Appointment & Qualification of Directors
Section 149. Company to have Board of Directors
149(1).
Every company must have a Board of Directors consisting only of individuals.
A public company must have at least three directors, a private company at least two, and a One Person Company at least one director.
The maximum number of directors a company can have is fifteen.
However, a company may appoint more than fifteen directors if it passes a special resolution
Certain prescribed classes of companies must also have at least one woman director.
149(2).
Time Limit for Compliance by Existing Companies
All companies existing before the commencement of this Act must comply with the above requirements within one year from the date the Act came into effect.
149(3).
Every company must have at least one director who stays in India for a total period of not less than 182 days during the financial year.
For a newly incorporated company, this requirement applies proportionately at the end of its first financial year.
149(4).
Independent Directors in Listed and Public Companies
Every listed public company must have at least one-third of its total directors as independent directors.
The Central Government may also prescribe a minimum number of independent directors for other classes of public companies.
If one-third results in a fraction, it is rounded off to the next whole number.
149(5).
Companies existing before the commencement of this Act must comply with the requirement of appointing independent directors within one year from the commencement of the Act or from the date of notification of the relevant rules.
149(6).
An independent director is a director other than a managing director, whole-time director, or nominee director who meets the following conditions:
Integrity and Expertise
The Board must believe that the person has integrity, relevant expertise, and experience.
Not a Promoter or Related to Promoters/Directors
The person should not be, and should never have been, a promoter of the company, its holding, subsidiary, or associate company.
The person should not be related to any promoter or director of these companies.
No Significant Financial Dealings with the Company
The person should not have any financial relationship with the company, its holding, subsidiary, or associate company, or their promoters/directors, except:
For receiving remuneration as a director, or
For transactions not exceeding 10% of his total income.
Relatives Must Also Meet Certain Conditions
None of the person’s relatives should:
(a). Hold securities in the company or its group companies beyond ₹50 lakh or 2% of paid-up capital, whichever is higher.
(b). Owe money (be indebted) to the company or its related entities beyond the prescribed limits.
(c). Have given any guarantee or security for a third party’s loan to the company or its related entities.
(d). Have financial dealings with the company or its related entities amounting to 2% or more of their gross turnover or total income.
No Recent Employment or Key Position in the Company
The person (or their relatives) must not have been a KMP or employee of the company or its group companies in the last three financial years.
For a relative, being an employee in the past is allowed.
No Close Association with Professional Firms
The person (or relatives) must not be a partner, proprietor, or employee of a firm of:
Auditors,
Company Secretaries,
Cost Accountants, or
Legal or consulting firms,
If such a firm had transactions amounting to 10% or more of its gross turnover with the company or its group companies in the last three years.
No Substantial Shareholding or Control
The person (along with relatives) should not hold 2% or more of the total voting power of the company.
No Connection with Certain Non-Profit Organisations
The person should not be a CEO or director of any non-profit organisation that:
Receives 25% or more of its funds from the company or its promoters.
Holds 2% or more of the total voting power of the company.
Other Prescribed Qualifications
The person must also meet any other qualifications or requirements prescribed under the rules.
149(7).
Every independent director must submit a declaration confirming that he meets the independence criteria under 149(6).
This declaration must be given at the first Board meeting in which he participates, at the first meeting of every financial year.
The declaration must also be given whenever there is any change in circumstances that could affect his independence.
Explanation:
A Nominee Director means a director nominated by a financial institution under any law, or by the Central Government, State Government, or any other person, to represent their interests on the Board of the company.
149(8).
The company and its independent directors must follow the provisions laid down in Schedule IV, which contains the Code for Independent Directors.
149(9).
Independent directors are not entitled to any stock options.
They may receive remuneration by way of fees for attending meetings, reimbursement of expenses, and profit-related commission approved by the members.
If the company has no profits or inadequate profits, they may receive remuneration in accordance with Schedule V, excluding sitting fees.
