Companies Act 2013 in a Nutshell
- Blog|Company Law|
- 22 Min Read
- By Taxmann
- |
- Last Updated on 24 November, 2023
Latest from Taxmann
Table of Contents
- J.J. Irani Report on Company Law
- Companies Act, 2013 and Reading Methodology and its Legal Aura
- Meaning and Characteristics of a Company
- Frequently Asked Questions
- Exceptions to the principle of limited liability
- Distinction between Partnership Firm and Company
- Distinction between a Hindu Undivided Family and Company
- Distinction between Limited Liability Partnership (LLP) and Company
- Doctrine of Lifting of or piercing the Corporate Veil
- Applicability of Companies Act, 2013 (Section 1 of Companies Act, 2013)
- Key Definitions and Key Concepts
Check out Taxmann's Company Law which provides a 'topic-wise' tabular presentation of the subject matter. Easy to understand language is used throughout the book for easy learning. It also includes examples, comments & explanatory notes for complicated provisions. CS Executive | New Syllabus | June 2022 Exams
1. J.J. Irani Report on Company Law
Dr. J J Irani Expert Committee on Company Law had submitted its report charting out the road map for a flexible, dynamic and user-friendly new company law.
A Committee was constituted on 2nd December, 2004 under the Chairmanship of Dr. J J Irani, the then Director, Tata Sons.
The Expert Committee had recommended that private and small companies need to be given flexibilities and freedom of operations and compliance at a low cost. Companies with higher public interest should be subject to a stricter regime of Corporate Governance. Government companies and public financial institutions should be subject to similar parameters with respect to disclosures and Corporate Governance as other companies are subjected to.
The Report of the Committee had sought to bring in multifarious visionary concepts which if accepted and acted upon would really simplify the voluminous and cumbersome Companies Act in the country.
Dive Deeper:
FAQs on Companies Act 2013
The Journey of Companies Act from 1956 to 2021
2. Companies Act, 2013 and Reading Methodology and its Legal Aura
2.1 The Companies Act, 2013
The Companies Act, 2013 received the assent of the President on August 29, 2013 and was notified in the Gazette of India on 30.08.2013.
The Companies Act, 2013 introduced new concepts supporting enhanced disclosure, accountability, better board governance, better facilitation of business and so on. It includes associate company, one person company, small company, dormant company, independent director, women director, resident director, special court, secretarial standards, secretarial audit, class action, registered valuers, rotation of auditors, vigil mechanism, corporate social responsibility, E-voting etc.
The Companies Act, 2013 has undergone amendments four times so far:
-
- The Companies (Amendment) Act, 2015,
- The Insolvency and Bankruptcy Code, 2016,
- The Companies (Amendment) Act, 2017,
- The Companies (Amendment) Act, 2019 and
- The Companies (Amendment) Act, 2020 amended the Companies Act, 2013.
The Ministry has come out with several circulars, notifications, Orders and various amendment rules to facilitate better and smooth implementation of the Act.
2.2 Reading Methodology and its Legal Aura
This whole ecosystem is called the Companies Law and should be read collectively and comprehensive as described below:
-
- Companies Act, 2013 is not a standalone piece of legislation but a complete ecosystem as it contains Orders, Rules, Notifications and Circulars. One should read each section of the Act, with relevant Rule, Notification and Circular.
- Act is a superior authority in law passed by the Legislature as Notifications and Rules are notified by the Executive under the powers derived from the Act itself.
- Wherever a section of the Companies Act, 2013 use words “as may be prescribed” it is an indication the Legislature has delegated powers to the Executive on that particular point as section 469 empowers the Central Government to make rules for sections which do not delegate such powers to the Central Government.
- Rules cannot change policy framework in any manner and cannot override substantial provision of the section empowering the Rules.
- Exemption Notifications and Schedules deals with the policy framework of the law; rules deals with the procedures.
- The Circulars are issued by the Department interpreting a particular provision of the Act or the Rule in certain circumstances. The Companies Act, 2013 does not empower the Department to issue circular.
- Secretarial Standards are standards prepared by Institute of Company Secretaries of India to standardise secretarial practices under the Companies Act and other areas related to Secretarial Practices.
- As per provisions of section 118(10) mandates that every company shall observe secretarial standards with respect to general and Board meetings. Further, by virtue of Explanation to section 205(1), secretarial standards issued by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved by the Central Government are part of law itself.
