Section 2 of Companies Act, 2013 – Definitions

  • Updated Till : March 27, 2017

SECTION 2. DEFINITIONS

[Clause (1), (3) to (6) (both inclusive), (8) to (12) (both inclusive), (14) to (22) (both inclusive), (24) to (28) (both inclusive), (29) [except sub clause (iv)], (30), (32) to (40) (both inclusive), (43) to (46) (both inclusive), (49) to (61) (both inclusive), (63) to (66) (both inclusive), (67) [except sub clause (ix)], (68) to (82) (both inclusive), (84), (86), (87) [except the proviso and explanation (d)], (88), (89), (90) to (95) (both inclusive) effective from 12th September, 2013.]

[Clause (2), (7), (13), (31), (41), (42), (47), (48), (62), (83), (85), and explanation (d) of clause (87), effective from 1st April, 2014.]

[Clause (29) (iv) effective from 18th May 2016 and Clause (23) effective from 15th December, 2016]

[Clause (67)(ix), proviso to clause (87) not notified]

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) “alter” or “alteration” includes the making of additions, omissions and substitutions;

(4) “Appellate Tribunal” means the National Company Law Appellate Tribunal constituted under section 410;

(5) “articles” means 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 of this Act;

(6) “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, “significant influence” means control of at least twenty per cent of total share capital, or of business decisions under an agreement;

Applicable Circular

Clarification with regard to holding of shares in a fiduciary capacity by associate company under section 2(6) of the Companies Act, 2013.

Circular No. 24/ 2014 dated 25th June, 2014

In continuation of the General circular No. 20/2013 dated 27th Dec, 2013, it is clarified that the 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.

(7) “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;

(8) “authorised capital” or “nominal capital” means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company;

(9) “banking company” means a banking company as defined in clause (c) of section 5 of the *Banking Regulation Act, 1949 (10 of 1949);

(10)Board of Directors” or “Board”, in relation to a company, means the collective body of the       directors of the company;

(11) body corporate” or “corporation” includes a company incorporated outside India, but does not include—

(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;

(12) book and paper” and “book or paper” include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form;

(13) books of account” includes records maintained in respect of—

(i) all sums of money received and expended by a company and matters in relation to which the receipts and expenditure take place;

(ii) all sales and purchases of goods and services by the company;

(iii) the assets and liabilities of the company; and

(iv) 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;

(14) branch office”, in relation to a company, means any establishment described as such by the company;

(15) called-up capital” means such part of the capital, which has been called for payment;

(16) charge” means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage;

(17) 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;

(18) Chief Executive Officer” means an officer of a company, who has been designated as such by it;

(19) Chief Financial Officer” means a person appointed as the Chief Financial Officer of a company;

(20) company” means a company incorporated under this Act or under any previous company law;

(21) company limited by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up;

(22) company limited by shares” means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them;

[10] [(23) “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;]

(24) 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;

Exemption

Section 2(24) shall not apply to a Section 8 Company, vide Notification No. 466(E) dated 5th June, 2015.

 (25) 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);

(26) contributory” means a person liable to contribute towards the assets of the company in the event of its being wound up;

(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;

(28) 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 (23 of 1959);

(29) court” means—

(i) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any district court or district courts subordinate to that High Court under sub-clause (ii);

(ii) the district court, in cases where the Central Government has, by notification, empowered any district court to exercise all or any of the jurisdictions conferred upon the High Court, within the scope of its jurisdiction in respect of a company whose registered office is situate in the district;

(iii) the Court of Session having jurisdiction to try any offence under this Act or under any previous company law;

[(iv) the Special Court established under section 435][1];

(v) any Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under this Act or under any previous company law;

(30) 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;

(31) 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;

(32) depository” means a depository as defined in clause (e) of sub-section (1) of section 2 of the *Depositories Act, 1996 (22 of 1996);

(33) derivative” means the derivative as defined in clause (ac) of section 2 of the *Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(34) director” means a director appointed to the Board of a company;

(35) dividend” includes any interim dividend;

(36) 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;

(37) 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;

(38) 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;

(39) financial institution” includes a scheduled bank, and any other financial institution defined or notified under the Reserve Bank of India Act, 1934 (2 of 1934);

(40) financial statement” in relation to a company, includes—

(i) a balance sheet as at the end of the financial year;

(ii) 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;

(iii) cash flow statement for the financial year;

(iv) a statement of changes in equity, if applicable; and

(v) 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 and dormant company, may not include the cash flow statement;

(41) 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 on an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year:

Provided further 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;

[12][Provided also that in case of a Specified IFSC private company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.]

