The companies Act 1956, Under sec 3(i) defines Company as "A company means formed and registered under this Act or an existing company"

The Act defines, Joint Stock Company as "A Stock Company means a company having a permanent paid up or nominal share capital of fixed amount divided into shares of fixed amount or held and transferable as stock, or divided and held partly in the other and formed on the principle of having for its member the holders of those shares or the stock and no other person"
(Sec.566 of Indian Company Act,1956).

A very simple definition of a company may be given as under:
"It is an incorporated association which is an artificial person, created by law, having a common seal and perpetual succession."

A company is also defined by other authorities, "A joint stock company is a voluntary association of individuals for profit, having capital dividend into transferable shares, the ownership of which is the condition for membership"

Features or Characteristics of the joint stock company

An Artificial Person: A company is a creation of law. A company does not have physical existence, but it can conduct various activities like any other human being. it can file suit against the third party and can be sued in the court of laws. A company has a corporate existence
Incorporated organization: A company is an incorporated (i.e.registeded under specific Act) Organisation. It is incorporated (Registered) under the Indian Companies Act, 1956. The Incorporation of a Joint Stock Co. is compulsory, A company is a corporate body with independent legal status.
Common seal: A company has a common seal of its own and all Its activities are conducted under this seal. A company being an artificial person its seal is a substitute for its singnature. This seal is name or any other recognition of a company engraved in a particular manner.
Transferability of shares: The shares of a company are transferable. They can be transferred freely or with some restriction. Transferability of shares being liquidity (conversion into Cash)
Limited liability: The liability of members or shareholders of a company is limited only to the extent of capital they invest in a company. The shareholders of a company are not liable for the debts of a company
Perpetual succession (continuous life): The existence of a company does not get affected or interrupted by the death, Insolvency, etc. of any shareholder. A company has a continuous existence(life). A life of a company also does not get affected by the transfer of shares.
Independent legal status: A company has a legal entity (recognition). It has separate legal status. The law recognizes a company as a separate body than its owners.
Separation of ownership and Management: A company is not managed by its owners (shareholders). Because of a complicated and large membership, it is not possible for a shareholder to manage a company. A company is managed, by the representatives of shareholders knowns as directors. so shareholders (owners) need not manage a company and directors need not be the owners of a company.
Large Membership: A company is owned by the large numbers of members. Form a private company, maximum membership is 50 (Minimum 2) and for a public company, there is no limit over a maximum number of members (Minimum 7).

Company Act 2013

1. Short title, extent, commencement and application.

(1) This Act may be called the Companies Act, 2013.

(2) It extends to the whole of India.

(3) This section shall come into force at once and the remaining provisions of this Act shall come into force on such date1 as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

(4) The provisions of this Act shall apply to—

(a) companies incorporated under this Act or under any previous company law;

(b) insurance companies, except in so far as the said provisions are inconsistent with the provisions of the Insurance Act, 1938 (4 of 1938) or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);

(c) banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949 (10 of 1949);

(d) companies engaged in the generation or supply of electricity, except in so far as the said provisions are inconsistent with the provisions of the Electricity Act, 2003 (36 of 2003);

(e) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and

(f) such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions, modifications or adaptation, as may be specified in the notification.

Definitions.— In this Act, unless the context otherwise requires,—

(1) ―abridged prospectus‖ means a memorandum containing such salient features of a prospectus as may be specified by the Securities and Exchange Board by making regulations in this behalf;

(2) ―accounting standards‖ means the standards of accounting or any addendum thereto for companies or class of companies referred to in section 133;

(3) ―alter‖ or ―alteration‖ includes the making of additions, omissions and substitutions;

(4) ―Appellate Tribunal‖ means the National Company Law Appellate Tribunal constituted under section 410;

(5) ―articles‖ means the articles of association of a company as originally framed or as altered from time to time or applied in pursuance of any previous company law or of this Act;

(6) ―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 purposes of this clause, ―significant influence‖ means control of at least twenty per cent. of total share capital, or of business decisions under an agreement;

(7) ―auditing standards‖ means the standards of auditing or any addendum thereto for companies or class of companies referred to in sub-section (10) of section 143;

(8) ―authorised capital‖ or ―nominal capital‖ means such capital as is authorised by the memorandum of a company to be the maximum amount of share capital of the company;

(9) ―banking company‖ means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);

