Company Law is crucial for anyone engaging with the corporate world. Whether you are a student, a business professional, or an aspiring entrepreneur, familiarity with its core concepts is key. The Companies Act, 2013, provides the framework governing how businesses operate in India. Here we have 25 important company law terms. With clear, easy-to-understand explanations for each. This information will help you prepare for exams, excel in your job, or manage your own business effectively. We break down the backbone of Company Law, term by term, making it accessible to all. Let’s explore these company law terms together.
25 Essential Company Law Terms
| S. No. | Term | Sections | Description |
| 1 | Annual General Meeting (AGM) | Section 96 | A mandatory yearly meeting where companies present financial performance, approve dividends, appoint auditors, and address shareholder concerns. |
| 2 | Articles of Association (AOA) | Section 5 | A critical document defining a company’s internal rules, such as director appointments, meeting conduct, and share issuance. |
| 3 | Audit and Auditor | Section 139-148 | An independent review of a company’s financial records by auditors to ensure accuracy and compliance. Auditors protect stakeholders by identifying discrepancies. |
| 4 | Compromise and Arrangement | Section 230-232 | An agreement between a company and its creditors or shareholders to restructure financial obligations or settle disputes, often during mergers or insolvency. |
| 5 | Company | Section 2(20) | A legal entity formed by individuals or groups for commercial or industrial activities, with a separate legal identity, limited liability, and perpetual succession. |
| 6 | Corporate Governance | A framework of policies and practices ensuring accountability, fairness, and transparency in a company’s operations, balancing stakeholder interests. | |
| 7 | Corporate Social Responsibility (CSR) | Section 135 | Mandates certain companies to allocate a portion of profits (at least 2%) towards social welfare activities like education, healthcare, and environmental conservation. |
| 8 | Debentures | Section 71 | Debt instruments are issued by companies to borrow funds from investors. Debenture holders earn fixed interest but do not have ownership rights. |
| 9 | Director | Section 149-172 | A person appointed to the board to oversee and guide the company’s strategic direction, responsible for high-level decisions and compliance. |
| 10 | Dividend | Section 123-127 | A portion of a company’s profits is distributed to shareholders as a reward for their investment, typically in cash or additional shares. |
| 11 | Extraordinary General Meeting (EGM) | Section 100 | A meeting held to address urgent issues requiring shareholder approval, such as amending the AOA or approving mergers, is not scheduled annually. |
| 12 | Insolvency | Occurs when a company cannot pay its debts as they become due, indicating financial distress requiring resolution plans, restructuring, or liquidation. | |
| 13 | Key Managerial Personnel (KMP) | Section 2(51) | Individuals holding significant responsibilities within a company, such as the CEO, CFO, and Company Secretary, ensure compliance and efficient operations. |
| 14 | Limited Liability | Limits a shareholder’s financial responsibility to the unpaid value of their shares, protecting personal assets from company losses or insolvency. | |
| 15 | Memorandum of Association (MOA) | Section 4 | A foundational document defining a company’s objectives, structure, and scope of operations, serving as a public declaration of its purpose. |
| 16 | National Company Law Tribunal (NCLT) | Section 407-434 | A quasi-judicial body handling corporate disputes, mergers, insolvency cases, and shareholder grievances for faster resolution. |
| 17 | One Person Company (OPC) | Section 2(62 ) | A type of company with a single owner who enjoys limited liability, ideal for small businesses and startups. |
| 18 | Private Company | Section 2(68) | Limits its shareholders to 200 and restricts public share trading, enjoying more flexibility and less regulatory burden. |
| 19 | Prospectus | Section 23-42 | A formal document issued by companies to invite public investment in their securities, detailing financial performance, risks, and objectives. |
| 20 | Public Company | Section 2(71) | Offers shares to the public and must comply with stricter regulations, gaining access to significant capital but facing higher transparency demands. |
| 21 | Registrar of Companies (ROC) | Section 2(75) | A government authority responsible for company registration, compliance, and record-keeping, ensuring adherence to the Companies Act, 2013. |
| 22 | Securities | Section 2(81) | Financial instruments like shares and debentures are used by companies to raise capital, representing ownership (equity) or debt (debentures). |
| 23 | Share Capital | Section 43-72 | The money raised by issuing shares represents ownership in the company and provides funds for operations and growth. |
| 24 | Shareholder | Section 48 | Owns shares in a company and holds rights such as voting and receiving dividends, influencing corporate decisions. |
| 25 | Winding Up | Section 271-303 | The process of closing a company, settling debts, and distributing remaining assets to shareholders, ensuring fairness and legal compliance. |