[13] [Provided also that in case of a Specified IFSC public company, which is a subsidiary of a foreign company, the financial year of the subsidiary may be same as the financial year of its holding company and approval of the Tribunal shall not be required.]

Applicable Orders

Companies(Removal of Difficulties) Third Order, 2014

S.O. 1429(E).— In exercise of the powers conferred by sub-section (I) of Section 470 of the Companies Act,2013 (18 of 2013), the Central Government hereby makes the following Order, namely:-

1. (1) This Order may be called the Companies(Removal of Difficulties) Third Order, 2014.

(2) It shall come into force at once.

2. Jurisdiction, powers, authority and functions of Company Law Board.- Until the National Company Law Tribunal is constituted under section 408 of the Companies Act, 2013 (18 of 2013), the Board of Company Law Administration constituted in pursuance of sub-section(1) of Section 10E of the Companies Act, 1956 ( 1 of 1956) shall exercise the jurisdiction, powers, authority and functions under the first proviso to clause (41) of Section 2 of the Companies Act, 2013 (18 of 2013).

Applicable Notifications

As per Company Law Board (Fees on Applications and Petitions) Amendment Rules, 2014 vide G.S.R. 772(E) dated 3rd November, 2014 fee of Rs. 5,000 shall be applicable for application to Company Law Board for allowing any period other than April to March as financial year.

(42) foreign company” means any company or body corporate incorporated outside India which—

(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and

(b) conducts any business activity in India in any other manner.

(43) free reserves” means such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend:

Provided that—

(i) any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or

(ii) 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;

(44) 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;

(45) 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 a subsidiary company of such a Government company;

(46) holding company”, in relation to one or more other companies, means a company of which such companies are subsidiary companies;

(47) independent director” means an independent director referred to in sub-section (5) of section 149;

(48) 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;

(49) interested director” means a director who is in any way, whether by himself or through any of his relatives or firm, body corporate or other association of individuals in which he or any of his relatives is a partner, director or a member, interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into by or on behalf of a company;

(50) issued capital” means such capital as the company issues from time to time for subscription;

(51) key managerial personnel”, in relation to a company, means—

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the company secretary;

(iii) the whole-time director;

(iv) the Chief Financial Officer; and

(v) such other officer as may be prescribed;

(52) listed company” means a company which has any of its securities listed on any recognised stock exchange;

(53) 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;

(54) 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;

(55) member”, in relation to a company, means—

(i) 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;

(ii) 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;

(iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository;

(56) memorandum” means the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this Act;

(57) net worth” means the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, 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;

(58) notification” means a notification published in the Official Gazette and the expression “notify” shall be construed accordingly;

(59) 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;

(60) 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 the way imprisonment, fine or otherwise, means any of the foloowing officer of a company, namely:-

(i) whole-time director;

(ii) key managerial personnel;

(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;

Applicable Rules

Companies (Registration Offices and Fees) Rules, 2014

[Effective from 1st April, 2014]

Rule 12. Fees.—

* * *

(3) For the purpose of filing information to sub-clause (60) of section 2 of the Act, such information shall be filed in Form No. GNL.3 alongwith fee as applicable.

* * *

(61) Official Liquidator” means an Official Liquidator appointed under sub-section (1) of section 359;

(62) One Person Company” means a company which has only one person as a member;

(63) ordinary or special resolution” means an ordinary resolution, or as the case may be, special resolution referred to in section 114;

(64) paid-up share capital” or “share capital paid-up” means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued 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 of such shares, by whatever name called;

(65) postal ballot” means voting by post or through any electronic mode;

(66) prescribed” means prescribed by rules made under this Act;

(67) previous company law” means any of the laws specified below:—

(i) Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866);

(ii) the Indian Companies Act, 1866 (10 of 1866);

(iii) the Indian Companies Act, 1882 (6 of 1882);

(iv) the Indian Companies Act, 1913 (7 of 1913);

(v) the Registration of Transferred Companies Ordinance, 1942 (Ordinance 54 of 1942);

(vi) the Companies Act, 1956 (1 of 1956); and

(vii) any law corresponding to any of the aforesaid Acts or the Ordinances and in force—