3. Meaning and Characteristics of a Company
3.1 Meaning of a Company
The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it originally referred to an association of persons who took their meals together.
Under Law a company is a corporate body and a legal person having status and personality distinct and separate from the members constituting it.
In the legal sense, a company is an association of both natural and artificial persons and is incorporated under the existing law of a country.
3.2 “Company” Vs. “Corporation”
An incorporated company owes its existence either to a Special Act of Parliament or to company law. Public corporations like Life Insurance Corporation of India, SBI etc., have been brought into existence through special Acts of Parliament, whereas companies like Tata Steel Ltd., Reliance Industries Limited have been formed under the Company law i.e. Companies Act, 1956 which is replaced by the Companies Act, 2013.
The word ‘company’ is derived from the Latin word (Com=with or together; panis =bread), and it originally referred to an association of persons who took their meals together. On other hand, the word ‘corporation’ is derived from the Latin term ‘corpus’ which means ‘body’. Accordingly, ‘corporation’ is a legal person created by a process other than natural birth.
The term “Company” is defined under section 2(20) of the Companies Act, 2013, “company” means a company incorporated under this Act or under any previous company law. On the other hand, the term “Corporation” is defined under section 2(11) of the Companies Act, 2013, “corporation” includes a company incorporated outside India but does not include:
-
- a co-operative society registered under any law relating to co-operative societies; and
- any other body corporate (not being a company as defined in this Act), which the Central Government may by notification specify in this behalf.
In nutshell, the term “Corporation” or Body Corporate” is wider than the word “Company”.
3.3 Characteristics of a Company
1. Corporate Personality
A company incorporated under the Act is vested with a corporate personality so it bears its own name, acts under name, may has a seal of its own and its assets are separate and distinct from those of its members. It is a different ‘person’ from the members who compose it.
Its shareholders are its notional owners and do not own anything in it except ownership of shares issued and they can be its creditors simultaneously.
A shareholder cannot be held liable for the acts of the company even if he holds virtually the entire share capital.
The shareholders are not agents of the company and so they cannot bind by their acts.
Thus, it is capable of owning property, incurring debts, borrowing money, having a bank account, employing people, entering into contracts and suing or being sued in the same manner as an individual.
Note: Refer Relevant Case Decided Case Laws on Corporate Personality in Topic 1.12:
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- Salomon v. Salomon and Co. Ltd., (1897);
- Shiromani Gurdwara Prabandhak Committee v. Shri Sam Nath Dass AIR 2000;
- Lee v. Lee’s Air Farming Ltd. (1961);
- New Horizons Ltd. v. Union of India, (AIR 1994 Delhi 126).
2. Company as an artificial person
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- A Company is an artificial person created by law.
- Company is not a human being but it acts through human beings.
- Company is considered as a legal person who can enter into contracts, possess properties in its own name, sue and can be sued by others etc.
- Company is called an artificial person because it is invisible, intangible, existing only in the contemplation of law. Also, company is capable of enjoying rights and being subject to duties.
Note: Refer Relevant Case Decided Case Laws on Company as an artificial person in Topic 1.12:
-
- Union Bank of India v. Khader International Construction and Other.
3. Company is not a citizen
The company being a legal person is not a citizen under the Citizenship Act, 1955 or the
Constitution of India. Section 2(f) of Citizenship Act, 1955 expressly excludes a company or association or body of individuals from citizenship. Certain fundamental rights enshrined in the Constitution for protection of “person”, e.g., right to equality (Article 14) etc. are also available to company.
Note: Refer Relevant Case Decided Case Laws on Company is not a citizen in Topic 1.12:
-
- R.C. Cooper v. Union of India, AIR 1970 SC 564.
- Bennet Coleman Co. v. Union of India, AIR 1973 SC 106.
4. Company has Nationality and Residence
As per judicial decisions it was established that a company cannot be a citizen yet it has nationality, domicile and residence. A limited company is capable of having a domicile and its domicile is the place of its registration and that domicile clings to it throughout its existence. Note: Refer Relevant Case Decided Case Laws on “Company has Nationality and Residence “in Topic 1.12: Tulika v. Parry and Co., (1903).
5. Separate Management
The members may derive profits without being burdened with the management of the company. They do not have effective and intimate control over its working and they elect their representatives as Directors on the Board of Directors of the company to conduct corporate functions through managerial personnel employed by them.
6. Limited Liability
The company being a separate person is the owner of its assets and bound by its liabilities. The Members even as a whole are neither the owners of the company’s undertakings nor liable for its debts.
