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Important Definitions under

the Companies Act, 2013

Under Section 2 of the Companies Act, 2013

In this Act, unless the context otherwise requires -
  1. “abridged prospectus” means a memorandum containing such salient features of a prospectus as may be specified by the Securities and Exchange Board by making regulations in this behalf;
  2. “accounting standards” means the standards of accounting or any addendum thereto for companies or class of companies referred to in section 133;

  3. Section 133 reads

    The Central Government may prescribe the standards of accounting 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.

    Provided that until the National Financial Reporting Authority is constituted under section 132 of the Companies Act, 2013 (18 of 2013), the Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949 (38 of 1949), in consultation with and after examination of the recommendations made by National Advisory Committee on Accounting Standards Constituted under section 210A of the Companies Act, 1956".

  4. associate company in relation to another company, means 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.

    Explanation.—For the purposes of this clause,

    1. the expression “significant influence” means control of at least twenty per cent of total voting power, or control of or participation in business decisions under an agreement;
    2. the expression "joint venture" means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement; (amended vide Companies (Amendment) Act, 2017, amendment effective from 07-05-2018)

    Note : Clarification vide General Circular no. 24/2014 dated 25-06-2014 - 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' under section 2(6) of the Companies Act, 2013.
  5. “auditing standards” means the standards of auditing or any addendum thereto for companies or class of companies referred to in sub-section (10) of section 143;

    Section 143 sub-section (10) reads

  6. 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:

    Provided that until any auditing standards are notified, any standard or standards of auditing specified by the Institute of Chartered Accountants of India shall be deemed to be the auditing standards.

  7. “body corporate” or “corporation” includes a company incorporated outside India, but does not include—
    1. a co-operative society registered under any law relating to co-operative societies; and
    2. any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf;
  8. “book and paper” and “book or paper” include books of accounts, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form;
  9. “books of account” includes records maintained in respect of—
    1. all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;
    2. all sales and purchases of goods and services by the company;
    3. the assets and liabilities of the company; and
    4. the items of cost as may be prescribed under section 148 in the case of a company which belongs to any class of companies specified under that section;

  10. “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice under sub-section (1) of section 6 of that Act;
  11. “Chief Executive Officer” means an officer of a company, who has been designated as such by it;
  12. “Chief Financial Officer” means a person appointed as the Chief Financial Officer of a company;
  13. “company” means a company incorporated under this Act or under any previous company law;
  14. "Company Liquidator" means a person appointed by the Tribunal as the Company Liquidator in accordance with the provisions of section 275 for the winding up of a company under this Act";
  15. “company secretary” or “secretary” means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) who is appointed by a company to perform the functions of a company secretary under this Act;
  16. “company secretary in practice” means a company secretary who is deemed to be in practice under sub-section (2) of section 2 of the Company Secretaries Act, 1980 (56 of 1980);
  17. “contributory” means a person liable to contribute towards the assets of the company in the event of its being wound up.

    Explanation.—For the purposes of this clause, it is hereby clarified that a person holding fully paid-up shares in a company shall be considered as a contributory but shall have no liabilities of a contributory under the Act whilst retaining rights of such a contributory;

  18. “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;
  19. "Cost Accountant" means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who holds a valid certificate of practice under sub-section (1) of section 6 of that Act;
  20. “debenture” includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not;
    Provided that—
    1. the instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934; and
    2. 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;
    (Proviso inserted vide Companies (Amendment) Act, 2017 and notified on 09-02-2018)

  21. “deposit” includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India;
  22. “depository” means a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996);
  23. “director” means a director appointed to the Board of a company;
  24. “dividend” includes any interim dividend;
  25. “document” includes summons, notice, requisition, order, declaration, form and 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;
  26. “employees’ stock option” means the option given to the directors, officers or employees of a company or of its holding company or subsidiary company or companies, 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;
  27. “expert” includes an engineer, a valuer, a chartered accountant, a company 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;
  28. “financial statement” in relation to a company, includes—
    1. a balance sheet as at the end of the financial year;
    2. a profit and loss account, or in the case of a company carrying on any activity not for profit, an income and expenditure account for the financial year;
    3. cash flow statement for the financial year;
    4. a statement of changes in equity, if applicable; and
    5. any explanatory note annexed to, or forming part of, any document referred to in sub-clause (i) to sub-clause (iv):