149(10).
An independent director may hold office for a term of up to five consecutive years.
An independent director can be reappointed by passing a special resolution in the general meeting, with disclosure of the reappointment in the Board’s report.
149(11).
No independent director can hold office for more than two consecutive terms.
After completing two terms, he may be reappointed only after a cooling-off period of three years.
During this three-year period, he cannot be associated with the company in any capacity, directly or indirectly.
Any tenure served before the commencement of this Act will not be counted towards these terms.
149(12).
Liability of Independent and Non-Executive Directors
Independent directors and non-executive directors are liable only for acts or omissions committed by the company:
With their knowledge (through Board processes).
With their consent or connivance.
Where they failed to act diligently.
149(13).
The provisions relating to retirement of directors by rotation under section 152(6) and (7) do not apply to the appointment of independent directors.
Section 150. Manner of selection of independent directors and maintenance of data bank of independent directors.
150(1).
An independent director can be chosen from a databank that contains the names, addresses, and qualifications of people who are eligible and willing to act as independent directors.
This databank is maintained by a body, institute, or association that has expertise in creating and managing such records.
This body , institute or association will be notified by the Central Government.
The databank is made available on their website for companies to use while appointing independent directors.
However, the company itself is responsible for conducting proper due diligence before selecting a person from the databank.
150(2).
The appointment of an independent director must be approved by the shareholders in a general meeting (as per section 152(2)).
The notice for the meeting must include an explanatory statement giving reasons and justification for selecting that particular person as an independent director.
150(3).
The databank must be created and maintained as per rules prescribed by the Central Government, containing details of persons who are willing to act as independent directors.
150(4).
The Central Government may also prescribe the detailed manner and procedure for the selection of independent directors who meet the qualifications and requirements laid down in section 149.
Section 151. Appointment of director elected by small shareholders
A listed company (a company whose shares are traded on a stock exchange) may appoint one director who is elected by small shareholders.
The process of election, along with the terms and conditions of such appointment, shall be laid down and prescribed by the Central Government through rules.
The idea is that , even shareholders with small investments have a voice in company management and their interests are protected.
Explanation:
The term Small Shareholders refers to shareholders who hold shares with a nominal value not exceeding ₹20,000, or any other amount as may later be specified by the government.
Section 152. Appointment of directors
152(1).
If the articles of association of a company do not mention who the first directors will be, then:
The subscribers to the MOA , that is, the individuals who originally formed the company, will automatically become its first directors.
In the case of a One Person Company (OPC), the sole member is treated as the first director.
This is done until that sole person appoints another person as director according to this section.
152(2).
Except where the Act provides otherwise, all directors must be appointed by the shareholders in a general meeting.
Directors cannot usually appoint themselves or others and the appointment requires shareholder approval.
152(3).
A person cannot be appointed as a director unless they have been allotted a Director Identification Number (DIN) under section 154 or any other identification number prescribed under section 153.
The DIN system ensures that all directors are registered in a central record for transparency and traceability.
152(4).
Any person proposed to be appointed as a director, whether in a general meeting or by any other method, must:
(a) .Provide their DIN or prescribed identification number.
(b). Submit a declaration stating that they are not disqualified from being appointed as a director under the Companies Act.
152(5).
A person appointed as a director must provide written consent to hold the position.
This consent must be filed with the Registrar of Companies within 30 days of the appointment.
In the case of independent directors, the explanatory statement attached to the notice of the meeting must include a statement from the Board of Directors confirming that the proposed person meets all the independence criteria under the Act.
152(6).
(a).
If the company’s Articles of Association do not state that all directors retire at every AGM, then:
At least two-thirds of the total number of directors must be directors liable to retire by rotation.
These directors are appointed by shareholders in the general meeting.
(b).
The remaining directors, if any, are also appointed by the shareholders, subject to what is stated in the company’s articles of association.
(c).