(10) ―Board of Directors‖ or ―Board‖, in relation to a company, means the collective body of the directors of the company;

(11) ―body corporate‖ or ―corporation‖ includes a company incorporated outside India, but does not include—

(i) a co-operative society registered under any law relating to co-operative societies; and

(ii) any other body corporate (not being a company as defined in this Act), which the Central Government may, by notification, specify in this behalf;

(12) ―book and paper‖ and ―book or paper‖ include books of account, deeds, vouchers, writings, documents, minutes and registers maintained on paper or in electronic form;

(13) ―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 148 in the case of a company which belongs to any class of companies specified under that section;

(14) ―branch office‖, in relation to a company, means any establishment described as such by the company;

(15) ―called-up capital‖ means such part of the capital, which has been called for payment; 16

(16) ―charge‖ means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage;

(17) ―chartered accountant‖ means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate of practice under sub-section (1) of section 6 of that Act;

(18) ―Chief Executive Officer‖ means an officer of a company, who has been designated as such by it;

(19) ―Chief Financial Officer‖ means a person appointed as the Chief Financial Officer of a company;

(20) ―company‖ means a company incorporated under this Act or under any previous company law;

(21) ―company limited by guarantee‖ means a company having the liability of its members limited by the memorandum to such amount as the members may respectively undertake to contribute to the assets of the company in the event of its being wound up;

(22) ―company limited by shares‖ means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them;

(23) ―Company Liquidator‖, in so far as it relates to the winding up of a company, means a person appointed by—

(a) the Tribunal in case of winding up by the Tribunal; or

(b) the company or creditors in case of voluntary winding up,

as a Company Liquidator from a panel of professionals maintained by the Central Government under sub-section (2) of section 275;

(24) ―company secretary‖ or ―secretary‖ means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) who is appointed by a company to perform the functions of a company secretary under this Act;

(25) ―company secretary in practice‖ means a company secretary who is deemed to be in practice under sub-section (2) of section 2 of the Company Secretaries Act, 1980 (56 of 1980);

(26) ―contributory‖ means a person liable to contribute towards the assets of the company in the event of its being wound up.

Explanation.—For the purposes of this clause, it is hereby clarified that a person holding fully paid-up shares in a company shall be considered as a contributory but shall have no liabilities of a contributory under the Act whilst retaining rights of such a contributory;

(27) ―control‖ shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner;

(28) ―cost accountant‖ means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959);

(29) ―court‖ means—

(i) the High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any district court or district courts subordinate to that High Court under sub-clause (ii);

(ii) the district court, in cases where the Central Government has, by notification, empowered any district court to exercise all or any of the jurisdictions conferred upon the High Court, within the scope of its jurisdiction in respect of a company whose registered office is situate in the district;

(iii) the Court of Session having jurisdiction to try any offence under this Act or under any previous company law; 17

(iv) the Special Court established under section 435;

(v) any Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under this Act or under any previous company law;

(30) ―debenture‖ includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not;

(31) ―deposit‖ includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India;

(32) ―depository‖ means a depository as defined in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996);

(33) ―derivative‖ means the derivative as defined in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(34) ―director‖ means a director appointed to the Board of a company;

(35) ―dividend‖ includes any interim dividend;

(36) ―document‖ includes summons, notice, requisition, order, declaration, form and register, whether issued, sent or kept in pursuance of this Act or under any other law for the time being in force or otherwise, maintained on paper or in electronic form;

(37) ―employees‘ stock option‖ means the option given to the directors, officers or employees of a company or of its holding company or subsidiary company or companies, if any, which gives such directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the company at a future date at a pre-determined price;

(38) ―expert‖ includes an engineer, a valuer, a chartered accountant, a company secretary, a cost accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force;

(39) ―financial institution‖ includes a scheduled bank, and any other financial institution defined or notified under the Reserve Bank of India Act, 1934 (2 of 1934);

(40) ―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;

(41) ―financial year‖, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:

Provided that on an application made by a company or body corporate, which is a holding company or a subsidiary of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Tribunal may, if it is satisfied, allow any period as its financial year, whether or not that period is a year: 18

Provided further that a company or body corporate, existing on the commencement of this Act, shall, within a period of two years from such commencement, align its financial year as per the provisions of this clause;

(42) ―foreign company‖ means any company or body corporate incorporated outside India which—

(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and

(b) conducts any business activity in India in any other manner.

