsidiary of a Public Company shall
be deemed to be public company for the purposes of this Act even where
such subsidiary company continues to be a Private Company in its articles

Means the register of companies maintained by the Registrar on paper or

(74) Register of in any electronic mode under this Act
Companies
Means
(75) Registrar • A Registrar
• An Additional Registrar
• A Joint Registrar
• A Deputy Registrar or
• An Assistant Registrar
having the duty of registering companies and discharging various
functions under this Act

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 Means-
(76) Related Party i. A director or his relative
ii. A key managerial personnel or his relative
iii. A firm, in which a director, manager or his relative is a partner
iv. A private company in which a director or manager or his relative is a
member or director
v. A public company in which a director and manager is a director and holds
along with his relatives, more than two per cent of its paid-up share
capital
vi. Any body corporate whose Board of Directors, managing director or
manager is accustomed to act in accordance with the advice, directions
or instructions of a director or manager
vii. Any person on whose advice, directions or instructions a director or
manager is accustomed to act: Provided that nothing in sub-clauses (vi)
and (vii) shall apply to the advice, directions or instructions given in a
professional capacity.
viii. such other person as may be prescribed;
ix. Any body corporate which is-
a. A holding, subsidiary or an associate company of such company
b. A subsidiary of a holding company to which it is also a subsidiary or
c. An investing company or the venturer of the company

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 Means
(77) Relative i. Members of a Hindu Undivided Family;
ii. Husband and wife; or
iii. One person is related to the other in following manner

a) Father: includes step-father.

b) Mother: includes the step-mother.
c) Son: includes the step-son.
d) Son’s wife.
e) Daughter.
f) Daughter’s husband.
g) Brother: includes the step-brother;
h) Sister: includes the step-sister
Means any money or its equivalent given or passed to any person for
(78) Remuneration services rendered by him and includes perquisites as defined under the
Income Tax Act, 1961

Means a share in the share capital of a company and includes stock

(84) Share

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 Means a Company, other than a Public Company-
(85) Small Company
(i) Paid Up Share Capital of which does not exceed 50 Lakhs Rupees Or
such higher amount as may be prescribed*, which shall not be more
than 10 Crore Rupees and
(ii) Turnover of which as per Profit and Loss account for the immediately
preceding financial year does not exceed 2 Crore Rupees or Such
higher amount as may be prescribed*, which shall not be more than
100 Crore Rupees.

Provided that nothing in this clause shall apply to-

a. A holding company or a subsidiary company
b. A company registered under section 8
c. A company or body corporate governed by any special Act.

*As per Rule 2(1)(t) of Companies ( Specification of Definitions Details)

Rules, 2014 Paid up Capital and Turnover of the Small company shall not
exceed Rupees 2 crores and Rupees 20 crores respectively.

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 Means such part of the capital which is for the time being subscribed by the
(86) Subscribed Capital members of a company

(87) Subsidiary Company Means a company in which the holding company

or Subsidiary i. Controls the composition of the Board of Directors or
ii. Exercises or controls more than one-half of the total voting power
either at its own or together with one or more of its subsidiary
companies.

Explanation—For the purposes of this clause,—

a) a company shall be deemed to be a subsidiary company of the holding
company even if the control referred to in sub-clause (i) or sub-clause
(ii) is of another subsidiary company of the holding company;

b) the composition of a company’s Board of Directors shall be deemed to be

controlled by another company if that other company by exercise of some
power exercisable by it at its discretion can appoint or remove all or a
majority of the directors;
© the expression “company” includes any body corporate;

(d) “layer” in relation to a holding company means its subsidiary or

subsidiaries; 28
 Means such equity shares as are issued by a company to its directors or
(88) Sweat Equity employees at a discount or for consideration, other than cash, for
Shares providing their know-how or making available rights in the nature of
intellectual property rights or value additions, by whatever name called.

Means the total number of votes which may be cast in regard to that
(89) Total Voting Power matter on a poll at a meeting of a company if all the members thereof or
their proxies having a right to vote on that matter are present at the
meeting and cast their votes.

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 Means the National Company Law Tribunal constituted under section
(90) Tribunal 408.
Means the gross amount of revenue recognised in the profit and loss
(91) Turnover account from the sale, supply, or distribution of goods or on account of
services rendered, or both, by a company during a financial year.

Means a company not having any limit on the liability of its members.
(92) Unlimited
Company
Means the right of a member of a company to vote in any meeting of the
(93) Voting Right company or by means of postal ballot.

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