At every AGM, one-third of the directors liable to retire by rotation must retire.
If the total number of such directors is not a multiple of three, then the number nearest to one-third shall retire.
(d).
The directors who have been longest in office since their last appointment will retire first.
If two or more directors were appointed on the same day, the retiring director or directors will be decided by lot.
(e).
The vacancy caused by retirement may be filled in the same meeting by reappointing the retiring director or by appointing someone new.
Explanation.
Independent directors are not counted when calculating the total number of directors for the purpose of determining rotational retirement.
152(7).
If the position of a retiring director is not filled at the meeting:
(a).
The meeting automatically stands adjourned to the same day, time, and place in the following week.
(b).
If the vacancy is still not filled in the adjourned meeting and no resolution is passed to not fill the vacancy, then:
The retiring director is deemed to have been reappointed, unless:
A resolution for his reappointment was proposed but not approved,
He has given a written notice stating he does not wish to be reappointed,
He is disqualified or not qualified to be a director,
A special or ordinary resolution is required for his appointment but has not been passed, or
The provisions of section 162 (appointment of multiple directors through a single resolution) apply.
Explanation:
The term retiring director here refers to a director who retires by rotation.
Section 153. Application for allotment of Director Identification Number
Any individual who intends to be appointed as a director of a company must first apply for a Director Identification Number (DIN).
The application must be made to the Central Government, which is responsible for issuing the DIN.
The application has to be made in the prescribed form, in the manner specified, and must be accompanied by the prescribed fee.
The DIN serves as a unique identification number for directors similar to a permanent ID so that the government can track the director’s:
Appointments.
Directorships.
Compliance history across different companies.
The Central Government may decide that any other type of identification number can be treated as a DIN for the purposes of the Companies Act.
If an individual already holds or acquires such a prescribed identification number, then:
They may not be required to apply separately for a DIN.
The requirement may apply in a modified manner as prescribed by the government.
Section 154. Allotment of Director Identification Number
The Central Government is the body responsible for processing and approving applications for the allotment of a Director Identification Number (DIN).
The government is required to allot the DIN within one month from the date it receives a valid application made under Section 153.
The DIN will be allotted in the manner prescribed by the government.
So the procedure, documentation, and mode of communication (such as electronic issuance) will follow specific rules framed under the Companies Act.
Section 155. Prohibition to obtain more than one Director Identification Number
Any individual who has already been allotted a DIN under Section 154 is strictly prohibited from applying for or possessing another DIN.
The DIN serves as a unique identification number for directors across all companies in India.
Allowing multiple DINs for the same person could lead to fraud, confusion, or manipulation of company records.
Section 156. Director to intimate Director Identification Number
Once a director receives their DIN from the Central Government, they must formally inform the company.
The Director must also inform all companies where they hold the position of director.
This intimation must be done within one month from the date on which the director receives the DIN.
The company will then use this information to update its records with the Registrar of Companies (ROC) as required under the next section (Section 157).
The rule applies to every existing director, whether they are serving in one or multiple companies, they must intimate their DIN to each company separately.
Section 157. Company to inform Director Identification Number to Registrar
157(1).
Every company must submit the DINs of all its directors to the Registrar of Companies (ROC) or any other authority as may be specified by the Central Government.
This must be done within 15 days from the date the company receives the intimation from its directors under Section 156.
The information must be provided in the prescribed form and manner, along with the prescribed filing fees (or additional fees, if delayed).
157(2).
If the company fails to furnish the required DIN details within the given time frame:
The company will be liable to pay a penalty of ₹25,000.
If the failure continues, there will be an additional penalty of ₹100 per day after the first day of delay, subject to a maximum of ₹1,00,000.
Similarly, every officer of the company who is in default will face the same penalty:
₹25,000 initially and ₹100 per day for continuing failure, capped at ₹1,00,000.
Companies must treat this as a mandatory reporting obligation. Non-compliance attracts monetary penalties both for the company and its officers.