(43) ―free reserves‖ means such reserves which, as per the latest audited balance sheet of a company, are available for distribution as dividend:

Provided that—

(i) any amount representing unrealised gains, notional gains or revaluation of assets, whether shown as a reserve or otherwise, or

(ii) any change in carrying amount of an asset or of a liability recognised in equity, including surplus in profit and loss account on measurement of the asset or the liability at fair value,

shall not be treated as free reserves;

(44) ―Global Depository Receipt‖ means any instrument in the form of a depository receipt, by whatever name called, created by a foreign depository outside India and authorised by a company making an issue of such depository receipts;

(45) ―Government company‖ means any company in which not less than fifty-one per cent. 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, and includes a company which is a subsidiary company of such a Government company;

(46) ―holding company‖, in relation to one or more other companies, means a company of which such companies are subsidiary companies;

(47) ―independent director‖ means an independent director referred to in sub-section (6) of section 149;

(48) ―Indian Depository Receipt‖ means any instrument in the form of a depository receipt created by a domestic depository in India and authorised by a company incorporated outside India making an issue of such depository receipts;

(49) ―interested director‖ means a director who is in any way, whether by himself or through any of his relatives or firm, body corporate or other association of individuals in which he or any of his relatives is a partner, director or a member, interested in a contract or arrangement, or proposed contract or arrangement, entered into or to be entered into by or on behalf of a company;

(50) ―issued capital‖ means such capital as the company issues from time to time for subscription;

(51) ―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; and

(v) such other officer as may be prescribed;

(52) ―listed company‖ means a company which has any of its securities listed on any recognised stock exchange;

(53) ―manager‖ means 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 19

company, and 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;

(54) ―managing director‖ means 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 and includes a director occupying the position of managing director, by whatever name called.

Explanation.—For the purposes of this clause, the power to do administrative acts of a routine nature when so authorised by the Board such as the power to affix the common seal of the company to any document or to draw and endorse any cheque on the account of the company in any bank or to draw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within the substantial powers of management;

(55) ―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;

(56) ―memorandum‖ means 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;

(57) ―net worth‖ means the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation and amalgamation;

(58) ―notification‖ means a notification published in the Official Gazette and the expression ―notify‖ shall be construed accordingly;

(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;

(60) ―officer who is in default‖, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:—

(i) whole-time director;

(ii) key managerial personnel;

(iii) where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no director is so specified;

(iv) any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;

(v) any person in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act, other than a person who gives advice to the Board in a professional capacity; 20

(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;

(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer;

(61) ―Official Liquidator‖ means an Official Liquidator appointed under sub-section (1) of section 359;

(62) ―One Person Company‖ means a company which has only one person as a member;

(63) "ordinary or special resolution" means an ordinary resolution, or as the case may be, special resolution referred to in section 114;

(64) ―paid-up share capital‖ or ―share capital paid-up‖ means such aggregate amount of money credited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued and also includes any amount credited as paid-up in respect of shares of the company, but does not include any other amount received in respect of such shares, by whatever name called;

(65) ―postal ballot‖ means voting by post or through any electronic mode;

(66) ―prescribed‖ means prescribed by rules made under this Act;

(67) ―previous company law‖ means any of the laws specified below:—

(i) Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866);

(ii) the Indian Companies Act, 1866 (10 of 1866);

(iii) the Indian Companies Act, 1882 (6 of 1882);

(iv) the Indian Companies Act, 1913 (7 of 1913);

(v) the Registration of Transferred Companies Ordinance, 1942 (Ord. 54 of 1942);

(vi) the Companies Act, 1956 (1 of 1956); and

(vii) any law corresponding to any of the aforesaid Acts or the Ordinances and in force—

(A) in the merged territories or in a Part B State (other than the State of Jammu and Kashmir), or any part thereof, before the extension thereto of the Indian Companies Act, 1913 (7 of 1913); or

(B) in the State of Jammu and Kashmir, or any part thereof, before the commencement of the Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), in so far as banking, insurance and financial corporations are concerned, and before the commencement of the Central Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968), in so far as other corporations are concerned;

(viii) the Portuguese Commercial Code, in so far as it relates to Sociedades anonymous; and

(ix) the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961);

(68) ―private company‖ means a company having a minimum paid-up share capital 1*** as may be prescribed, and which by its articles,—

1. The words ―of one lakh rupees or such higher paid-up share capital‖ omitted by Act 21 of 2015, s. 2 (w.e.f. 29-5-2015).