    Provided that the financial statement, with respect to One Person Company, small company, dormant company and private company (if such private company is a start-up), may not include the cash flow statement;

    Proviso substituted vide Notification dated 13-06-2017

    Explanation.— For the purposes of this Act, the term 'start-up' or "start-up company" means a private company incorporated under the Companies Act, 2013 (18 of 2013) or the Companies Act, 1956 (1 of 1956) and recognised as start-up in accordance with the notification issued by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry".

  29. “financial year” in relation to any company or body corporate, means the period ending on the 31st day of March every 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, in respect whereof financial statement of the company or body corporate is made up:

    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:

    Provided further that any application pending before the Tribunal as on the date of commencement of the Companies (Amendment) Act, 2019, shall be disposed of by the Tribunal in accordance with the provisions applicable to it before such commencement

    (First proviso substituted vide Companies (Amendment) Act, 2019, effective from 02-11-2018),

    Provided also that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause;

    (Second proviso amended vide Companies (Amendment) Act, 2019, effective from 02-11-2018)

  30. “foreign company” means any company or body corporate incorporated outside India which—
    1. has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
    2. conducts any business activity in India in any other manner.
  31. “free reserves” means such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend:
    Provided that—
    1. any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or
    2. any change in carrying amount of an asset or of a liability recognised in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value,
    shall not be treated as free reserves;
  32. “Global Depository Receipt” means any instrument in the form of a depository receipt, by whatever name called, created by a foreign depository outside India and authorised by a company making an issue of such depository receipts;
  33. “Government company” means any company in which not less than fifty one per cent of the paid-up share capital is held by the Central Government, or by any State Government or Governments, or partly by the Central Government and partly by one or more State Governments, and includes a company which is subsidiary company of such a Government company;

  34. Explanation – For the purposes of this clause, the “paid-up share capital” shall be construed as “total voting power”, where shares with differential voting rights have been issued

    (Explanation inserted vide Exemptions to Govt. Companies under section 462 of the Companies Act, 2013 notification dated 02-03-2020, effective from 03-03-2020)
  35. “holding company” in relation to one or more other companies, means a company of which such companies are subsidiary companies;
    [Explanation.—For the purposes of this clause, the expression "company" includes any body corporate.]

    (Explanation inserted vide Companies (Amendment) Act, 2017, notified on 09-02-2018)

  36. “independent director” means an independent director referred to in sub-section (6) of section 149;

    Note : The above should be read as sub-section (6) of Section 149 and Under Section 149(6)