Section 158. Obligation to indicate Director Identification Number
Any person or company filing or submitting: A return, information, or particulars under the Companies Act must comply with this requirement.
If the document:
Relates to a director.
Refers to a director in any manner.
Then the Director Identification Number (DIN) of that director must be mentioned in the document.
All official filings or records involving a director such as annual returns, appointment or resignation filings, other statutory submissions the DIN must be quoted.
Section 159. Penalty for default of certain provisions.
If any individual or company director fails to comply with the requirements mentioned in:
Section 152 (appointment of directors)
Section 155 (restriction on multiple DINs)
Section 156 (intimation of DIN to company), they will be considered in default.
Such a person will be liable to pay a penalty up to ₹50,000.
If the default continues even after the initial penalty, an additional penalty will apply for each day the default continues until it is rectified.
Section 160. Right of persons other than retiring directors to stand for directorship
160(1).
A person who is not a retiring director may be appointed as a director at any general meeting if the following conditions are fulfilled:
He himself, or a member intending to propose him as a director, gives a written notice under his hand to the company’s registered office.
The notice has to be given at least 14 days before the meeting.
2.
The notice must be accompanied by a deposit of ₹1,00,000 (or such higher amount as may be prescribed).
3.
The deposit shall be refunded if the proposed person:
(a). Gets elected as a director.
(b). Gets more than 25% of the total valid votes cast (either on show of hands or on poll) for that resolution.
Provided that the requirement of deposit shall not apply in the following cases:
(a). Where the appointment is of an independent director; or
(b). Where the person is recommended by the Nomination and Remuneration Committee if constituted under Section 178(1)/
(c). Where the person is recommended by the Board of Directors in case the company is not required to have a Nomination and Remuneration Committee.
160(2).
The company shall inform its members about the candidature of the person proposed for appointment as a director in such manner as may be prescribed.
Section 161. Appointment of additional director, alternate director and nominee director.
161(1).
The company’s Articles of Association may give the Board of Directors the power to appoint an additional director at any time.
This person cannot be someone who failed to get appointed as a director in a general meeting.
The additional director will hold office until the next annual general meeting or the date on which that meeting should have been held, whichever is earlier.
161(2).
The Board of Directors may, if authorised by the articles or by a resolution passed in a general meeting, appoint an alternate director to act in place of another director who is absent from India for at least three months.
The person appointed as an alternate director cannot already be holding another alternate directorship or directorship in the same company.
No person can be appointed as an alternate director for an independent director, unless he himself qualifies to be an independent director.
The alternate director’s term ends when:
The original director returns to India.
The original director’s term naturally ends.
If the original director’s term ends before he returns, then automatic reappointment (if any) applies to the original director, not the alternate.
161(3).
The Board may, if allowed by the articles, appoint a nominee director .
A nominee director is a person nominated:
By any institution under a law or agreement, or
By the Central or State Government based on their shareholding in a Government company.
161(4).
If a director appointed in a general meeting leaves office before his term ends, the Board may fill that casual vacancy in a Board meeting.
This appointment must be approved by the members in the next general meeting.
The new director will hold office only till the original director’s term would have normally ended.
Section 162. Appointment of directors to be voted individually
162(1).
In a company’s general meeting, each director must be appointed through a separate resolution.
This means you cannot appoint two or more directors together in a single resolution.
Unless the members present at the meeting unanimously agree (i.e., there is no vote against the proposal to move such a combined motion).
162(2).
If any company ignores this rule and passes a single resolution to appoint multiple directors without unanimous consent, then:
That resolution is invalid (void) even if no one objected at that time.
162(3).
Any motion that proposes to approve or nominate a person for appointment as a director will be treated as a motion for his appointment itself.
Section 163. Option to adopt principle of proportional representation for appointment of directors
The Articles of Association of a company may provide for the appointment of directors based on the principle of proportional representation.
