Section 2 Companies Act explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
What is Section 2 definitions Part 2 Under the Companies Act 2013?
Section 2 definitions Part 2 under Section 2(51)-(94) of the Companies Act, 2013 is Part 2 of the definitional foundation, covering Section 2(51) to 2(94). These include the most compliance-critical definitions: Key Managerial Personnel , Net Worth , Officer in Default , Private Company , Related Party , Small Company , and Subsidiary .
Getting these definitions wrong has severe consequences — wrongly claiming Small Company exemptions means every exemption claimed becomes a violation. Misidentifying Related Parties means RPT violations under Section 188. Wrong Officer in Default identification means the wrong person faces penalties.
This comprehensive guide covers Section 2 definitions Part 2 in plain English — legal requirements, who must comply, step-by-step procedures, practical examples with calculations, MCA forms and filing deadlines, penalties for non-compliance, amendment history from 2013 to 2026, comparison with the 1956 Act, judicial interpretations, and a compliance checklist. Updated with all MCA notifications and circulars up to March 2026.
Rules: Not applicable — definitional section
Last Amended: MCA Notifications up to March 2026
Who Must Comply with Section 2 definitions Part 2?
Applicability depends on company type, size, turnover, and MCA exemption notifications:
| Company Type | Applicable? | Conditions | Exemptions Available? |
|---|---|---|---|
| Private Limited Company | Yes | Subject to G.S.R. 464(E) dated 05.06.2015 | Yes — several relaxations |
| Public Limited Company | Yes — Full | Strictest compliance required | No |
| One Person Company (OPC) | Yes, relaxed | Single director sufficient | Yes — 1 BM per half-year, no AGM |
| Section 8 Company (NGO) | Yes | Central Government license | Yes — specific exemptions |
| Listed Company | Yes + SEBI LODR | Dual compliance (MCA + SEBI) | No — enhanced requirements |
| Small Company | Yes, exempted | Capital ≤ Rs. 4 Cr AND Turnover ≤ Rs. 40 Cr | Yes — MGT-7A, 2 BMs/year |
| Government Company | Yes, modified | 51%+ govt shareholding; CAG audit | Yes — Sec 462 notifications |
Section 2 definitions Part 2 — Detailed Legal Analysis
Section 2(51) — Key Managerial Personnel (KMP)
KMP means: (i) CEO/MD/Manager, (ii) Company Secretary, (iii) Whole-time Director, (iv) CFO. Mandatory appointment for every listed company and every public company with paid-up capital ≥ Rs. 10 crore. KMP face personal liability for company defaults.
Section 2(57) — Net Worth
Formula: Paid-up capital + All reserves created out of profits + Securities premium account MINUS Accumulated losses MINUS Deferred expenditure MINUS Miscellaneous expenditure not written off. Excludes: Revaluation reserves and capital reserves not arising from profits. Used for CSR threshold (Rs. 500 Cr), NFRA jurisdiction, managerial remuneration limits.
Section 2(60) — Officer Who Is in Default
Determines who faces personal penalties: (a) whole-time director, (b) KMP, (c) director who is aware through Board participation, (d) director who authorized/participated, (e) person on whose advice Board acted. Directors attending Board meetings are deemed aware of all resolutions — ignorance is not a defence.
Section 2(76) — Related Party (Expanded 2017)
Includes: directors, KMPs, their relatives , firms/companies where director/KMP/relative is partner/director/member, holding/subsidiary/associate/fellow subsidiary companies, and directors/KMP of holding company. The 2017 Amendment expanded this definition significantly.
Section 2(85) — Small Company (2022 Thresholds)
Paid-up capital ≤ Rs. 4 crore AND turnover ≤ Rs. 40 crore. BOTH conditions must be met simultaneously. Exemptions: no cash flow statement, no auditor rotation, 2 Board meetings per year, simplified annual return (MGT-7A). Exclusions: Public companies, Section 8 companies, companies under special Acts.
Rules, Procedures, and Compliance Framework
The Not applicable — definitional section operationalize Section 2(51)-(94) through prescribed procedures, forms, timelines, and documentation requirements. Non-compliance with rules attracts the same penalties as non-compliance with the section itself. All forms are filed electronically on MCA V3 portal (mca.gov.in) with Digital Signature Certificate (DSC) of the authorized signatory.
Exemptions framework: G.S.R. 464(E) for private companies, separate notifications for Section 8, government, Nidhi, and startup companies. Small companies enjoy reduced compliance. Always verify exemption eligibility before claiming — wrongly claimed exemptions become violations.
Professional certification: Many forms require certification by a practicing CS, CA, or CMA. The professional certifying the form is personally liable for accuracy — false certification attracts disciplinary action by ICSI/ICAI/ICMAI and criminal prosecution under Section 448.
Practical Examples — Section 2 definitions Part 2 in Real Business
Example 1 — Net Worth for CSR Applicability
Calculation: Capital Rs. 100 Cr + Profit reserves Rs. 200 Cr + Securities premium Rs. 50 Cr − Accumulated losses Rs. 10 Cr − Deferred expenditure Rs. 2 Cr = Net worth Rs. 338 Cr. Revaluation reserve of Rs. 80 Cr is EXCLUDED from net worth. Since Rs. 338 Cr is less than Rs. 500 Cr, CSR is NOT triggered by net worth alone (but check turnover Rs. 1,000 Cr and net profit Rs. 5 Cr separately).
