THE COMPANIES ACT, 2013

THE COMPANIES ACT,2013

Overview: Definitions

By Ashwani Jaiswal

DisclaimerThe content of this presentation is meant

for informational purposes only.

The views expressed and the comments or statements made herein are those of the presenter.

Out of 95 definitions enacted in the companies act 2013, a few have been covered in this presentation.

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Areas to be covered

Introduction of new definitions

Major changes in the important definitions

References of the key definitions

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Organisation

Companies Act 2013

29 Chapters

470 Sections

7 Schedules

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Accounting StandardsSection 2(2)Accounting standards referred to in

Section 133

Section 133:- Prescribed by Central Government- Recommended by ICAI- In consultation with and after examination by NFRA

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NFRANATIONAL FINANCIAL REPORTING AUTHORITY

This authority shall:Recommend, Monitor and EnforceCompliance of Accounting and Auditing Standards

Make recommendation to CG onFormulation and Laying Down ofAccounting and Auditing Policies and Standardsfor adoption by companies

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NFRANATIONAL FINANCIAL REPORTING AUTHORITY

Power to investigate

Powers of Civil Court

Imposing penalty and debarring members(including Chartered Accountants) T

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Financial YearSection 2(41)Can only be April to March

In case company incorporated after 1st January Financial year will end on 31st March of the Following Year

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Financial Year

In case holding or subsidiary is a foreign company

AndRequired to follow different financial year, tribunal may allow any F.Y.

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Financial StatementSection 2(40)Balance SheetProfit and Loss / Income & ExpenditureCash Flow StatementA Statement of Change in EquityExplanatory Note

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Private CompanySection 2(68)Minimum Paid-up Capital Rs. 1 Lakh or such

higher Paid-up capital as may be prescribed.

And which by its articles-- Restricts the right to transfer its shares;- Limits the number of its members to 200

(except OPC)- Prohibits any invitation to the public to subscribe for any securities of the company.

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Private Company

“Securities” as defined in section 2(81) of the companies act 2013 and section 2(h) of the SCRA, 1956.

Shares, scrips, stocks, bonds, debentures, debenture stock , derivative, units, government securities, right or interest in securities or other instrument as may be declared by the CG to be securities.

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DepositsSection 2(31)Receipt of Money by way of

Deposit orLoan orAny other manner

Except defined by RBI

Read with Rule 2(c) of Companies(Acceptance of Deposit Rules), 2013

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Deposits Linked Sections/Rules

-Section 73Prohibition on acceptance of deposits from

public

-Section 74Repayment of deposits accepted before

commencement of this act

-Section 75Damages for fraud

-Section 76Acceptance of public deposit by certain

companies

-Companies (Acceptance of Deposit) Rules, 2013

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Rule 2(c)Companies (Acceptance of Deposits) Rules, 2013

Depositor:“(i) any member of the company who has made a deposit with the company in accordance with sub-section (2) of section 73 of the Act, or(ii) any person who has made a deposit with a public company in accordance with section 76 of the Act.”

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Deposits does not include-Any amount received by a company from any other company.-Any amount received from an employee

Not exceeding his annual salaryUnder terms of contractNon interest bearing

-Non interest bearing amount received or held in trust

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Share Application money or advance received-Not allotted within 60 Days of receipt-Not repaid within 15 Days after above 60 daysWill be treated as Deposits

Does not apply to-A Banking Company-NBFC (Registered with RBI)

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Rule 2(c)Companies (Acceptance of Deposits) Rules, 2013Eligible Company means-A Public Company [Sec. 76(1)]-NW > Rs. 100 Crore or

Turnover > Rs 500 Crore-Prior consent obtained in GM by SR-Filed resolution with RoC-Filed resolution with RBI (if required)

Before making any invitation for deposits.

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Limits of Deposits1. Other Than Eligible Company [Sec. 73](a)From Members

Deposit* < 25% (PUC + Free Reserves)*(Current deposit to be made

+ Other Outstanding deposits)

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2. Eligible Company [Sec 76](a) From Members

Deposit* < 10% (PUC + Free Reserves)*(Deposit to be made + Other O/s Deposit)

(b) From PublicDeposit* < 25% (PUC + Free Reserves)*(Deposit to be made + Other O/s Deposit)

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One Person Company (OPC)Section 2(62)Only one person as a member.

“One person company” shall be mentioned in brackets below the name of such company on all the stationeries.

Name of the nominee

The name of the company with the last word “Private Limited”

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One Person Company (OPC)

OPC is not required to hold Annual general meeting – 96(1)

Deemed passing of ordinary or special resolution by entry in minutes book – 139(2)

Compulsory rotation of auditors not applicable – 139(2)

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One Person Company (OPC)

The company shall have a minimum one director and maximum of fifteen directors [Section 149(1)(a)]

No person shall be eligible to incorporate more than 1 One Person Company or become nominee in more than one such company.

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Small CompanySection 2(85)

Other than a public companyPaid-Up Capital not exceeding Rs. 50 Lakh

OR

Turnover not exceeding Rs. 2 CroreThe status of a company as “Small

Company” may change from year to year.Provision regarding mandatory rotation

of auditor is not applicable.

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Small Company Holding company, Subsidiary company,

Charitable company and Company governed by any Special Act- Not classified as a Small company.