At least two-thirds of the total number of directors can be appointed in this manner.
The appointment can be made through a single transferable vote, a system of cumulative voting, or any other method following proportional representation.
These appointments are made once every three years.
If a casual vacancy arises among such directors, it must be filled as provided under Section 161(4) of the Companies Act, 2013.
Section 164. Disqualifications for appointment of director
164(1).
A person is not eligible for appointment as a director of a company if:
(a).
He is of unsound mind and has been declared so by a competent court.
(b).
He is an undischarged insolvent.
(c).
He has applied to be adjudicated as an insolvent, and the application is still pending.
(d).
He has been convicted by a court for any offence (whether involving moral turpitude or not) and sentenced to imprisonment for at least six months.
After such imprisoment, five years have not yet passed since the expiry of that sentence.
However, if a person has been convicted and sentenced to imprisonment for seven years or more then:
He is permanently disqualified from being appointed as a director in any company.
(e).
A court or Tribunal has passed an order disqualifying him from being appointed as a director, and that order is still in force.
(f).
He has failed to pay any call money due on shares held by him (alone or jointly) for six months after the last date fixed for payment.
(g).
He has been convicted of an offence related to related party transactions under section 188 within the last five years.
(h).
He has not complied with 152(3).
This is regarding obtaining and furnishing a valid Director Identification Number.
(i).
He has not complied with 165 (1).
This is regarding the limit on the number of directorships a person can hold).
164(2).
A person who is or has been a director of a company will also be disqualified from reappointment or appointment in any other company if that company:
(a) Has not filed its financial statements or annual returns for any continuous period of three financial years.
(b) Has failed to repay deposits accepted by it, pay interest on such deposits, redeem any debentures on the due date, pay interest on such debentures
, or pay any declared dividend, and such failure continues for one year or more.
In such cases, the director is disqualified for a period of five years from the date the company failed to meet these obligations.
Provided that if a person is newly appointed as a director in a company that is already in default under clause (a) or (b), he will not incur the disqualification for a period of six months from the date of his appointment.
164(3).
A private company may, through its AOA , include additional disqualifications for the appointment of a director beyond those mentioned in 164(1) and 164(2).
But the disqualifications mentioned in clauses (d), (e), and (g) of 164(1) will continue to apply even if the person has filed an appeal or petition against the order of conviction or disqualification.
165. Number of directorships
165(1).
No person, after the commencement of this Act, shall hold office as a director (including any alternate directorship) in more than twenty companies at the same time.
However, out of these, the maximum number of public companies in which a person can be appointed as a director shall not exceed ten.
Explanation.
For calculating the limit of ten public companies, directorships held in private companies that are holding or subsidiary companies of a public company will also be counted.
Explanation.
For calculating the overall limit of twenty directorships, directorships in dormant companies will not be counted.
165(2).
The members of a company may, by passing a special resolution, specify a lower limit on the number of companies in which a director of that company may act as director.
165(3).
If, before the commencement of this Act, a person was already holding directorships in more companies than allowed under 165(1), he must, within one year from the commencement of the Act:
(a). Choose not more than the permitted number of companies in which he wishes to continue as a director.
(b). Resign from his directorships in the remaining companies.
(c). Inform each of the companies where he was a director and the ROC about his decision and the companies he chooses to retain.
165(4).
The resignation made under clause (b) of 165(3) takes effect immediately when it is sent (dispatched) to the concerned company.
165(5).
A person cannot continue to act as director in more companies than the permitted limit:
(a) After sending his resignation from the excess companies as required under clause (b) of sub-section (3), or
(b) After the expiry of one year from the commencement of this, whichever occurs earlier.
165(6).
If a person accepts an appointment as a director in violation of this section, he shall be liable to a penalty of two thousand rupees for each day after the first day of such violation, subject to a maximum of two lakh rupees.
Section 166: Duties of Directors
166(1).