(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: 21

Provided further that—

(A) persons who are in the employment of the company; and

(B) 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; and

(iii) prohibits any invitation to the public to subscribe for any securities of the company;

(69) ―promoter‖ means a person—

(a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or

(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 of the company is accustomed to act:

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity;

(70) ―prospectus‖ means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of body corporate;

(71) ―public company‖ means a company which—

(a) is not a private company;

(b) has a minimum paid-up share capital 1*** as may be prescribed:

1. The words ―of five lakh rupees or such higher paid-up share capital,‖ omitted by Act 21 of 2015, s. 2 (w.e.f. 29-5-2015).

Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles ;

(72) ―public financial institution‖ means—

(i) the Life Insurance Corporation of India, established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956);

(ii) the Infrastructure Development Finance Company Limited, referred to in clause (vi) of sub-section (1) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act;

(iii) specified company referred to in the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);

(iv) institutions notified by the Central Government under sub-section (2) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section 465 of this Act;

(v) such other institution as may be notified by the Central Government in consultation with the Reserve Bank of India:

Provided that no institution shall be so notified unless—

(A) it has been established or constituted by or under any Central or State Act; or 22

(B) not less than fifty-one per cent. of the paid-up share capital is held or controlled 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;

(73) ―recognised stock exchange‖ means a recognised stock exchange as defined in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(74) ―register of companies‖ means the register of companies maintained by the Registrar on paper or in any electronic mode under this Act;

(75) ―Registrar‖ means a Registrar, an Additional Registrar, a Joint Registrar, a Deputy Registrar or an Assistant Registrar, having the duty of registering companies and discharging various functions under this Act;

(76) ―related party‖, with reference to a company, means—

(i) a director or his relative;

(ii) a key managerial personnel 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 or manager is a member or director;

(v) a public company in which a director or manager is a director or holds along with his relatives, more than two per cent. of its paid-up share capital;

(vi) any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager;

(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:

Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions or instructions given in a professional capacity;

(viii) any company which is—

(A) a holding, subsidiary or an associate company of such company; or

(B) a subsidiary of a holding company to which it is also a subsidiary;

(ix) such other person as may be prescribed;

(77) ‗‗relative‘‘, with reference to any person, means any one who is 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;

(78) ―remuneration‖ means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-tax Act, 1961 (43 of 1961);

(79) ―Schedule‖ means a Schedule annexed to this Act;

(80) ―scheduled bank‖ means the scheduled bank as defined in clause (e) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934);

(81) ―securities‖ means the securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(82) ―Securities and Exchange Board‖ means the Securities and Exchange Board of India established under section 3 of the Securities and Exchange Board of India Act,1992 (15 of 1992);

(83) ―Serious Fraud Investigation Office‖ means the office referred to in section 211;

(84) ―share‖ means a share in the share capital of a company and includes stock; 23

(85) ‗‗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 five crore rupees; or

(ii) turnover of which as per its last profit and loss account does not exceed two crore rupees or such higher amount as may be prescribed which shall not be more than twenty 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

(86) ―subscribed capital‖ means such part of the capital which is for the time being subscribed by the members of a company;

(87) ―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 share capital either 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.

Explanation.—For the purposes of this clause,—

(a) a company shall be deemed to be a subsidiary company of the holding company even if the control referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of the holding company;

(b) the composition of a company‘s Board of Directors shall be deemed to be controlled by another company if that other company by exercise of some power exercisable by it at its discretion can appoint or remove all or a majority of the directors;

(d) ―layer‖ in relation to a holding company means its subsidiary or subsidiaries;

(88) ―sweat equity shares‖ means such equity shares as are 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;

(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 thereof or their proxies having a right to vote on that matter are present at the meeting and cast their votes;

(90) ―Tribunal‖ means the National Company Law Tribunal constituted under section 408;

(91) ―turnover‖ means the aggregate value of the realization of the amount made from the sale, supply or distribution of goods or on account of services rendered, or both, by the company during a financial year;

(92) ―unlimited company‖ means a company not having any limit on the liability of its members;

(93) ―voting right‖ means the right of a member of a company to vote in any meeting of the company or by means of the postal ballot;

(94) ―whole-time director‖ includes a director in the whole-time employment of the company; 24

(95) words and expressions used and not defined in this Act but defined in the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) shall have the meanings respectively assigned to them in those Acts.