    An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee director,—
    1. who, in the opinion of the Board, is a person of integrity and possesses relevant expertise and experience;
      1. who is or was not a promoter of the company or its holding, subsidiary or associate company;
      2. who is not related to promoters or directors in the company, its holding, subsidiary or associate company;
    2. who has or had no pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten per cent. of his total income or such amount as may be prescribed with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year; (amended vide Companies (Amendment) Act, 2017, effective from 07-05-2018)
    3. none of whose relatives—
      1. is holding any security of or interest in the company, its holding, subsidiary or associate company during the two immediately preceding financial years or during the current financial year:
        Provided that the relative may hold security or interest in the company of face value not exceeding fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding, subsidiary or associate company or such higher sum as may be prescribed;
      2. is indebted to the company, its holding, subsidiary or associate company or their promoters, or directors, in excess of such amount as may be prescribed during the two immediately preceding financial years or during the current financial year;
      3. has given a guarantee or provided any security in connection with the indebtedness of any third person to the company, its holding, subsidiary or associate company or their promoters, or directors of such holding company, for such amount as may be prescribed during the two immediately preceding financial years or during the current financial year; or
      4. has any other pecuniary transaction or relationship with the company, or its subsidiary, or its holding or associate company amounting to two per cent. or more of its gross turnover or total income singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii);
      (substituted vide Companies (Amendment) Act, 2017, effective from 07-05-2018)
    4. who, neither himself nor any of his relatives—
      1. holds or has held the position of a key managerial personnel or is or has been employee of the company or its holding, subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed;
        Provided that in case of a relative who is an employee, the restriction under this clause shall not apply for his employment during preceding three financial years. (Proviso inserted vide Companies (Amendment) Act, 2017, effective from 07-05-2018)
      2. is or has been an employee or proprietor or a partner, in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed, of—`
        1. a firm of auditors or company secretaries in practice or cost auditors of the company or its holding, subsidiary or associate company; or
        2. any legal or a consulting firm that has or had any transaction with the company, its holding, subsidiary or associate company amounting to ten per cent or more of the gross turnover of such firm;
      3. holds together with his relatives two per cent. or more of the total voting power of the company; or
      4. is a Chief Executive or director, by whatever name called, of any non-profit organisation that receives twenty-five per cent or more of its receipts from the company, any of its promoters, directors or its holding, subsidiary or associate company or that holds two per cent or more of the total voting power of the company; or
    5. who possesses such other qualifications as may be prescribed.
  37. Indian Depository Receipt” means any instrument in the form of a depository receipt created by a domestic depository in India and authorised by a company incorporated outside India making an issue of such depository receipts;
  38. (Omitted vide Companies (Amendment) Act, 2017 and notified on 09-02-2018)
  39. “key managerial personnel”, in relation to a company, means—
    1. the Chief Executive Officer or the managing director or the manager;
    2. the company secretary;
    3. the whole-time director;
    4. the Chief Financial Officer; (omitted vide Companies (Amendment) Act, 2017 and notified on 09-02-2018)
    5. 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;
    6. such other officer as may be prescribed
      (substituted vide Companies (Amendment) Act, 2017 and notified on 09-02-2018)
  40. “listed company” means a company which has any of its securities listed on any recognised stock 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 and Exchange Board, shall not be considered as listed companies.

    (Inserted by the Companies (Amendment) Act, 2020, Notification dated 28-09-2020, Amendment effective from 22-01-2021)

    Companies not to be considered as listed companies: -

    Rule 2A - Companies (Specification of Definitions Details) Rules, 2021


    ( Inserted by the Companies (Specifications of definitions details) Second Amendment Rules, 2021, Effective from 01-04-2021)

    For the purpose of the proviso to clause (52) of section 2 of the Act, the following classes of companies shall not be considered as listed companies, namely:-
    1. Public companies which have not listed their equity shares on a recognized stock exchange but have listed their –
      1. non-convertible debt securities issued on private placement basis in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008; or 
      2. non-convertible redeemable preference shares issued on private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013; or
    2. 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) Regulations, 2008;
    3. 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 as specified in sub-section (3) of section 23 of the Act.
  41. “manager” means an individual who, subject to the superintendence, control and 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;
  42. “managing director” means a director who, by virtue of the articles of a company or an agreement with the company or a resolution passed in its general meeting, or 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.

    Explanation.—For the purposes of this clause, the power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within the substantial powers of management;
  43. “member” in relation to a company, 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;
  44. “net worth” means the 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 (substituted vide Companies (Amendment) Act, 2017 and notified on 09-02-2018), 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;
  45. “officer” includes any director, manager or key managerial personnel or any 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;
  46. “officer who is in default”, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:—
    1. whole-time director;
    2. key managerial personnel;
    3. 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;
    4. 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;
    5. 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;
    6. 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;
    7. 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;
  47. "Official Liquidator" means an Official Liquidator appointed under sub-section (1) of section 359;
    Section 359 sub-section (1) reads:

    For the purposes of this Act, so far as it relates to the winding up of companies by the Tribunal, the Central Government may appoint as many Official Liquidators, Joint, Deputy or Assistant Official Liquidators as it may consider necessary to discharge the functions of the Official Liquidator.
  48. “One Person Company” means a company which has only one person as a member;
  49. “postal ballot” means voting by post or through any electronic mode;
  50. “private company” means a company having a minimum paid-up share capital as may be prescribed, 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—
      1. persons who are in the employment of the company; and
      2. 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;

      The Requirements of having minimum paid-up share capital shall not apply to Section 8 Company, vide Notification F.No. 1/2/2014-CL.I dated 5th June, 2015.