Every director must act in accordance with the company’s Articles of Association, which set the internal rules and limits for managing the company.
166(2).
A director must act in good faith to:
(a). Promote the company’s objectives.
(b). Work for the benefit of all shareholders as a whole.
(c). Act in the best interests of the company, its employees, the shareholders, the community, and the environment.
166(3).
A director must perform his duties with due and reasonable care, skill, and diligence.
He should also exercise independent judgment and not merely follow the directions of others.
166(4).
A director must avoid any situation where his personal interest, whether direct or indirect, conflicts or may conflict with the interest of the company.
166(5).
A director must not seek to gain any undue advantage for himself, his relatives, partners, or associates.
If he gains such an advantage, he must repay the entire amount to the company.
166(6).
A director cannot transfer or assign his office to another person. Any such transfer or assignment is void.
166(7).
If a director contravenes any of these provisions, he is liable to a fine of not less than ₹1,00,000 and up to ₹5,00,000.
Section 167: Vacation of Office of Director
167(1).
A director’s office becomes vacant if any of the following situations occur:
(a).
If the director incurs any disqualification mentioned in Section 164.
Exception:
If the disqualification is under Section 164(2) the director vacates office in all other companies except the defaulting company.
(b).
If the director does not attend any Board meeting for 12 months, whether or not leave of absence was granted.
Continuous absence from all meetings for a year leads to automatic loss of directorship.
(c).
If he acts in contravention of Section 184, by entering into a contract or arrangement in which he has a direct or indirect interest, without proper disclosure
or approval.
(d).
If he fails to disclose his interest in any contract or arrangement as required under Section 184.
(e).
If he becomes disqualified by an order of a court or tribunal.
(f).
If he is convicted by a court for any offence (whether involving moral turpitude or not) and sentenced to imprisonment for at least six months.
However, in cases of (e) and (f), the office is not vacated immediately.
The director retains office:
(i).
The director does not immediately lose office.
He continues as a director for 30 days from the date of the conviction or the order of disqualification.
(ii).
If he files an appeal or petition against that conviction or order within those 30 days, then:
He can continue to hold office until 7 days after the appeal or petition has been decided.
(iii).
If he files a further appeal or petition within those 7 days, then he can continue to hold office until that final appeal or petition is fully decided.
(g).
If he is removed from office under any provision of the Companies Act.
(h).
If his appointment was due to holding a specific position in a holding, subsidiary, or associate company, and he ceases to hold that position, he
automatically vacates the directorship.
167(2). If a person continues to act as a director even after knowing his office has become vacant, he is liable to a fine of ₹1,00,000 to ₹5,00,000.
167(3).
If all directors vacate their offices 167(1) then:
The promoter of the company will hold the office.
If there is no promoter, the Central Government, shall appoint the required number of directors, who will hold office until new directors are appointed in the next general meeting.
167(4).
A private company may, through its Articles of Association, provide for additional grounds for vacating a director’s office beyond those listed above
Section 168. Resignation of director
168(1).
A director can resign from his office by giving a written notice to the company.
Once the company receives this notice, the Board of Directors must take note of it.
The company must then inform the Registrar of Companies within the prescribed time, manner, and form.
It must also mention the resignation in the Directors’ Report presented at the next general meeting.
A director may also send a copy of his resignation, along with the detailed reasons for it, directly to the Registrar within thirty days of his resignation.
168(2).
The resignation takes effect from the date the company receives the notice, or from the date specified by the director in his notice, whichever is later.
However, even after resigning, the director remains liable for any offences that occurred during his tenure.
168(3). If all directors of a company resign or vacate their offices under Section 167, the promoter of the company, or in his absence, the Central Government, must appoint the required number of directors. These directors will hold office until new directors are appointed by the company in a general meeting.
Section 169. Removal of directors
169(1).
A company can remove a director before the expiry of his term by passing an ordinary resolution in a general meeting, after giving the director a fair opportunity to be heard.