(A) in the merged territories or in a Part B State (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913); or

(B) in the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), in so far as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968), in so far as other corporations are concerned;

(viii) the Portuguese Commercial Code, in so far as it relates to sociedades anonimas; and

[(ix) the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961);][2]

(68) private company” means a company having a minimum paid-up share capital [***][3]as may be prescribed, and which by its articles,—

(i) restricts the right to transfer its shares;

(ii) 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

(iii) prohibits any invitation to the public to subscribe for any securities of the company;

EXEMPTIONS

The requirement of having minimum paid-up share capital shall not apply to a Section 8 Company, vide Notification No. 466(E) dated 5th June, 2015.

Applicable Circular(s)

Clarification on the notification dated 12-9-2013 regarding

implementation of provisions of Companies Act, 2013 [Relevant extract]

General Circular No. 15/2013, dated 13-9-2013

The Companies Act, 2013 received the assent of the President on 29th August, 2013 and was notified in the Gazette of India on 30th August, 2013. Towards the proper implementation  of the Companies Act, 2013, first tranche of Draft Rules on 16 Chapters have been placed on the website of the Ministry on 9.9.2013 for inviting comments and objections/suggestions from the general public/stakeholders. Of the 16 Chapters, only 13 Chapters require specifying of Forms referred to in those Chapters. The draft Forms shall be placed on the website shortly.

2. Ministry of Corporate Affairs has also notified 98 sections for implementation of the provisions of the Companies Act, 2013 (the “said Act”) on 12.9.2013. Certain difficulties have been expressed by the stakeholders in the implementation of following provisions of the said Act. With a view to facilitate proper administration of the said Act, it is clarified that –

(i) Sub-section (68) of section 2: Registrar of Companies may register those Memorandum and Articles of Association received till 11.9.2013 as per the definition clause of the ‘private company’ under the Companies Act, 1956 without referring to the definition of ‘private company’ under the “said Act”.

(69) 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;

(70) 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;

(71) public company” means a company which—

(a) is not a private company;

(b) has a minimum paid-up share capital [***][4], 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;

(72) “public financial institution” means-

(i) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);

(ii) the Infrastructure Development Finance Company Limited, referred to in clause (vi) of sub-section (1) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act;

(iii) specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);

(iv) institutions notified by the Central Government under sub-section (2) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act;

(v) such other institution as may be notified by the Central Government in consultation with the Reserve Bank of India:

Provided that no institution shall be so notified unless—

(A) it has been established or constituted by or under any Central or State Act; or

(B) not less than fifty-one per cent. of the paid-up share capital is held or controlled 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;

(73) recognised stock exchange” means a recognised stock exchange as defined in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(74) register of companies” means the register of companies maintained by the Registrar on paper or in any electronic mode under this Act;

(75) Registrar” means 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;

(76) related party”, with reference to a company, means—

(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][5]is a member or director;

(v) a public company in which a director or manager is a director [and holds][6] 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) any company which is—

(A) a holding, subsidiary or an associate company of such company; or

(B) a subsidiary of a holding company to which it is also a subsidiary;

EXEMPTIONS

The above clause (viii) shall not apply with respect to section 188 to a private company vide Notification no. G.S.R. 464(E) dated 5th June, 2015.

The above clause (viii) shall not apply with respect to section 188 to a Specified IFSC public company vide Notification no. G.S.R. 08(E).dated 04th January, 2017.

(ix) such other person as may be prescribed;

Applicable Rules

Companies (Specification of Definitions Details) Rules, 2014

[Effective from 1st April, 2014]

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 ][7]or key managerial personnel of the holding company or his relative with reference to a company, shall be deemed to be a related party.

(77) relative”, with reference to any person, means any one who is related to another, if—

(i) they are members of a Hindu Undivided Family;

(ii) they are husband and wife; or

(iii) one person is related to the other in such manner as may be prescribed;

 

Applicable Rules

Companies (Specification of Definitions Details) Rules, 2014

[Effective from 1st April, 2014]

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.