      Omitted words “of one lakh rupees or such higher paid-up,” by the Companies (Amendments) Act, 2015 vide Notification F.No. 1/6/2015-CL.V. dated 29th May, 2015 w.e.f. 29th May, 2015.

  51. “promoter” means a person—
    (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:
    Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;
  52. “prospectus” means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 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;
  53. “public company” means a company which—

    (a) is not a private company; and
    (inserted vide Companies (Amendment) Act, 2017 and notified on 09-02-2018)
    (b)
    has a minimum paid-up share capital , as may be prescribed:
    Provided that a company which is a subsidiary of a company, not being a private 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;

    The Requirements of having minimum paid-up share capital shall not apply to Section 8 Company, vide Notification F.No. 1/2/2014-CL.I dated 5th June, 2015.

    Omitted words “of five lakhs rupees or such higher paid-up,” by the Companies (Amendments) Act, 2015 vide Notification F.No. 1/6/2015-CL.V. dated 29th May, 2015 w.e.f. 29th May, 2015.
  54. “related party”, with reference to a company, means—
    1. a director or his relative;
    2. a key managerial personnel or his relative;
    3. a firm, in which a director, manager or his relative is a partner;
    4. a private company in which a director or manager [or his relative] is a member or director;
    5. 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;
    6. 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;
    7. 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;
    8. any body corporate which is—
      1. holding, subsidiary or an associate company of such company;
      2. subsidiary of a holding company to which it is also a subsidiary; or
      3. an investing company or the venturer of the company:

        Explanation
        .—For the purpose of this clause, “the investing company or the venturer of a company” means a body corporate whose investment in the company would result in the company becoming an associate company of the body corporate.

        (Substituted vide Companies (Amendment) Act, 2017 and notified on 09-02-2018)
    9. such other person as may be prescribed;

      Note : Sub-clause (viii) of clause (76) of Section 2 shall not apply with respect to Section 188, to a Private Company - vide Notification F. No. 1/2/2014-CL.I dated 5th June, 2015.

      Under Companies (Specification of definitions details) Rules, 2014, Sub-Rule 3, Related party - For the purposes of sub-clause (ix) of clause (76) of section 2 of the Act, a director other than an independent director, or key managerial personnel of the holding company or his relative with reference to a company, shall be deemed to be a related party.

  55. ‘‘relative’’, with reference to any person, means any one who is related to another, if—
    1. they are members of a Hindu Undivided Family;
    2. they are husband and wife; or
    3. one person is related to the other in such manner as may be prescribed;

      Under Companies (Specification of definitions details) Rules, 2014, Sub Rule 4

      List of relatives in terms of clause (77) of section 2


      A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:—
      1. Father: Provided that the term “Father” includes step-father.
      2. Mother: Provided that the term “Mother” includes the step-mother.
      3. Son: Provided that the term “Son” includes the step-son.
      4. Son’s wife.
      5. Daughter.
      6. Daughter’s husband.
      7. Brother: Provided that the term “Brother” includes the step-brother;
      8. Sister: Provided that the term “Sister” includes the step-sister.
  56. “remuneration” means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-Tax Act, 1961 (43 of 1961);
  57. “securities” means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
    Section 2(h) of Securities Contracts (Regulation) Act defines “securities” as follows:
    “Securities”include —
    1. shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate.
      1. derivatives
      2. units or any other instrument issued by any collective investment scheme to the investors in such schemes.
      3. security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
      4. units or any other such instrument issued to the investors under any mutual fund scheme.

        Explanation.— For the removal of doubts, it is hereby declared that “securities” shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a combined benefit risk on the life of the persons and investment by such persons and issued by an insurer referred to in clause (9) of section 2 of the Insurance Act, 1938.