Exception:
This does not apply to a director appointed by the Tribunal under Section 242 (during cases of oppression or mismanagement).
If the director is an independent director who has been re-appointed for a second term under Section 149(10), he can be removed only through a special resolution, not an ordinary one, and after being given a reasonable opportunity to be heard.
This section does not apply to companies that have chosen to appoint directors using the principle of proportional representation under Section 163.
169(2).
A special notice is required for any resolution to remove a director, or appoint someone else in his place at the same meeting.
169(3).
Once the company receives notice of such a resolution, it must immediately send a copy of the notice to the concerned director.
That director whether or not he is a member of the company has the right to be heard on that resolution during the meeting.
169(4).
If the director being removed sends a written representation to the company explaining his side and asks for it to be shared with the members, then:
(a) The company must, if time permits, mention in the meeting notice that the director has made such a representation.
(b) The company must also send a copy of the representation to all members along with the notice of the meeting.
If the company fails to do so, the director can demand that his representation be read out loud at the meeting.
The Tribunal may prevent the circulation or reading of the representation if it believes the right is being misused to spread defamatory or false statements.
In such cases, the Tribunal may also order the director to pay the company’s legal costs for the application, even if he’s not a formal party to it.
169(5).
If a director is removed, the vacancy may be filled immediately at the same meeting by appointing another director, provided special notice for the new appointment as required in 169(2).
169(6).
The newly appointed director will hold office till the date on which the removed director’s term would have originally expired.
169(7).
If no new director is appointed at that meeting, the vacancy can be filled later as a casual vacancy under the relevant provisions of the Act.
However, the removed director cannot be reappointed by the Board of Directors.
169(8).
This section does not affect two things:
(a) The right of the removed director to claim compensation or damages for termination of his appointment, if he is entitled under his contract or terms of
appointment.(b) The company’s other powers to remove a director under any other provisions of the Companies Act.
170. Register of directors and key managerial personnel and their shareholding
170(1).
Every company must maintain a register at its registered office. This register should contain details (particulars) of:
All its directors, and
All its key managerial personnel (KMP) such as CEO, CFO, company secretary, etc.
The register must also include details of the securities or shares held by each of these persons:
In the company itself.
In its holding company, subsidiary, subsidiary of its holding company, or any associate company.
170(2).
A company must also file a return with the Registrar of Companies (ROC):
Containing all such particulars and related documents,
Within 30 days of the appointment of any director or key managerial personnel, and
Within 30 days of any change (like resignation, removal, or alteration in details).
Section 171. Members’ right to inspect
171(1).
Shareholders/Members have the right to inspect the register that is maintained under Section 170(1).
(i.e., the register of directors and key managerial personnel and their shareholdings).
The register must be open for inspection during business hours.
Members of the company have the right to look at (inspect) it, and they can also take extracts or copies of it.
If members request copies, the company must provide them free of cost within 30 days of receiving the request.
The register must also be kept open for inspection during every Annual General Meeting (AGM).
It should be accessible to anyone attending the AGM, not just members.
171(2).
If the company refuses inspection or fails to send copies within 30 days after a member requests them:
The Registrar of Companies (ROC) can be approached by the member.
On such an application, the Registrar can order the company to immediately allow inspection and supply the required copies.
Section 172. Penalty
When a company fails to comply with any provision under this Chapter (Chapter XI — Appointment and Qualifications of Directors), and there is no specific penalty mentioned for that particular default elsewhere in the Chapter.
In such a case:
The company shall be liable to pay a penalty of ₹50,000.
The officer in default (such as a director or key managerial person responsible) shall also be liable to the same penalty of ₹50,000.
2. If the default continues, then:
An additional penalty of ₹500 per day will be charged for every day the failure continues.
However, the total penalty shall not exceed:
₹3,00,000 for the company, and
₹1,00,000 for the officer in default.