Example 2 — Small Company Status Changes
QuickServe Pvt Ltd: FY 2024-25: Capital Rs. 2 Cr, Turnover Rs. 35 Cr → Small Company (both conditions met). FY 2025-26: Turnover rises to Rs. 45 Cr → NOT Small Company (turnover exceeds Rs. 40 Cr). Must switch from MGT-7A to full MGT-7, add cash flow statement, hold 4 Board meetings.
Example 3 — Related Party Transaction Trap
Scenario: Director Rajesh's wife Priya owns Priya Interiors Pvt Ltd. XYZ Ltd awards Rs. 50 lakh interior contract to Priya Interiors without Board approval. Priya is a relative of director → Priya Interiors is a related party under Section 2(76). Without Section 188 approval, the contract is voidable and Rajesh faces Rs. 25,000-5 lakh penalty.
MCA Forms Required for Section 2 definitions Part 2
All forms filed electronically on MCA V3 portal with DSC. Late fees: 15 days = 2x; 30 days = 4x; 60 days = 6x; 90 days = 10x; beyond 90 days = 12x normal fee:
| Form | Purpose | Deadline | Certification |
|---|---|---|---|
| MGT-14 | Filing resolutions for definitional changes | Within 30 days | CS / Director |
| INC-27 | Conversion public to private or vice versa | Within 30 days | CS / Director |
Penalties for Non-Compliance with Section 2 definitions Part 2
The Companies (Amendment) Act, 2019 decriminalized many offences — converting them to civil penalties adjudicated by ROC under Section 454. Serious offences remain criminal (Section 447 fraud):
| Violation | Company Penalty | Officer/Director Penalty | Section |
|---|---|---|---|
| Wrong small company exemption claim | Each claimed exemption = separate violation | Rs. 50,000-5L per officer per violation | Sec 2(85) |
| Not identifying related parties | RPT violations under Section 188 | Rs. 25,000-5L per officer | Sec 2(76)/188 |
Compliance Calendar for Section 2 definitions Part 2
Event-based: Board resolution → Shareholder approval (if needed) → MCA form filing within 15-30 days → Statutory register update within 7-15 days → Stakeholder notification as prescribed.
Annual cycle: AOC-4 (30 days of AGM) → MGT-7/MGT-7A (60 days of AGM) → ADT-1 (15 days of AGM) → DIR-3 KYC (September 30) → DPT-3 (June 30, if deposits). Board meetings: minimum 4/year with maximum 120-day gap (2 per year for small companies/OPCs).
Judicial Interpretations on Section 2 definitions Part 2
Supreme Court: Section 2(51)-(94) compliance is mandatory, not directory. Procedural requirements cannot be waived. Penalties upheld as reasonable restrictions under Article 19(6) of the Constitution. Directors attending Board meetings are deemed aware of all resolutions — ignorance is not a defence.
NCLT/NCLAT: Filing deadlines strictly enforced — even one-day delays attract penalties. No inherent right to condonation of delay. Constructive notice applies to all ROC filings. No retroactive approval for acts requiring prior approval under the Act.
Compliance Checklist for Section 2 definitions Part 2
| # | Action | Timeline | Responsible | Done? |
|---|---|---|---|---|
| 1 | Verify applicability of Section 2(51)-(94) and check exemptions | At event / annual | CS / Director | ☐ |
| 2 | Board resolution with proper minutes | Before event | Board / CS | ☐ |
| 3 | Shareholder approval if required (OR/SR) | Per timeline | CS | ☐ |
| 4 | Prepare documents and professional certifications | Before filing | CS / CA | ☐ |
| 5 | File MCA form on V3 portal with DSC | 15-30 days | Authorized signatory | ☐ |
| 6 | Track SRN status and respond to ROC queries | Within 15 days | CS | ☐ |
| 7 | Update statutory registers | 7-15 days | CS | ☐ |
| 8 | Maintain records for minimum 8 financial years | Ongoing | CS / Admin | ☐ |
Key Facts About Section 2 Companies Act
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What are the requirements under Section 2(51)-(94) of the Companies Act 2013?
Section 2(51)-(94) establishes mandatory compliance requirements for Section 2 definitions Part 2 under the Companies Act, 2013. Every company registered in India must comply with these provisions. Private companies enjoy certain relaxations under MCA exemption notification G.S.R. 464(E) dated June 5, 2015, while small companies (paid-up capital ≤ Rs. 4 crore AND turnover ≤ Rs. 40 crore) get further concessions including simplified annual return filing through MGT-7A.
What is the penalty for violating Section 2(51)-(94) of the Companies Act 2013?
Penalties for non-compliance with Section 2(51)-(94) range from Rs. 1 lakh to Rs. 25 lakh on the company and Rs. 50,000 to Rs. 5 lakh on every officer in default. Continuing violations attract daily penalties until the default is rectified. The most severe personal consequence is under Section 164(2) — if a company fails to file annual returns (MGT-7) and financial statements (AOC-4) for 3 consecutive financial years, ALL directors are automatically disqualified for 5 years from being appointed as director in any company.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Section 2 Companies Act: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
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