      5. any certificate or instrument (by whatever name called) issued to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt, as the case may be.
    2. Government securities.
      1. such other instruments as may be declared by Central Government to be securities; and
    3. rights or interest in securities.
  58. ‘‘small company’’ means a company, other than a public company,—
    1. paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed [ w.e.f. 01-04-2021 ,Prescribed amount is Rs. 2 crores , see the note below ] which shall not be more than ten crore rupees ; and
    2. turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed [ w.e.f. 01-04-2021, Prescribed amount is Rs. 20 crores , see the note below ] which shall not be more than one hundred crore rupees:
      Provided that nothing in this clause shall apply to—
      1. a holding company or a subsidiary company;
      2. a company registered under section 8; or
      3. a company or body corporate governed by any special Act;
        The above substitutions has been made vide Companies (Amendment) Act, 2017 and notified on 07.05.2018
      Note :

      Rule 2(1)(t) of Companies (Specification of Definitions Details) Rules, 2014 :
      (Inserted vide Companies (Specification of Definitions Details) Amendment Rules, 2021, Amendment effective from 01-04-2021)

      For the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees two crores and rupees twenty crores respectively.
  59. “subsidiary company” or “subsidiary” in relation to any other company (that is to say the holding company), means a company in which the holding company—
    1. controls the composition of the Board of Directors; or
    2. exercises or controls more than one-half of the total voting power (Substituted vide Companies (Amendment) Act, 2017, amendment effective from 07-05-2018) either at its own or together with one or more of its subsidiary companies:

      Provided that such class or classes of holding companies as may be prescribed shall not have layers of subsidiaries beyond such numbers as may be prescribed. (Proviso notified on 20-09-2017)

      Explanation.—For the purposes of this clause,—

      1. 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;
      2. 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;
      3. the expression “company” includes any body corporate;
      4. “layer” in relation to a holding company means its subsidiary or subsidiaries;

        Note : Clarification vide General Circular No. 20 /2013 dated 27-12-2013 - shares held by a company or power exercisable by it in another company in a 'fiduciary capacity' shall not be counted for the purpose of determining the holding-subsidiary relationship in terms of the provision of section 2(87) of the Companies Act, 2013.
  60. “sweat equity shares” means such equity shares as are issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called;
  61. “total voting power” in relation to any matter, means the total number of votes which may be cast in regard to that 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;
  62. “turnover” means the gross amount of revenue recognised in the profit and loss account from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year;
    Substituted vide Companies (Amendment) Act, 2017 and notified on 09-02-2018
  63. “whole-time director” includes a director in the whole-time employment of the company;

    Under Companies (Specification of definitions details) Rules, 2014, Sub Rule 2(k) –

    “Executive Director” means a whole time director as defined in clause (94) of section 2 of the Act.
    1. "winding up" means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.
  64. words and expressions used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) shall have the meanings respectively assigned to them in those Acts.

Under Other Sections of the Companies Act, 2013

Section 23 – Explanation - "public offer" includes initial public offer or further public offer of securities to the public by a company, or an offer for sale of securities to the public by an existing shareholder, through issue of a prospectus.

Section 31 Explanation- For the purposes of this section, the expression "shelf prospectus" means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus.

Section 32Explanation - For the purposes of this section, the expression "red herring prospectus" means a prospectus which does not include complete particulars of the quantum or price of the securities included therein.

Section 42(2) Explanation I - "private placement" means any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum-application, which satisfies the conditions specified in this section.

(Section 42 has been completely substituted vide Companies (Amendment) Act, 2017 and the above definition of private placement is as per the substituted section, amendment effective from 07-08-2018)

Section 43 Explanation— For the purposes of this section,—

  1. ‘‘equity share capital’’, with reference to any company limited by shares, means all share capital which is not preference share capital;
  2. ‘‘preference share capital’’, with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to —
    1. payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income-tax; and
    2. repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company;
  3. capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely :—
    1. that in respect of dividends, in addition to the preferential rights to the amounts specified in sub-clause (a) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid;
    2. that in respect of capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in sub-clause (b) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid.