A shareholder is liable to pay the balance, if any, due on the shares held by him, when called upon to pay and nothing more, even if the liabilities of the company far exceed its assets. This means that the liability of a member is limited. Also, there are few exceptions to the principle of limited liability. (For Exceptions refer Topic 1.4 of this Chapter on Next Page).
Note: Refer Relevant Case Decided Case Laws on Limited Liability in Topic 1.12:
-
- Buckley, J. in Re. London and Globe Finance Corporation, (1903).
7. Perpetual Succession
Perpetual succession, means that the membership of a company may keep changing from time to time, but that shall not affect its continuity.
A company being a separate legal person is unaffected by death or departure of any member and it remains the same entity, despite total change in the membership.
8. Separate Property
A company being a legal person and entirely distinct from its members is capable of owning, enjoying and disposing of property in its own name.
Note: Refer Relevant Case Decided Case Laws on Separate Property in Topic 1.12:
-
- Mrs. Bacha F. Guzdar v. The Commissioner of Income Tax, Bombay, A.I.R. 1955.
9. Transferability of Shares
The capital of a company is divided into parts, called shares. The shares are said to be movable property and subject to certain conditions, freely transferable so that no shareholder is permanently or necessarily wedded to a company. However there are restrictions with respect to transferability of shares of a Private Limited Company.
10. Capacity to sue and be sued
A company being a body corporate can sue and be sued in its own name. Note: Refer Relevant Case Decided Case Laws on Capacity to sue and be sued in Topic 1.12:
-
- Floating Services Ltd. v. MV San Fransceco Dipaloa (2004).
- TVS Employees Federation v. TVS and Sons Ltd., (1996).
- Lalit Surajmal Kanodia v. Office Tiger Database Systems India (P.) Ltd., (2006).
11. Contractual Rights
A company, being a legal entity different from its members, can enter into contracts for the conduct of the business in its own name. A shareholder cannot enforce a contract made by his company; he is neither a party to the contract, nor be entitled to the benefit derived from of it, as a company is not a trustee for its shareholders.
12. Limitation of Action
A company cannot go beyond the power stated in its Memorandum of Association. The actions and objects of the company are limited within the scope of its Memorandum of Association.
13. Voluntary Association for Profit
A company is a voluntary association for profit. It is formed for the accomplishment of some stated goals and whatsoever profit is gained is divided among its shareholders or saved for the future expansion of the company.
Exception: Only Section 8 company can be formed with no profit motive
14. Termination of Existence
A company, being an artificial juridical person, does not die a natural death. It is created by law, carries on its affairs according to law and effaced by law.
Dive Deeper:
Key Terms of Companies Act 2013
Amendments to India’s Companies Act, 2013
4. Frequently Asked Questions
FAQ 1. What is meant by “Company is not a citizen”?
Ans.
The company being a legal person is not a citizen under the Citizenship Act, 1955 or the Constitution of India.
-
- Section 2(f) of Citizenship Act, 1955 expressly excludes a company or association or body of individuals from citizenship. Certain fundamental rights enshrined in the Constitution for protection of “person”, e.g., right to equality (Article 14) etc. are also available to company.
- As per decided case Law, R.C. Cooper v. Union of India, AIR 1970 SC 564: The Supreme Court held that where the legislative measures directly touch the company of which the petitioner is a shareholder, he can petition on behalf of the company, if by the impugned action, his rights are also infringed. In that case, the court entertained the petition under Article 32 of the Constitution at the instance of a director as shareholder of a company and granted relief. Therefore, it is noted that an individual’s right is not lost by reason of the fact that he is a shareholder of the company.
- As per decided case law, Bennet Coleman Co. v. Union of India, AIR 1973 SC 106: The Supreme Court stated that it is now clear that the Fundamental Rights of shareholders as citizens are not lost when they associate to form a company. When their Fundamental Rights as shareholders are impaired by State action, their rights as shareholders are protected. The reason is that the shareholders’ rights are equally and necessarily affected if the rights of the company are affected.
FAQ 2. Whether Company has Nationality and Residence?
Ans.
As per judicial decisions it was established that a company cannot be a citizen yet it has nationality, domicile and residence. A limited company is capable of having a domicile and its domicile is the place of its registration and that domicile clings to it throughout its existence.
As per decided case law Tulika v. Parry and Co., (1903); it was observed that A joint stock company resides where its place of incorporation is where the meetings of the whole company or those who represent it are held and where its governing body meets in bodily presence for the purposes of the company and exercises the powers conferred upon it by statute and by the Articles of Association.
