• By Team Koncept
  • 20 March, 2024


Table of content:

  1. Introduction of Preliminary - CA Inter Law
  3. Conclusion of Preliminary - CA Inter Lawof Preliminary 

Introduction of Preliminary - CA Inter Law

The Companies Act, 2013 is an Act to consolidate and amend the law relating to companies. The legislation was necessitated to meet changes in the national and international economic environment and for expansion and growth of economy of our country. 

The Companies Act, 2013 is rule based legislation with 470 sections and seven schedules. The entire Act has been divided into 29 chapters. Each chapter has at least one set of Rules. The Companies Act, 2013 aims to improve corporate governance, simplify regulations and strengthen the interests of investors. Thus, this enactment makes our corporate regulations more contemporary.


1) Accounting standards means the standards of accounting or any addendum thereto for companies or class of companies referred to in section 133;

Section 133 of the Act deals with the Central Government to Prescribe Accounting Standards. As per the section, the Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority.

Section 133 is to be read with Rule 7 of the Companies (Accounts) Rules, 2014. Accordingly,
(i) The standards of accounting as specified under the Companies Act, 1956 shall be deemed to be the accounting standards until accounting standards are specified by the Central Government under section 133.
(ii) Till the National Financial Reporting Authority* is constituted under section 132 of the Act, the Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India in consultation with and after examination of the recommendations made by the National Advisory Committee on Accounting Standards constituted under section 210A of the Companies Act, 1956.

2) 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 purpose of this clause, —
(a) the expression "significant influence" means control of at least twenty per cent. of total voting power, or control of or participation in business decisions under an agreement;
(b) the expression "joint venture" means a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement;

3) 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 1482 in the case of a company which belongs to any class of companies specified under that section;

4) 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;

5) 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; 
(v) such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and 
(vi) such other officer as may be prescribed

Note: However, till now no other officer has been prescribed.


6) 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;

7) Private company means 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) 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—persons who are in the employment of the company; and 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; 
(iii) prohibits any invitation to the public to subscribe for any securities of the company;

8) 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 ten crore rupees; and
(ii) turnover of which as per profit and loss account for the immediately preceding financial year does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than one hundred 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. 
As per the Companies (Specification of Definitions Details) Rules, 201410, for the purposes of sub-clause (i) and sub-clause (ii) of clause (85) of section 2 of the Act, paid up capital and turnover of the small company shall not exceed rupees four crore and rupees forty crore respectively. 

9) Subscribed capital means such part of the capital which is for the time being subscribed by the members of a company;

Example : ABC Ltd. was registered with Registrar with an Authorised capital of ` 2,00,00,000 where each share is of ` 10.

In response to the advertisements made by the company to buy shares in the company, applications have been received for 10,00,000 shares but company actually issued 700,000 shares where company has called for rupees 8 per share.

All the calls have been met in full except three shareholders who still owe for their 6000 shares in total.
Amount of various share capital
Authorized share capital = ` 2,00,00,000 (2 crores) 
Subscribed capital = 10,00,000 x 10 = ` 1,00,00,000 (1 Crore) 
Issued capital = 7,00,000 x 10 = ` 70,00,000
Called-up capital = 7,00,000 x 8 = ` 56,00,000
Paid-up capital = 56,00,000 – (6000 x ` 8) = ` 55,52,000

10) 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 voting powereither 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.

Conclusion of Preliminary - CA Inter Lawof Preliminary 

In conclusion, the Companies Act, 2013, with its comprehensive framework and numerous definitions, serves as the cornerstone of corporate regulation in India. Designed to adapt to the evolving economic landscape, this legislation aims to enhance corporate governance, protect investor interests, and facilitate business growth. By providing clear definitions for key terms such as accounting standards, associate company, books of account, financial statement, and more, the Act ensures clarity and uniformity in corporate practices. Understanding these definitions is essential for companies, directors, shareholders, and other stakeholders to navigate the regulatory environment effectively and uphold the integrity of the corporate sector. As businesses continue to evolve and expand, adherence to the provisions of the Companies Act, 2013 remains crucial for fostering transparency, accountability, and sustainable growth in the Indian corporate ecosystem.

Ruchika Saboo An All India Ranker (AIR 7 - CA Finals, AIR 43 - CA Inter), she is one of those teachers who just loved studying as a student. Aims to bring the same drive in her students.

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She believes - "When you study, you get wise, you obtain knowledge. A knowledge that helps you in real life, in solving problems, finding opportunities. Implement what you study". She has a huge affinity for the Law Subject in particular and always encourages student to - "STUDY FROM THE BARE ACT, MAKE YOUR OWN INTERPRETATIONS". A rare practice that you will find in her video lectures as well.

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He cleared his CA Finals in May 2011 and has been into teaching since. He started teaching CA, CS, 11th, 12th, B.Com, M.Com students in an offline mode until 2016 when Konceptca was launched. One of the pioneers in Online Education, he believes in providing a learning experience which is NEAT, SMOOTH and AFFORDABLE.

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