Section 96(2) Explanation– for the purposes of this sub-section, “National Holiday” means and includes a day declared as National Holiday by the Central Government.

Section 134(5)(e) Explanation – For the purposes of this clause, the term “internal financial controls” means the policies and procedures adopted by the company for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information;

Section 151 Explanation - For the purposes of this section “small shareholders” means a shareholder holding shares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.

Section 180 Explanation.—For the purposes of this clause,—

  1. undertaking shall mean an undertaking in which the investment of the company exceeds twenty per cent. of its net worth as per the audited balance sheet of the preceding financial year or an undertaking which generates twenty per cent. of the total income of the company during the previous financial year;
  2. the expression ―substantially the whole of the undertaking‖ in any financial year shall mean twenty per cent. or more of the value of the undertaking as per the audited balance sheet of the preceding financial year;

Section 180(1)(c)  Explanation.—For the purposes of this clause, the expression ― temporary loans means loans repayable on demand or within six months from the date of the loan such as short-term, cash credit arrangements, the discounting of bills and the issue of other short-term loans of a seasonal character, but does not include loans raised for the purpose of financial expenditure of a capital nature;

Section 185(2)Explanation - For the purposes of this section, the expression "any person in whom any of the director of the company is interested" means—

  1. any private company of which any such director is a director or member;

    [vide notification G.S.R. 08(E) dated 4th Jan. 2017: in case of a Specified IFSC Public company, for clause (c), the following clause shall be substituted, namely “(c) any private company of which any such director is a director or member in which director of the lending company do not have direct or indirect shareholding through themselves or through their relatives and a special resolution is passed to this effect ”]

    [vide notification G.S.R. 09(E) dated 4th Jan. 2017: in case of a Specified IFSC Private company, for clause (c), the following clause shall be substituted, namely “(c) any private company of which any such director is a director or member in which director of the lending company do not have direct or indirect shareholding through themselves or through their relatives and a special resolution is passed to this effect ”]

    Section 185 has been completely substituted but there is no further notification w.r.t. the above exemptions to IFSC public company and IFSC private company
  2. any body corporate at a general meeting of which not less than twenty five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or
  3. any body corporate, the Board of directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.
  4. (Section 185 has been completely substituted vide Companies (Amendment) Act, 2017 and the above explanation of persons in whom the director is interested is as per the substituted section, amendment effective from 07-05-2018)

Section 188Explanation – In this sub-section -

  1. the expression “office or place of profit” means any office or place—
    1. where such office or place is held by a director, if the director holding it receives from the company anything by way of remuneration over and above the remuneration to which he is entitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
    2. where such office or place is held by an individual other than a director or by any firm, private company or other body corporate, if the individual, firm, private company or body corporate holding it receives from the company anything by way of remuneration, salary, fee, commission, perquisites, any rent-free accommodation, or otherwise;
  2. the expression “arm’s length transaction” means a transaction between two related parties that is conducted as if they were unrelated, so that there is no conflict of interest.

Section 205Explanation– For the purpose of this section, the expression “secretarial standards” means secretarial standards issued by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980) and approved by the Central Government.

Section 447 Explanation.—For the purposes of this section—

  1. fraud in relation to affairs of a company or any body corporate, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in any manner, with intent to deceive, to gain undue advantage from, or to injure the interests of, the company or its shareholders or its creditors or any other person, whether or not there is any wrongful gain or wrongful loss;
  2. wrongful gain means the gain by unlawful means of property to which the person gaining is not legally entitled;
  3. wrongful loss means the loss by unlawful means of property to which the person losing is legally entitled.

Section 455Explanation – For the purposes of this section,—

  1. “inactive company” means a company which has not been carrying on any business or operation, or has not made any significant accounting transaction during the last two financial years, or has not filed financial statements and annual returns during the last two financial years;
  2. “significant accounting transaction” means any transaction other than—
    1. payment of fees by a company to the Registrar;
    2. payments made by it to fulfill the requirements of this Act or any other law;
    3. allotment of shares to fulfill the requirements of this Act; and
    4. payments for maintenance of its office and records.
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