Companies Act, 2013 - Chapter 1 Preliminary Vocabulary

Vocabulary flashcards covering key definitions and statutory terms from Chapter 1 (Preliminary) of the Companies Act, 2013.

Associate Company

A company in relation to another company in which that other company has a significant influence (control of at least $20\%$ of total voting power, or control of or participation in business decisions under an agreement), but which is not a subsidiary company of the company having such influence, and includes a joint venture company.

Government Company

Any company in which not less than $51\%$ 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, including a company which is a subsidiary company of such a Government company.

Small Company

A company, other than a public company, whose paid-up share capital does not exceed $4\,\text{crore rupees}$ (or up to $10\,\text{crore rupees}$ as prescribed) and whose turnover as per its last profit and loss account does not exceed $40\,\text{crore rupees}$ (or up to $100\,\text{crore rupees}$ as prescribed).

Managing Director

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.

Key Managerial Personnel

In relation to a company, means the Chief Executive Officer or managing director or manager, company secretary, whole-time director, Chief Financial Officer, and such other officer not more than one level below the directors in whole-time employment designated as key managerial personnel by the Board.

Net Worth

The aggregate value of the paid-up share capital and all reserves created out of profits, securities premium account, and debit/credit balance of profit and loss account, minus accumulated losses, deferred expenditure, and miscellaneous expenditure, excluding reserves created from asset revaluation, write-back of depreciation, and amalgamation.

Free Reserves

Reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend, excluding unrealised or notional gains, revaluation of assets, or fair value measurements of assets/liabilities recognized in equity.

Officer Who Is in Default

An officer liable to penalty or punishment under the Act, including whole-time directors, key managerial personnel, specified directors who consented in writing, authorized persons charged with administrative responsibilities, persons whose directions the Board follows, aware directors who do not object, and share transfer agents or registrars.

Related Party

With reference to a company, entities including a director or relative, KMP or relative, partner firm, private company where a director/manager is member or director, public company where director/manager holds over $2\%$ paid-up share capital with relatives, or holding, subsidiary, or associate companies.

Sweat Equity Shares

Equity shares 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.