5. Exceptions to the principle of limited liability
If at any time the number of members of a company is reduced below seven in the case of a public company and below two in the case of a private company and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than seven members or two members (as the case may be) shall be severally liable for the payment of the whole debts of the company contracted during that time and may be severally sued therefor. [Section 3A of Companies Act, 2013]
When the company is incorporated as an Unlimited Company. [Section 3(2)(c) of the Companies Act, 2013].
Where in the course of winding up it appears that any business of the company has been carried on with an intent to defraud creditors of the company or any other persons or for any fraudulent purpose, the Tribunal may declare the persons who were knowingly parties to the carrying on of the business in the manner aforesaid as personally liable without limitation of liability for all or any of the debts/liabilities of the company. [Section 339 of Companies Act, 2013].
Where it is proved that a prospectus has been issued with intent to defraud the applicants for the securities of a company or any other person or for any fraudulent purpose, every person who was a director at the time of issue of the prospectus or has been named as a director in the prospectus or every person who has authorised the issue of prospectus or every promoter or a person referred to as an expert in the prospectus shall be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by any person who subscribed to the securities on the basis of such prospectus.[Section 35(3) of Companies Act, 2013]
Where a company fails to repay the deposit or part thereof or any interest thereon referred to in section 74 within the time specified or such further time as may be allowed by the Tribunal and it is proved that the deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, every officer of the company who was responsible for the acceptance of such deposit shall, without prejudice to other liabilities, also be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by the depositors.[ Section 75(1) of Companies Act, 2013].
Where the report made by an inspector states that fraud has taken place in a company and due to such fraud any director, key managerial personnel other officer of the company or any other person or entity, has taken undue advantage or benefit, whether in the form of any asset, property or cash or in any other manner, the Central Government may file an application before the Tribunal for appropriate orders with regard to disgorgement of such asset, property, or cash and also for holding such director, key managerial personnel, officer or other person liable personally without any limitation of liability. [Section 224(5) of Companies Act, 2013].
6. Distinction between Partnership Firm and Company
|
Basis of |
Partnership Firm |
Company |
| Separate Legal Entity | A partnership firm is not distinct from the several persons who form the partnership. | A company is a distinct legal person. |
| Entity’s Agent | Partners are the agents of the firm. A partner can dispose of the property and incur liabilities as long as he acts in the course of the firm’s business. | Members of a company are not its agents. A member of a company cannot dispose of the property and incur liabilities in the course of the company’s business. |
| Right to contract | A partner cannot contract with his firm. | A member can contract with his company. |
| Transfer Rights | A partner cannot transfer his share and make the transferee a member of the firm without the consent of the other partners. | A company’s share can ordinarily be transferred. |
| Perpetual Succession | The death or insolvency of a partner dissolves the firm unless otherwise provided. | A company has perpetual succession, i.e. the death or insolvency of a shareholder or all of them does not affect the life of the company. |
| Auditing of Accounts | The accounts of a firm are audited at the discretion of the partners. | A company is required to have its accounts audited annually by a chartered accountant. |
| Partner’s/Sharehold-er’s Liability | A partner’s liability is always unlimited. | The liability of shareholder may be limited either by shares or a guarantee. |
7. Distinction between a Hindu Undivided Family and Company
| Basis of Distinction |
Hindu Undivided Family |
Company |
| Homogenous/Heterogeneous Members | A Hindu Undivided Family consists of homogenous (unvarying) members since it consists of members of the joint family itself | A company may consists of homogenous or heterogeneous (varied or diverse) members. |
| Karta | In a Hindu Undivided Family business the Karta (manager) has the sole authority to contract debts for the purpose of the business, other coparceners cannot do so. | There is no such system in a company. |
| Membership by virtue of Birth | A person becomes a member of a Hindu Undivided Family by virtue of birth. | There is no provision to that effect in the company. |
| Compulsory/ Voluntary Registration | No registration is compulsory for carrying on business for gain by a Hindu Undivided Family even if the number of members exceeds twenty. | Registration of a company is compulsory. |
8. Distinction between Limited Liability Partnership (LLP) and Company
A basic difference between an LLP and a company lies in that the internal governance structure of a company is regulated by statute (i.e. Companies Act) whereas for an LLP it would be by a contractual agreement between partners.