Commentary on Section 168 of Companies Act, 2013

SECTION 168 OF THE COMPANIES ACT, 2013

Section 168- Resignation of Director

(1) A director may resign from his office by giving a notice in writing to the company and the Board shall on receipt of such notice take note of the same and the company shall intimate the Registrar in such manner, within such time and in such form as may be prescribed and shall also place the fact of such resignation in the report of directors laid in the immediately following general meeting by the company:

Provided that a director may also forward a copy of his resignation along with detailed reasons for the resignation to the Registrar within thirty days of resignation in such manner as may be prescribed

(2) The resignation of a director shall take effect from the date on which the notice is received by the company or the date, if any, specified by the director in the notice, whichever is later:

Provided that the director who has resigned shall be liable even after his resignation for the offences which occurred during his tenure.

(3) Where all the directors of a company resign from their offices, or vacate their offices under section 167, the promoter or, in his absence, the Central Government shall appoint the required number of directors who shall hold office till the directors are appointed by the company in general meeting.

RELEVANT RULES OF COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) RULES, 2014

Rule 15- Notice of Resignation of Director

The company shall within thirty days from the date of receipt of notice of resignation from a director, intimate the Registrar in Form DIR-12 and post the information on its website, if any.

Rule 16- Copy of resignation of director to be forwarded by him

Where a director resigns from his office, he may within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form DIR-11 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Provided that in case a company has already filed Form DIR-12 with the Registrar under rule 15, a foreign director of such company resigning from his office may authorise in writing a practising chartered accountant or cost accountant in practice or company secretary in practice or any other resident director of the company to sign Form DIR-11 and file the same on his behalf intimating the reasons for the resignation.

ANALYSIS OF SECTION 168 OF THE COMPANIES ACT, 2013

This is a new provision in the Companies Act, 2013 and there is no corresponding provision in the Companies Act, 1956. This section regulate resignation by a director and making it clear that resignation can be rendered only in writing, a company has to do compliance because of resignation, provide an option to resigning director for intimating his resignation with detailed reasons to Registrar and erring director cannot escape his liability after resignation for his tenure.

Sub-section (1) of section 168 casts responsibility on a director that he may resign only after giving notice in writing (not oral resignation) to a company and on receipt of such notice Board shall take note of the same. Such a company is required to intimate Registrar in form DIR-12 within 30 days of receipt of notice of resignation and such fact shall also be mentioned in Director’s report that is laid in immediately following general meeting by the company so that member can take note of the same and may enquire reason of resignation if they wish and if such company has website then this information will also be posted on such website thereby providing information to general public and persons dealing with the companies.

Earlier Proviso to section 168(1) used to cast responsibility on such retiring director that he shall intimate his resignation with detailed reason to ROC in form DIR-11 and this was introduced to prevent likely misuse of Director’s name by company after his resignation but Companies (Amendment) Act, 2017 w.e.f 7^th May 2018, has made this filing requirement optional at the desire of such resigning director and thereby giving relief to such resigning director now he may or may not file DIR-11 with ROC thereby making DIR-11 optional for resigning director.

Resigning director of IFSC private company and public company was required to file DIR-11 on optional basis (because of Notification No. G.S.R. 08(E) dated 4^thJanuary 2017) but now to this facility is available to director of any company whether specified IFSC company or not.

Section 168(2) is making a very clear that resignation of director shall be effective from receipt of notice of resignation or in case of prospective resignation (i.e on later date as mentioned in notice) date specified by director in the notice, whichever is later. Proviso to section 168(2) has made it clear that resigning director cannot escape his liability for offences which occurred during his tenure.

Section 168(3) introduced to take of exception cases where all the director resign from their offices hence resulting in no director company but section 168(3) is there to take care of this exceptional and rare situation and provide mechanism whereby promoter or in his absence Central Government can appoint required number of directors till new director are appointed by company in general meeting.

PROCEDURE UNDER SECTION 168 OF THE COMPANIES ACT, 2013

Concerned Director shall render his resignation in writing.
Board to take note of resignation submitted by a director
Make necessary changes in the Register of Directors and KMP.
A company is under obligation to inform Registrar within 30 days from the date of receipt of resignation notice
A company is required to post-resignation information on its website if such company has a website
Board report shall include the fact of resignation
A resigning director can optionally file DIR-11 to Registrar within 30 days of his resignation