(78) 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);

(79) Schedule” means a Schedule annexed to this Act;

(80) scheduled bank” means the scheduled bank as defined in clause (e) of section 2 of the *Reserve Bank of India Act, 1934 (2 of 1934);

(81) securities” means the securities as defined in clause (h) of section 2 of the *Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(82) Securities and Exchange Board” means the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(83) Serious Fraud Investigation Office” means the office referred to in section 211;

(84) share” means a share in the share capital of a company and includes stock;

(85) small company” means a company, other than a public company,—

(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount as may be prescribed which shall not be more than five crore rupees; [and][8]

(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty 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; or

(C) a company or body corporate governed by any special Act;

(86) subscribed capital” means such part of the capital which is for the time being subscribed by the members of a company;

(87) 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—

(i) controls the composition of the Board of Directors; or

(ii) exercises or controls more than one-half of the total share capital 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.][9]

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;

(c) the expression “company” includes any body corporate;

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

Applicable Circular(s)

Clarification with regard to holding of shares or exercising power in a fiduciary capacity — Holding and Subsidiary relationship under section 2(87) of the Companies Act, 2013

General Circular No. 20 /2013, dated 27-12-2013

This Ministry has received a number of representations consequent upon notifying section 2(87) of the Companies Act, 2013 which defines “subsidiary company” or “subsidiary”. The stakeholders have requested this Ministry to clarify whether shares held or power exercisable by a company in a ‘fiduciary capacity’ will be excluded while determining if a particular company is a subsidiary of another company. The stakeholders have further pointed out that in terms of section 4(3) of the Companies Act, 1956, such shares or powers were excluded from the purview of holding-subsidiary relationship.

  1. The matter has been examined in the Ministry and it is hereby clarified that the 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.

Clarification relating to incorporation of a company i.e. company Incorporated outside India,

General Circular No. 23/2014, dated 25-6-2014

Government has received references seeking clarity about the status of subsidiaries incorporated/to be incorporated by companies incorporated outside India. Attention has, in particular, been drawn to the absence of the deeming provision of sub-section (7) of section 4 of the Companies Act, 1956 in the Companies Act, 2013 (New Act).

The matter has been examined in the Ministry in the light of sections 2(68), 2(71) and 2(87) of the New Act and it is clarified that there is no bar in the new Act for a company incorporated outside India to incorporate a subsidiary either as a public company or a private company. An existing company, being a subsidiary of a company incorporated outside India, registered under the Companies Act, 1956, either as private company or a public company by virtue of section 4(7) of that Act, will continue as a private company or public company, as the case may be, without any change in the incorporation status of such company.

(88) 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;

(89) 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;

(90) Tribunal” means the National Company Law Tribunal constituted under section 408;

(91) turnover” means the aggregate value of the realisation of amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year;

(92) unlimited company” means a company not having any limit on the liability of its members;

(93) voting right” means the right of a member of a company to vote in any meeting of the company or by means of postal ballot;

(94) whole-time director” includes a director in the whole-time employment of the company;

Applicable Rules

Companies (Specification of Definitions Details) Rules, 2014

[Effective from 1st April, 2014]

Rule 2. Definitions.—(1). In these rules, unless the context otherwise requires,-

* * *

(k). “Executive Director” means a whole time director as defined in clause (94) of section 2 of the Act;

[11] [(94A) “winding up” means winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.]

(95) 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.

Applicable Rules

Companies (Specification of Definitions Details) Rules, 2014

[Effective from 1st April, 2014]

Rule 2. Definitions.—(1) In these rules, unless the context otherwise requires,—

(a) “Act” means the Companies Act, 2013 (18 of 2013);

(b) “Certifying Authority” for the purpose of Digital Signature Certificate means a person who has been granted a licence to issue a Digital Signature Certificate under section 24 of the Information Technology Act, 2000 (21 of 2000) and the Certified Filing Center (CFC) under the Act;

(c) “digital signature” means the digital signature as defined under clause (p) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(d) “Digital Signature Certificate” means a Digital Signature Certificate as defined under clause (q) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000);

(e) “Director Identification Number” (DIN) means an identification number allotted by the Central Government to any individual, intending to be appointed as director or to any existing director of a company, for the purpose of his identification as a director of a company;

Provided that the Director Identification Number (DIN) obtained by the individuals prior to the notification of these rules shall be the DIN for the purpose of the Companies Act, 2013:

Provided further that “Director Identification Number” (DIN) includes the Designated Partnership Identification Number (DPIN) issued under section 7 of the Limited Liability Partnership Act, 2008 (6 of 2009) and the rules made thereunder;