The management-ownership divide inherent in a company is not there in a limited liability partnership. LLP have more flexibility as compared to a company and have lesser compliance requirements as compared to a company.
9. Doctrine of Lifting of or piercing the Corporate Veil
9.1 Meaning of Doctrine of lifting of or piercing the corporate veil
The separate personality of a company is a statutory privilege and it must be used for legitimate business purposes only.
Where a fraudulent and dishonest use is made of the legal entity, the individuals concerned will not be allowed to take shelter behind the corporate personality. The Court will look behind the corporate entity and take action as though no entity separate from the members existed and make the members or the controlling persons liable for debts and obligations of the company.
Thus, the Court will break through the corporate shell and apply the principle/doctrine of lifting of or piercing the corporate veil.
9.2 Statutory Recognition of Lifting of Corporate Veil
The Companies Act, 2013 itself contains some provisions i.e. sections 7(7), 251(1) and 339 which lift the corporate veil to reach the real forces of action namely:
-
- Section 7(7) deals with punishment for incorporation of company by furnishing false information;
- Section 251(1) deals with liability for making fraudulent application for removal of name of company from the register of companies, and
- Section 339 deals with liability for fraudulent conduct of business during the course of winding up.
9.3 Lifting of Corporate Veil under Judicial Interpretation
The Courts have found it necessary to disregard the separate personality of a company in the following situations:
-
- Where the corporate veil has been used for commission of fraud or improper conduct. In such a situation, Courts have lifted the veil and looked at the realities of the situation. [Refer decided case law Jones v. Lipman, (1962) as discussed in Topic 1.12]
- Where a corporate facade is really only an agency instrumentality. [Refer decided case law Re. R.G. Films Ltd. (1953) as discussed in Topic 1.12]
- Where the conduct conflicts with public policy, courts lifted the corporate veil for protecting the public policy. [Refer decided case law Connors Bros. v. Connors (1940) as discussed in Topic 1.12]
- A company will be regarded as having enemy character, if the persons having de facto control of its affairs are resident in an enemy country or they may be are acting under instructions from or on behalf of the enemy. [Refer decided case law Daimler Co. Ltd. v. Continental Tyre & Rubber Co. as discussed in Topic 1.12]
- Where it was found that the sole purpose for which the company was formed was to evade taxes the Court will ignore the concept of separate entity and make the individuals concerned liable to pay the taxes which they would have paid but for the formation of the company. [Refer decided case law Re. Sir Dinshaw Maneckjee Petit, A.I.R. 1927 as discussed in Topic 1.12]
- Avoidance of welfare legislation is as common as avoidance of taxation and the approach in considering problems arising out of such avoidance has necessarily to be the same and, therefore, where it was found that the sole purpose for the formation of the new company was to use it as a device to reduce the amount to be paid by way of bonus to workmen, the Supreme Court upheld the piercing of the veil to look at the real transaction. [Refer decided case law the Workmen Employed in Associated Rubber Industries Limited, Bhavnagar v. The Associated Rubber Industries Ltd., Bhavnagar and another, A.I.R. 1986 as discussed in Topic 1.12]
- Where it is found that a company has abused its corporate personality for an unjust and inequitable purpose, the court would not hesitate to lift the corporate veil. Further, the corporate veil could be lifted when acts of a corporation are allegedly opposed to justice, convenience and interests of revenue or workmen or are against public interest.
9.4 Lifting the Corporate Veil of Small Scale Industry
Where small scale industries were given certain exemptions and the company owning an industry was controlled by some group of persons or companies, it was held that it was permissible to lift the veil of the company to see whether it was the subsidiary of another company and, therefore, not entitled to the proposed exemptions.
9.5 Use of Corporate Veil for Hiding Criminal Activities
Where the defendant used the corporate structure as a device or facade to conceal his criminal activities i.e. evasion of customs and excise duties payable by the company. The Court could lift the corporate veil and treat the assets of the company as the realisable property of the shareholder.
10. Applicability of Companies Act, 2013 (Section 1 of Companies Act, 2013)
According to section 1 of the Companies Act, 2013, the Act extends to whole of India and the provisions of the Act shall apply to the following:
-
- companies incorporated under this Act or under any previous company law;
- insurance companies, except insofar 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 insofar as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949;
- companies engaged in the generation or supply of electricity, except insofar as the said provisions are inconsistent with the provisions of the Electricity Act, 2003;
- any other company governed by any special Act for the time being in force, except insofar as the said provisions are inconsistent with the provisions of such special Act;
- 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.
