1. THE COMPANIES ACT, 2013 Overview: Definitions By Ashwani Jaiswal

2. Disclaimer  The 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.

3. Areas to be covered  Introduction of new definitions  Major changes in the important definitions  References of the key definitions

4. Organisation Companies Act 201329 Chapters470 Sections7 Schedules

5. Accounting Standards Section 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

6. NFRA NATIONAL FINANCIAL REPORTING AUTHORITY  This authority shall: Recommend, Monitor and Enforce Compliance of Accounting and Auditing Standards  Make recommendation to CG on Formulation and Laying Down of Accounting and Auditing Policies and Standards for adoption by companies

7. NFRA NATIONAL FINANCIAL REPORTING AUTHORITY  Power to investigate  Powers of Civil Court  Imposing penalty and debarring members (including Chartered Accountants)

8. Financial Year Section 2(41) Can only be April to March In case company incorporated after 1 st January Financial year will end on 31 st March of the Following Year

9. Financial Year  In case holding or subsidiary is a foreign company And Required to follow different financial year, tribunal may allow any F.Y.  Transition within 2 years

10. Financial Statement Section 2(40)  Balance Sheet  Profit and Loss / Income & Expenditure  Cash Flow Statement  A Statement of Change in Equity  Explanatory Note

11. Private Company Section 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.

12. 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.

13. Deposits Section 2(31)  Receipt of Money by way of Deposit or Loan or Any other manner  Except defined by RBI Read with Rule 2(c) of Companies (Acceptance of Deposit Rules), 2013

14. Deposits  Linked Sections/Rules - Section 73 Prohibition on acceptance of deposits from public - Section 74 Repayment of deposits accepted before commencement of this act - Section 75 Damages for fraud - Section 76 Acceptance of public deposit by certain companies - Companies (Acceptance of Deposit) Rules, 2013

15. 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.”

16. Rule 2(c) Companies (Acceptance of Deposits) Rules, 2013  Deposits does not include -Any amount received by a company from any other company. -Any amount received from an employee Not exceeding his annual salary Under terms of contract Non interest bearing -Non interest bearing amount received or held in trust

17. Rule 2(c) Companies (Acceptance of Deposits) Rules, 2013  Share Application money or advance received -Not allotted within 60 Days of receipt -Not repaid within 15 Days after above 60 days Will be treated as Deposits  Does not apply to -A Banking Company -NBFC (Registered with RBI)

18. Rule 2(c) Companies (Acceptance of Deposits) Rules, 2013  Eligible 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.

19. Rule 2(c) Companies (Acceptance of Deposits) Rules, 2013  Limits of Deposits 1. Other Than Eligible Company [Sec. 73] (a)From Members Deposit* < 25% (PUC + Free Reserves) *(Current deposit to be made + Other Outstanding deposits)

20. Rule 2(c) Companies (Acceptance of Deposits) Rules, 2013 2. Eligible Company [Sec 76] (a) From Members Deposit* < 10% (PUC + Free Reserves) *(Deposit to be made + Other O/s Deposit) (b) From Public Deposit* < 25% (PUC + Free Reserves) *(Deposit to be made + Other O/s Deposit)

21. 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”

22. 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)

23. 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.

24. Small Company Section 2(85)  Other than a public company  Paid-Up Capital not exceeding Rs. 50 Lakh OR Turnover not exceeding Rs. 2 Crore  The status of a company as “Small Company” may change from year to year.  Provision regarding mandatory rotation of auditor is not applicable.

25. 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.

26. Subsidiary Company Section 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.

27. Associate Company Section 2(6) *Owns/controls ≥ 20% total share capital or business decisions under agreement Not include Subsidiary nor JVC Significant Influence* Holding Company Associate Company

28.  Under 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.

29. Associate Company  The 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

30. Control Section 2(27)  Includes Right to appoint majority of Directors or Control the management or Policy decisions  Directly or Indirectly  By way of shareholding, management rights, shareholder agreement, voting arrangement or any other manner.

31. Control  As 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.

32. Control  The 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)]

33. Expert Section 2(38)  Includes Engineer, Valuer, CA, CS, CMA  Any other person who has power to issue certificate in pursuance to any law

34. Registered Valuer Section 247  Valuation of any Property, Stock, Shares, Debentures, Securities, Goodwill  Any other asset  Net Worth  Shall 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

35. Foreign Company Section 2(42)  Any Company or Body Corporate Incorporated outside India Place of business in India Itself or through agent Physically or electronically and Conducts any business activity in India

36. Relative Section 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 Prescribed

37. Related Party Section 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.

38. Related Party  Any 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.

39. Independent Director Section 2(47) & Section 149  Every Listed Public Company At Least 1/3rd of the Total number of Directors as Independent Directors  Public company At 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

40. Independent Director  BOD 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.

41. Independent Director  Responsibility 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

42. Officer Section 2(59)  Any director, manager or KMP  Any person on whose directions or instructions the BOD, directors are accustomed to act

43. Officer In Default Section 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

44. Officer In Default  Every Director who is aware of Contravention  For issue of transfer of shares – -Share transfer agent -Registrar to issue -Merchant Banker

45. Net Worth Section 2(57)  Paid-Up share capital  Reserves created out of profit  Securities premium  After deducting -Accumulated losses -Deferred expenditure -Miscellaneous expenditure

46. Free Reserves Section 2(43)  Reserves available for distribution as dividend [Link: Section 123] As per latest Audited Balance Sheet Does not include: -Unrealised, Notional gains -Revaluation of assets -Surplus on measuring Assets and Liabilities at FMV -Share Premium

47. Serious Fraud Investigation Officer Section 2(83) & Section 211  Investigation of fraud relating to a company  The 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.

48. THANK YOU Ashwani Jaiswal Ashwani Jaiswal