(f) “e-Form” means a form in the electronic form as prescribed under the Act or the rules made thereunder and notified by the Central Government under the Act;

(g) “electronic Mail” means the message sent, received or forwarded in digital form using any electronic communication mechanism that the message so sent, received or forwarded is storable and retrievable;

(h) “electronic mode”, for the purposes of clause (42) of section 2 of the Act, means carrying out electronically based, whether main server is installed in India or not, including, but not limited to—

(i) business to business and business to consumer transactions, data interchange and other digital supply transactions;

(ii) offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India;

(iii) financial settlements, web based marketing, advisory and transactional services, database services and products, supply chain management;

(iv) online services such as telemarketing, telecommuting, telemedicine, education and information research; and

(v) all related data communication services,

whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise;

(i) “electronic record” means the electronic record as defined under clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000;

(j) “electronic Registry” means an electronic repository or storage system of the Central Government in which the information or documents are received, stored, protected and preserved in electronic form;

(k) “Executive Director” means a whole time director as defined in clause (94) of section 2 of the Act;

(l) “Fees” means the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014;

(m) “Form” means a form set forth in the Act or the rules made thereunder which shall be used for the matter to which it relates;

(n) “Pre-fill” means the automated process of data input by the computer system from the database maintained in electronic registry of the Central Government;

(o) “Registrar’s Front Office” means an office maintained by the Central Government or an agency authorised by it to facilitate e-filing of documents into the electronic registry and their inspection and viewing;

(p) “Regional Director” means the person appointed by the Central Government in the Ministry of Corporate Affairs as a Regional Director;

(q) “section” means the section of the Act;

(r) “Total Share Capital”, for the purposes of clause (6) and clause (87) of section 2, means the aggregate of the—

(a) paid-up equity share capital; and

(b) convertible preference share capital;

(s) For the purposes of clause (d) of sub-section (1) of Section 164 and clause (f) of sub-section (1) of section 167 of the Act, “or otherwise” means any offence in respect of which he has been convicted by a Court under this Act or the Companies Act, 1956.

(2) The words and expressions used in these rules but not defined and defined in the Act or in (i) the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or (ii) the Securities and Exchange Board of India Act, 1992 (15 of 1992) or (iii) the Depositories Act, 1996 (22 of 1996) or (iv) the Information Technology Act, 2000 (21 of 2000) or rules and regulations made thereunder shall have the meanings respectively assigned to them under the Act or those Acts.

[1] Not Yet Notified

[2] Sec 2(67) (ix) not notified.

[3] Omitted words “of one lakh rupees or such higher paid-up share capital” by the Companies (Amendment) Act, 2015 vide Notification No. F No. 1/6/2015-CL.V dated 29th May 2015.

[4]Omitted words “of five lakh rupees or such higher paid-up share capital” by the Companies (Amendment) Act, 2015 vide Notification No. F No. 1/6/2015-CL.V dated 29th May 2015.

[5] Inserted by Companies (Removal of Difficulties) Sixth Order, 2014 vide SO. 1894(E) dated 24th July, 2014.

[6] Substituted for the words “or holds” by Companies (Removal of Difficulties) Fifth Order, 2014 vide S.O. 1820(E) dated 9th July, 2014.

[7] Inserted by Companies (Specification of Definition Details) Amendement Rules, 2014 vide Notification No. G.S.R. 507(E) dated 17th July, 2014.

[8] Substituted for “or” by the Companies (Removal of Difficulties) Order, 2015 vide S.O. 504 (E) dated 13th February, 2015.

[9] Proviso to Section 2(87) not notified.

[10] Substituted by the Insolvency and Bankruptcy Code, 2016,(31 of 2016), S. 255 & Eleventh Schedule. Prior to substitution it read as under:—

“Company Liquidator”, in so far as it relates to the winding up of a company, means a person appointed by—

(a)   the Tribunal in case of winding up by the Tribunal; or

(b)   the company or creditors in case of voluntary winding up, as a Company Liquidator from a panel of professionals maintained by the Central Government under sub-section (2) of section 275;”

[11] Inserted by the Insolvency and Bankruptcy Code, 2016,(31 of 2016), S. 255 & Eleventh Schedule.

[12] Inserted vide Notification no. G.S.R. 9(E).dated 04th January, 2017.

[13] Inserted vide Notification no. G.S.R. 08(E).dated 04th January, 2017.

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