Note: Companies Act, 2013 is not applicable to unincorporated companies.
11. Key Definitions and Key Concepts
11.1 Illegal Association
Section 464 of the Companies Act, 2013 read with Rule 10 of the Companies (Miscellaneous) Rules, 2014, no association or partnership consisting of more than 50 persons shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association or partnership or by the individual members thereof unless it is registered as a company under this Act or is formed under any other law for the time being in force. The maximum number of persons which may be prescribed under this section shall not exceed 100.
Non-applicability of Illegal Association: Section 464 of the Act does not apply to –
-
- In the case of a Hindu undivided family carrying on any business whatever may be the number of its members.
- In case of an association or partnership, if it is formed by professionals who are governed by special Acts.
11.2 Dormant Company
As per provisions of section 455(1) of Companies Act, 2013, where a company is formed and registered under this Act for a future project or to hold an asset or intellectual property and has no significant accounting transaction, such a company or an inactive company may make an application to the Registrar in such manner as may be prescribed for obtaining the status of a dormant company.
Note 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.
Note 2: “Significant accounting transaction” means any transaction other than-
-
- payment of fees by a company to the Registrar;
- payments made by it to fulfil the requirements of this Act or any other law;
- allotment of shares to fulfil the requirements of this Act; and
- payments for maintenance of its office and records.
11.3 Key Definitions
| Section 2(6) | Associate Company:
“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. |
| Note 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.
Note 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. |
|
| Example 1: XYZ Ltd. is subsidiary of ABC Ltd. ABC Ltd. having control of 50 per cent of total voting power in XYZ Ltd. In the given situation, XYZ Ltd. is not considered as an associate company inspite of the fact that ABC Ltd. having “significant influence” in XYZ Ltd. but as subsidiary of ABC Ltd. Thus, XYZ Ltd. (subsidiary company) of the company having such influence is not considered as “Associate Company” of ABC Ltd.
Example 2: ABC Ltd. having control of 40 per cent of total voting power. In the given situation, XYZ Ltd. is considered as an associate company of ABC Ltd.; because ABC Ltd. having “significant influence” in XYZ Ltd. 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. Thus, XYZ Ltd. having such influence is considered as “Associate Company” of ABC Ltd. |
|
| Section 2(9) | Banking Company: “Banking company” means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949. |
| Section 2(20) | Company: “Company” means a company incorporated under this Act or under any previous company law. |
| Section 2(21) | Company limited by guarantee: “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. |
| Section 2(22) | Company limited by shares: “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. |
| Section 2(39) | Financial Institution: “Financial institution” includes a scheduled bank and any other financial institution defined or notified under Reserve Bank of India Act, 1934. |
| Section 2(42) | Foreign Company: “Foreign Company” means any company or body corporate incorporated outside India which—
|
| Rule 3 of the Companies (Registration Offices & Fees) Rules, 2014: Business Activity | |
Every company including foreign company which carries out its business through electronic mode, whether its main server is installed in India or outside India, which—
whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise shall be deemed to have carried out business in India. |
|
| Section 2(45) | Government Company: “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. |
| Note: The “paid-up share capital” shall be construed as “total voting power”, where shares with differential voting rights have been issued. | |
| Section 2(46) | Holding Company: “Holding company” in relation to one or more other companies means a company of which such companies are subsidiary companies. |
| Note: The expression “company” includes any body corporate. | |
| Section 2(47) | Independent Director: “Independent director” means an independent director referred to in section 149(6) of Companies Act, 2013. |
| Section 2(51) | Key Managerial Personnel: “Key managerial personnel” in relation to a company means—
|
| Section 2(52) | Listed Company: “Listed company” means a company which has any of its securities listed on any recognised stock exchange. |
| Note: 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. | |
| Section 2(59) | Officer: “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. |
| Section 2(68) | Private Company: “Private Company” means a company having a minimum paid-up share capital 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; iii. prohibits any invitation to the public to subscribe for any securities of the company. |
| Section 2(71) | Public Company: “Public Company” means a company which—
Providedthat 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 |
| Section 2(85) | Small Company: “Small company” means a company, other than a public company—
Provided that nothing in this clause shall apply to—
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| Section 2(87) | Subsidiary Company: “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 voting power 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. |
| Note 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.
Note 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. Note 3: The expression “company” includes any body corporate. Note 4: “Layer” in relation to a holding company means its subsidiary or subsidiaries |
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