Companies Act, 2013: Important Sections for SEBI Grade A and RBI Grade B (Directors, Meetings, Audit, CSR, NCLT) (+ Quiz)

The Companies Act, 2013 is a full subject in SEBI Grade A Paper 2 and appears in RBI Grade B and NABARD finance papers. Questions usually ask a section number, a limit or a timeline. This guide gives you the most-asked ones.

Basics

Point	Detail
Replaced	Companies Act, 1956
Based on	J.J. Irani Committee (2005)
Passed / assent	29 August 2013
Sections and schedules	470 sections, 7 schedules (29 chapters)
Ministry	Ministry of Corporate Affairs (MCA)
Registrar	Registrar of Companies (RoC)
Tribunal	NCLT (set up 1 June 2016); appeals to NCLAT, then the Supreme Court
Decriminalisation	Many minor offences made civil penalties (2019 and 2020 amendments)

Types of companies

Type	Key rule
One Person Company (OPC) (Section 2(62))	New concept in the 2013 Act; one member; only a natural person who is an Indian citizen (residency rule relaxed in 2021)
Private company (Section 2(68))	Minimum 2 members, maximum 200; restricts share transfer
Public company (Section 2(71))	Minimum 7 members, no maximum
Small company (Section 2(85))	Paid-up capital up to ₹4 crore and turnover up to ₹40 crore (2022 limits; a further rise to ₹10 crore / ₹100 crore was announced later, approx)
Section 8 company	Non-profit (charity, education, arts); no dividends
Government company (Section 2(45))	At least 51% held by the Centre and/or states
Producer company	Farmers’ collectives

Incorporation and capital

Section	Subject
3	Formation of a company
4	Memorandum of Association (MoA) (the company’s charter: name, objects, liability, capital)
5	Articles of Association (AoA) (internal rules)
7	Incorporation (SPICe+ form online)
23	Public offer and private placement
42	Private placement (up to 200 people a year)
43	Kinds of share capital: equity and preference
54	Sweat equity shares
55	Preference shares (redeemable within 20 years)
62	Further issue of capital (rights, ESOPs)
63	Bonus shares
68	Buy-back (up to 25% of paid-up capital and free reserves)

Directors

Section	Rule
149	Board composition: minimum 3 (public), 2 (private), 1 (OPC); maximum 15 (more by special resolution); at least one woman director in listed and certain public companies; at least one resident director (182 days in India)
149(4)	Listed companies: at least one-third independent directors
149(10)/(11)	Independent director: term of 5 years, maximum two terms
152	Appointment of directors; DIN needed
165	Maximum 20 directorships (10 in public companies)
173	Board meetings: first within 30 days of incorporation; at least 4 a year, gap not more than 120 days
177	Audit Committee
178	Nomination and Remuneration Committee and Stakeholders Relationship Committee
197	Managerial remuneration: up to 11% of net profit (public companies)
203	Key Managerial Personnel (KMP): MD/CEO/Manager, CS, CFO

General meetings

Section	Rule
96	Annual General Meeting (AGM): first AGM within 9 months of the first financial year’s end; later within 6 months; gap of no more than 15 months
100	Extraordinary General Meeting (EGM)
101	Notice of at least 21 clear days
103	Quorum: public company 5/15/30 members depending on size; private company 2
114	Ordinary resolution (simple majority) and special resolution (votes in favour at least 3 times votes against)

Accounts and audit

Section	Rule
2(41)	Financial year: 1 April to 31 March
129	Financial statements; Schedule III format
133	Indian Accounting Standards (Ind AS) notified by the Centre (advice of NFRA)
139	Appointment of auditors for 5 years; rotation: an individual auditor for one term of 5 years, an audit firm for two terms of 5 years each
143	Auditor’s powers and duties; reporting of fraud
132	National Financial Reporting Authority (NFRA) (set up in 2018)

Corporate Social Responsibility (Section 135)

Rule	Detail
Who	Companies with net worth ≥ ₹500 crore, or turnover ≥ ₹1,000 crore, or net profit ≥ ₹5 crore in the preceding financial year
How much	At least 2% of the average net profit of the last 3 years
Committee	CSR Committee of at least 3 directors (if CSR spend is above ₹50 lakh)
Activities	Schedule VII (education, health, environment, PM CARES, etc.)
Unspent amount	Transfer to a Schedule VII fund (or an Unspent CSR Account for ongoing projects)
India	First country to make CSR mandatory by law (from 1 April 2014)

Mergers, revival and winding up

Section	Subject
230–232	Compromise, arrangement and mergers (approved by NCLT)
233	Fast-track merger of small companies and holding–subsidiary companies (approval by the Regional Director)
241–242	Oppression and mismanagement (minority shareholders can approach NCLT)
245	Class action suits
271	Winding up by the Tribunal
IBC, 2016	Insolvency resolution and voluntary liquidation (moved out of the Companies Act)

Exam-ready one-liners

1. The Companies Act, 2013 replaced the 1956 Act, based on the J.J. Irani Committee.
2. One Person Company is a new concept in the 2013 Act.
3. Private company: 2–200 members; public company: minimum 7 members.
4. Maximum 15 directors (more by special resolution); at least one woman director in listed companies.
5. Independent directors: 5-year term, maximum two terms.
6. CSR (Section 135): 2% of average net profit of 3 years for companies above the thresholds.
7. Auditor rotation (Section 139): individual 5 years; firm 10 years (2 terms).
8. NCLT was set up on 1 June 2016; NFRA in 2018.

Related reading

• SEBI LODR and corporate governance
• Accounting and costing basics
• SARFAESI, IBC and DRTs

Quiz: test yourself

Based on the Companies Act, 2013 as amended, as reported. Limits are revised from time to time; check mca.gov.in.