The Companies Act, 2013: Preliminary Concepts and Definitions

Vocabulary practice flashcards covering key definitions and corporate concepts introduced or modified under the Companies Act, 2013, specifically sections 2, 3, 12, 96, 122, and 455.

Associate Company [Section 2(6)]

A company in relation to another company in which that other company has a significant influence, meaning it controls at least $20\%$ of total share capital or business decisions under an agreement, and includes joint ventures but excludes subsidiaries.

Control [Section 2(27)]

Includes the right to appoint the majority of the directors or to control management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, through shareholding, management rights, or voting agreements.

Dormant Company [Section 455(1)]

A company formed and registered under the Act for a future project or to hold an asset or intellectual property that has no significant accounting transaction and has applied to the Registrar for this status.

Financial Statement [Section 2(40)]

Includes a balance sheet as at the end of the financial year, a profit and loss account (or income and expenditure account), a cash flow statement, a statement of changes in equity if applicable, and annexed explanatory notes.

Financial Year [Section 2(41)]

The period ending on $March\,31$ every year; however, companies incorporated on or after $January\,1$ have a first financial year ending on $March\,31$ of the following year, potentially spanning $15\,months$.

Free Reserves [Section 2(43)]

Reserves which, per the latest audited balance sheet, are available for distribution as dividend, excluding securities premium, capital reserves, debenture redemption reserves, statutory reserves, and revaluation reserves.

Key Managerial Personnel (KMP) [Section 2(51)]

Refers to the $CEO$, Managing Director, Manager, Whole-time Director, Chief Financial Officer ($CFO$), and Company Secretary ($CS$).

Listed Company [Section 2(52)]

A public or private company which has any of its securities listed on any recognized stock exchange.

One Person Company (OPC) [Section 2(62)]

A private company that has only one natural person as a member and is governed by specific provisions, such as naming a nominee in the memorandum and being exempt from holding annual general meetings.

Private Company [Section 2(68)]

A company (other than an $OPC$) which limits the number of its members to $200$, prohibits public invitations to subscribe for securities, and treats money received from members or the public as a deposit if so invited.

Related Party [Section 2(76)]

Includes directors, key managerial personnel, firms/companies where directors are partners/members, holding/subsidiary/associate companies, and persons whose advice a director is accustomed to follow.

Relatives [Section 2(77)]

Refers to persons related as members of a $HUF$, husband and wife, or specifically listed family members including father, mother, son (including step-son), son's wife, daughter, daughter's husband, brother, and sister.

Small Company [Section 2(85)]

A company other than a public company with a paid-up capital not exceeding $50\,lakh\,rupees$ (maximum $5\,crore$) or turnover not exceeding $2\,crore\,rupees$ (maximum $20\,crore$).

Subsidiary Company [Section 2(87)]

A company in which the holding company controls the composition of the Board of Directors or exercises/controls more than $\frac{1}{2}$ of the total share capital, including paid-up equity and convertible preference share capital.