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Highlights of Changes in Section 2 of Companies Act, 2013  related to Definition vide Companies (Amendment) Act 2017. Article discusses definition of Associate Company, Cost Accountant, Debenture, Financial Year, Holding Company, Interested Director, Key Managerial Personnel, Net Worth, Public Company, Public Financial Institution, Related Party, Small Company, Subsidiary Company and Turnover.

Sl. No. Section Highlights of the Amendments / Changes
1. 2(6) – “Associate Company” 1.   Significant Influence currently means only means control of at least 20% of total share capital, or of business decisions under an agreement. Now 20% of control will also mean significant influence.

2.   The expression Joint Venture” has been defined. 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 Earlier the same was missing and brought clarity.

2. 2(28) – “Cost Accountant” Holding a valid certificate of practice has been made mandatory in the definition of Cost Accountant. Earlier the same was not mentioned.
3. 2(30) – “Debenture” Definition of instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934 like DERIVATIVES, MONEY MARKET INSTRUMENTS, SECURITIES, ETC. has been excluded from the definition of debenture. Further other instrument as may be prescribed by the Central Government in consultation with RBI has also been excluded.
4. 2(41) – “Financial Year” Associate Company incorporated outside India has been added for allowability to follow a different financial year for consolidation of its accounts outside India.
5. 2(46) – “Holding Company” In the definition the word company means any body corporate. Even company registered outside India can be Holding company.
6. 2(49) – “Interested Director” The definition of Interested Director has been omitted as interested director has been clearly mentioned in Section 188. Hence the same has been omitted.
7. 2(51) – “Key Managerial Personnel” Whole time Employees one level below the director is designated as KMP after amendment as per Companies Amendment Act 2017.
8. 2(57) – “Net Worth” The debit and Credit balance of the P/L has been added to definition of the net worth.
9. 2(71) – “Public Company” A Public Company must satisfy both the condition i.e.,

(a) is not a private company; and

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

10. 2(72) – “Public Financial Institution” Companies incorporated under Companies Act cannot be notified as PFI.
11. 2(76) – “Related Party” If the investment of investing co. or the venturer  of a company result in the company becoming an associate (at least 20%) then it will be treated as related party.
12. 2(85) – “Small Company Enabling amendment


Paid capital may be upto 10 ten crore and turnover upto 20 crore.


Turnover should be of immediately preceding Financial Year.

13. 2(87) – “Subsidiary Company” Total voting power shall be considered for the definition of subsidiary company instead of total share capital.
14. 2(91) – “ Turnover” For the purpose of turnover instead of aggregate realisation  of amount, gross amount of revenue recognized in P/L account from sale, supply or distribution of goods or on account of services rendered, or both, by a company during a financial year shall be considered.

Author Bio

CA Madhav Khandelwal is a young Chartered Accountant and the founder partner of the firm. He is a B. Com (H) graduate and a fellow member of The Institute of Chartered Accountants of India with 7 years of Post Qualification experience. He has handled vide variety of audits of various companies View Full Profile

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June 2024