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 Chapter I

 

 

 

 

Preliminary 

 

 

1.Short title, extent, commencement and application.

 

 (1) This Act may be called the Companies Act, 2013.
(2) It extends to the whole of India.
(3) This section shall come into force at once and the remaining provisions of this Act
shall come into force on such date as the Central Government may, by notification in the
Official Gazette, appoint and different dates may be appointed for different provisions of this
Act and any reference in any provision to the commencement of this Act shall be construed
as a reference to the coming into force of that provision.
(4) The provisions of this Act shall apply to—
(a) companies incorporated under this Act or under any previous company law;
(b) insurance companies, except in so far as the said provisions are inconsistent
with the provisions of the Insurance Act, 1938 or the Insurance Regulatory and
Development Authority Act, 1999;
(c) banking companies, except in so far as the said provisions are inconsistent
with the provisions of the Banking Regulation Act, 1949;
(d) companies engaged in the generation or supply of electricity, except in so far
as the said provisions are inconsistent with the provisions of the Electricity Act, 2003;
(e) any other company governed by any special Act for the time being in force,
except in so far as the said provisions are inconsistent with the provisions of such
special Act; and
(f) 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.
 
2.Definitions. 
 
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;
(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) “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 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;
(23) “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;
(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 who
is appointed by a company to perform the functions of a company secretary under this
Act;
(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;
(26) “contributory” means a person liable to contribute towards the assets of
the company in the event of its being wound up.
Explanation.—For the purposes of this clause, it is hereby clarified that a
person holding fully paid-up shares in a company shall be considered as a contributory
but shall have no liabilities of a contributory under the Act whilst retaining rights of
such a contributory;
(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 subsection
(1) of section 2 of the Cost and Works Accountants Act, 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;
(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;
(33) “derivative” means the derivative as defined in clause (ac) of section 2 of
the Securities Contracts (Regulation) Act, 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;
(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;
(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 fiftyone
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 way of imprisonment, fine or otherwise, means any of the
following officers 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;
(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 paidup
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;
(ii) the Indian Companies Act, 1866;
(iii) the Indian Companies Act, 1882;
(iv) the Indian Companies Act, 1913;
(v) the Registration of Transferred Companies Ordinance, 1942;
(vi) the Companies Act, 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; 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, 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, 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;
(68) “private company” means a company having a minimum paid-up share
capital of one lakh rupees or such higher 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; and
(iii) prohibits any invitation to the public to subscribe for any securities of
the company;
(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 of five lakh rupees or such higher
paid-up capital, as may be prescribed:
Provided that a company which is a subsidiary of a company, not being a private
company, shall be deemed to be public company for the purposes of this Act even
where such subsidiary company continues to be a private company in its articles ;
(72) “public financial institution” means—
(i) the Life Insurance Corporation of India, established under section 3 of
the Life Insurance Corporation Act, 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 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;
(iv) institutions notified by the Central Government under sub-section (2)
of section 4A of the Companies Act, 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;
(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 is a member or
director;
(v) a public company in which a director or manager is a director or holds
along with his relatives, more than two per cent. of its paid-up share capital;
(vi) any body corporate whose Board of Directors, managing director or
manager is accustomed to act in accordance with the advice, directions or
instructions of a director or manager;
(vii) any person on whose advice, directions or instructions a director or
manager is accustomed to act:
Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice,
directions or instructions given in a professional capacity;
(viii) 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;
(ix) such other person as may be prescribed;
(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;
(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;
(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;
(81) “securities” means the securities as defined in clause (h) of section 2 of the
Securities Contracts (Regulation) Act, 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;
(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; or
(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.
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;
(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;
(95) words and expressions used and not defined in this Act but defined in the
Securities Contracts (Regulation) Act, 1956 or the Securities and Exchange Board of
India Act, 1992 or the Depositories Act, 1996 shall have the meanings respectively
assigned to them in those Acts.
 

 

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