The Annual Return can be signed by the Company Secretary alone,In case no Company Secretary,By a single director of the company.

A small company need not include Cash Flow Statement as a part of its financial statements.

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Subsidiary CompanySection 2(87)Controls composition of BOD

Exercises or controls more than ½ of total share capital

Holding company shall not have layers of subsidiaries beyond two.

“Control” shall include the right to appoint majority of the directors or management or policy decisions.

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Associate CompanySection 2(6)

*Owns/controls ≥ 20% total share capital or business decisions under agreement

Not include Subsidiary nor JVC

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Significant Influence*

Holding Company

Associate Company

Associate CompanyUnder AS 23 Accounting for Investments

in Associates in Consolidated Financial Statements, ‘associate’ is defined as an enterprise in which the investor has ‘significant influence’.

‘Significant influence’ is defined as the power to participate in the financial and operating policy decisions of the investee but not control over those policies.

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Associate CompanyThe definition of an associate in the 2013 Act

is based on control of business decisions as compared to the concept of power to participate under AS 23

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ControlSection 2(27)Includes

Right to appoint majority of Directors or

Control the management orPolicy decisions

Directly or IndirectlyBy way of shareholding, management

rights, shareholder agreement, voting arrangement or any other manner.

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ControlAs per AS 21, only board control and

control over voting rights is considered.

As per Companies Act, 2013 a company may control other company through other mechanism also, say, management rights or voting agreements.

This may require many more companies to be consolidated, though they are not subsidiaries under AS 21.

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ControlThe definition of ‘control’ is linked closely

with the definition of ‘promoter’. The 2013 Act provides that a person having control over the affairs of the company would be regarded as its ‘promoter’. [Section 2(69)]

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ExpertSection 2(38)Includes Engineer, Valuer, CA, CS, CMA

Any other person who has power to issue certificate in pursuance to any law

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Registered ValuerSection 247

Valuation of any Property, Stock, Shares, Debentures, Securities, Goodwill

Any other assetNet WorthShall be valued by a person having such

qualification to be prescribed.Under or Over Valuation

Fine of Rs. 25,000 to Rs. 1,00,000

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Foreign CompanySection 2(42)Any Company or Body Corporate

Incorporated outside IndiaPlace of business in India Itself or through agentPhysically or electronicallyandConducts any business activity in India

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RelativeSection 2(77)

Members of HUF

Husband and Wife

Father and Mother

Son and Son’s wife

Daughter and Daughter’s husband

Brother and Sister

As P

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Related PartySection 2(76)Director, KMP or their relatives;

A firm, in which a Director, Manager or his relative is a partner;

A Private Company in which a Director or Manager is Member or Director;

A public company in which a Director or Manager is a Director or holds along with his relatives more than 2% of its Paid-up Capital.

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Related PartyAny Body Corporate whose BOD, MD or

Manager is accustomed to act in accordance with the advice, directions or instructions of a Director or Manager;

Any person on whose advice, directions or instructions a Director or Manager is accustomed to act

Any company which is a holding, subsidiary or an associate company of such company

A Director or Key Managerial Personnel of the holding company or his relative.

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Independent DirectorSection 2(47) & Section 149Every Listed Public Company

At Least 1/3rd of the Total number of Directors as Independent Directors

Public companyAt least 2 independent director if;

- Paid-up capital is Rs. 10 Crores or more,

- Turnover of Rs. 100 Crores or more,- Outsiders Liability exceeding 50

Crores

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Independent DirectorBOD to Ensure skills, experience and

knowledge in disciplines related to the company’s business AND DISCLOSE IN BOARD REPORT

DATA BANK with details of the person eligible and willing to be appointed as independent director.

Filling of “Form DIR-1” for inclusion of name in the data bank.

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Independent DirectorResponsibility of due diligence for

appointment of independent directors to be on company.

Paid up share capital or turnover or outsider’s liability as existing on the last date of latest audited financial statements shall be taken into account T

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OfficerSection 2(59)Any director, manager or KMP

Any person on whose directions or instructions the BOD, directors are accustomed to act

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Officer In DefaultSection 2(60)KMP and WTD

If no KMP’s- Any director so appointed- All directors if no one is appointed

Any person authorised by BOD or KMP

Any Person who advices, directs or instructs BOD

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Officer In DefaultEvery Director who is aware of

Contravention

For issue of transfer of shares – - Share transfer agent- Registrar to issue- Merchant Banker

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Net WorthSection 2(57)

Paid-Up share capital

Reserves created out of profit

Securities premium

After deducting- Accumulated losses- Deferred expenditure- Miscellaneous expenditure

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Free ReservesSection 2(43)Reserves available for distribution as

dividend [Link: Section 123]As per latest Audited Balance SheetDoes not include:-Unrealised, Notional gains-Revaluation of assets-Surplus on measuring Assets and Liabilities at FMV-Share Premium

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Serious Fraud Investigation OfficerSection 2(83) & Section 211Investigation of fraud relating to a

companyThe Central Government may appoint

persons having expertise in the fields of investigations, cyber forensics, financial accounting, management accounting, cost accounting and any other fields as may be necessary for the efficient discharge of Serious Fraud Investigation Office (SFIO) functions under the Act.

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THANK YOU

Ashwani Jaiswal

THE COMPANIES ACT, 2013

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