Important Definitions under Company Law – Part II

Section 

Term 

Definition 

2(51) 

Key Managerial Personnel 

In relation to a company, means the Chief Executive Officer or the Managing Director or the Manager; the Company Secretary; the Whole-time Director; the Chief Financial Officer; such other officer, not more than one level below the directors, who is in whole-time employment and designated as KMP by the Board; and such other officer as may be prescribed. 

2(52) 

Listed Company 

A company which has any of its securities listed on any recognised stock exchange. Such class of companies which have listed or intend to list such class of securities as may be prescribed in consultation with SEBI shall not be considered as listed companies. 

2(53) 

Manager 

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; 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. 

2(54) 

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; includes a director occupying the position of managing director, by whatever name called. Routine administrative acts such as affixing the common seal, drawing cheques, or signing share certificates do not constitute substantial powers of management. 

2(55) 

Member 

In relation to a company, means: (i) the subscriber to the memorandum, deemed to have agreed to become a member and entered as such upon registration; (ii) every other person who agrees in writing to become a member and whose name is entered in the register of members; and (iii) every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository. 

2(56) 

Memorandum 

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. 

2(57) 

Net Worth 

The aggregate value of the paid-up share capital and all reserves created out of the profits, securities premium account, and debit or credit balance of the profit and loss account, after deducting accumulated losses, deferred expenditure, and miscellaneous expenditure not written off, as per the audited balance sheet. Excludes reserves created out of revaluation of assets, write-back of depreciation, and amalgamation. 

2(58) 

Notification 

A notification published in the Official Gazette; the expression "notify" shall be construed accordingly. 

2(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. 

2(60) 

Officer Who Is in Default 

For the purpose of any provision imposing liability, means: (i) whole-time director; (ii) KMP; (iii) where there is no KMP, such director(s) as specified by the Board or all directors if none is specified; (iv) any person under the immediate authority of the Board or KMP who is charged with any responsibility including maintenance, filing or distribution of accounts or records, and authorises, actively participates in, knowingly permits, or fails to prevent any default; (v) any person in accordance with whose advice the Board is accustomed to act, other than a person acting in a professional capacity; (vi) every director aware of a contravention by virtue of Board proceedings without objecting, or where contravention took place with his consent or connivance; and (vii) in respect of issue or transfer of shares, the share transfer agents, registrars, and merchant bankers. 

2(61) 

Official Liquidator 

An Official Liquidator appointed under sub-section (1) of Section 59. 

2(62) 

One Person Company 

A company which has only one person as a member. 

2(63) 

Ordinary or Special Resolution 

An ordinary resolution or, as the case may be, a special resolution referred to in Section 114. 

2(64) 

Paid-Up Share Capital 

Such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued; also includes any amount credited as paid-up in respect of shares of the company; does not include any other amount received in respect of such shares, by whatever name called. 

2(65) 

Postal Ballot 

Voting by post or through any electronic mode. 

2(66) 

Prescribed 

Prescribed by rules made under this Act. 

2(68) 

Private Company 

A company having a minimum paid-up share capital as may be prescribed, and which by its articles: (i) restricts the right to transfer its shares; (ii) limits the number of its members to two hundred (except in case of OPC); and (iii) prohibits any invitation to the public to subscribe for any securities of the company. Joint holders are treated as a single member; employees and former employees who are members are excluded from the count of two hundred. 

2(69) 

Promoter 

A person: (a) named as such in a prospectus or identified by the company in the annual return; (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 is accustomed to act. A person acting merely in a professional capacity is excluded from (c). 

2(70) 

Prospectus 

Any document described or issued as a prospectus; includes a red herring prospectus (Section 32), shelf prospectus (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. 

2(71) 

Public Company 

A company which is not a private company and has a minimum paid-up share capital as may be prescribed. A subsidiary of a company that is not a private company shall be deemed to be a public company even if such subsidiary continues to be a private company in its articles. 

2(72) 

Public Financial Institution 

Includes LIC of India; Infrastructure Development Finance Company Limited; specified company referred to in the UTI (Transfer of Undertaking and Repeal) Act, 2002; institutions notified under Section 4A of the Companies Act, 1956; and such other institution as may be notified by the Central Government in consultation with the RBI. For notification, the institution must either be established by a Central or State Act or have not less than 51% of paid-up share capital held or controlled by the Central Government or any State Government(s). 

2(73) 

Recognised Stock Exchange 

A recognised stock exchange as defined in clause (f) of Section 2 of the Securities Contracts (Regulation) Act, 1956. 

2(74) 

Register of Companies 

The register of companies maintained by the Registrar on paper or in any electronic mode under this Act. 

2(75) 

Registrar 

A Registrar, Additional Registrar, Joint Registrar, Deputy Registrar, or Assistant Registrar, having the duty of registering companies and discharging various functions under this Act. 

2(76) 

Related Party 

With reference to a company, means: (i) a director or his relative; (ii) KMP 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, manager, or his relative is a member or director; (v) a public company in which a director or manager is a director and holds, along with his relatives, more than 2% of paid-up share capital; (vi) any body corporate whose Board, MD, or manager is accustomed to act in accordance with the advice of a director or manager; (vii) any person on whose advice a director or manager is accustomed to act (excluding professional capacity); (viii) any body corporate which is a holding, subsidiary, or associate company; a subsidiary of a holding company to which it is also a subsidiary; or an investing company or venturer of the company; and (ix) such other person as may be prescribed. 

2(77) 

Relative 

With reference to any person, means any one 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. 

2(78) 

Remuneration 

Any money or its equivalent given or passed to any person for services rendered by him; includes perquisites as defined under the Income-tax Act, 1961. 

2(80) 

Scheduled Bank 

A scheduled bank as defined in clause (e) of Section 2 of the Reserve Bank of India Act, 1934. 

2(81) 

Securities 

Securities as defined in clause (h) of Section 2 of the Securities Contracts (Regulation) Act, 1956. 

2(82) 

Securities and Exchange Board 

The Securities and Exchange Board of India established under Section 3 of the SEBI Act, 1992. 

2(84) 

Share 

A share in the share capital of a company; includes stock. 

2(85) 

Small Company 

A company other than a public company whose paid-up share capital does not exceed fifty lakh rupees or such higher amount as may be prescribed (not more than ten crore rupees), and whose turnover as per the profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed (not more than one hundred crore rupees). Does not apply to a holding or subsidiary company, a company registered under Section 8, or a company governed by any special Act. 

2(86) 

Subscribed Capital 

Such part of the capital which is for the time being subscribed by the members of a company. 

2(87) 

Subsidiary Company / Subsidiary 

In relation to a 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 voting power, either at its own or together with one or more of its subsidiary companies. Holding companies are subject to prescribed limits on layers of subsidiaries. 

2(88) 

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, by whatever name called. 

2(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 or their proxies having a right to vote on that matter are present and cast their votes. 

2(90) 

Tribunal 

The National Company Law Tribunal constituted under Section 408. 

2(91) 

Turnover 

The gross amount of revenue recognised in the profit and loss account from the sale, supply, or distribution of goods or on account of services rendered, or both, by a company during a financial year. 

2(92) 

Unlimited Company 

A company not having any limit on the liability of its members. 

2(93) 

Voting Right 

The right of a member of a company to vote in any meeting of the company or by means of postal ballot. 

2(94) 

Whole-Time Director 

Includes a director in the whole-time employment of the company. 

2(94A) 

Winding Up 

Winding up under this Act or liquidation under the Insolvency and Bankruptcy Code, 2016, as applicable.