Management & Administration - Part 1
Section 88. Register of members.
88(1).
Every company is legally required to keep and maintain certain registers in a prescribed format and manner.
These registers are essential for recording ownership and stakeholder information.
The company must maintain the following:
(a). Register of Members
This must show details of each member (shareholder).
It needs to clearly indicate the number and type of equity and preference shares held by each person.
It needs to mention where the member is residing, whether in India or abroad.
(b). Register of Debenture-holders
This records details of all persons or institutions that hold debentures issued by the company.
(c). Register of any other Security Holders
This covers holders of other securities, such as bonds or convertible instruments, apart from shares and debentures.
88(2).
Every register mentioned above must also include an index of names of all persons listed in it.
This index helps in easily locating:
Any shareholder.
Any debenture-holder.
Other security holder in the register.
88(3).
The register and index of beneficial owners maintained by a depository under Section 11 of the Depositories Act, 1996, will be treated as the official register and index for the purposes of the Companies Act, 2013.
Therefore, if shares are held in dematerialised form, the records maintained by the depository (like NSDL or CDSL) will be legally accepted as the company’s own register.
88(4).
If permitted by its Articles of Association, a company may maintain a foreign register outside India.
This foreign register will contain the names and details of members, debenture-holders, security holders, or beneficial owners who reside outside India.
The manner and form of keeping this foreign register are also prescribed by law to ensure authenticity and compliance.
88(5).
If a company fails to maintain any of these required registers or does not keep them properly as per the provisions of 88(1) and 88(2), penalties apply:
The company shall be liable to a penalty of ₹3,00,000.
Every officer in default shall be liable to a penalty of ₹50,000.
Section 89. Declaration in respect of beneficial interest in any share.
89(1).
If the name of a person appears in the company’s register of members as the holder of certain shares, but
That person does not actually hold the beneficial interest in those shares, then:
Such person (The registered owner) must make a declaration to the company.
This declaration must be made within the prescribed time and in the prescribed form.
It must include the name and details of the actual beneficial owner (The person who truly enjoys the benefits of the shares).
89(2).
Any person who holds or acquires beneficial interest in shares of a company.
A person with beneficial interest is someone who actually enjoys the ownership benefits even if the shares are registered in someone else’s name.
Even they must also make a declaration to the company.
This declaration must state:
The nature of their beneficial interest.
The details of the person in whose name the shares are registered.
Any other particulars as may be prescribed.
Therefore, both the nominee/registered holder and the actual owner are required to declare their respective positions to ensure full disclosure.
89(3).
If there is any change in the beneficial interest; for example, if the beneficial owner changes, or the extent of interest changes then both:
The registered holder, and the beneficial owner must make a fresh declaration to the company within 30 days from the date of such change.
89(4).
The Central Government has the authority to make rules regarding:
(a). How beneficial interest is to be held.
(b). How such interests must be disclosed under this section.
89(5).
If any person fails to make a declaration as required under 89(1), 89(2) & 89(3) then penalties apply:
A penalty of ₹50,000 for failure to declare.
An additional penalty of ₹200 per day for continuing default, subject to a maximum penalty of ₹5,00,000.
89(6).
When a company receives a declaration under this section, it must:
(a). Record the details of the declaration in the relevant register.
(b). File a return with the Registrar of Companies (ROC) within 30 days from the date it received the declaration.
89(7).
If the company fails to file, the return within the time limit under 89(6) then:
The company shall be liable to a penalty of ₹1,000 per day for each day of default, subject to a maximum of ₹5,00,000.
Every officer in default shall be liable to a penalty up to ₹2,00,000.
89(8).
If a beneficial owner fails to make the required declaration, then:
No rights relating to that share (such as voting rights or dividend claims) can be enforced by him or anyone claiming through him.
So , if you do not disclose your beneficial ownership , you lose your right to exercise or claim benefits associated with those shares until compliance is made.
89(9).
However, this section does not affect the company’s duty to pay dividends to the person whose name is on the register of members (the registered holder).
Once the company pays the dividend to the registered member, its responsibility ends, even if the beneficial owner has not made a declaration.
89(10).
For the purposes of this section (and Section 90), “beneficial interest in a share” includes, whether directly or indirectly, through any arrangement or contract:
(i). The right to exercise or cause to be exercised any or all of the rights attached to such shares (like voting rights).
(ii). The right to receive or participate in any dividend or other distribution relating to such shares.
89(11).
The Central Government may, by notification, exempt certain classes of persons from the requirements of this section/
This is done by the Central Government only if it considers such exemption necessary in the public interest.
This exemption may be conditional or unconditional as specified in the notification.
Section 90. Register of significant beneficial owners in a Company.
90(1).
The rule applies to an individual. who may hold the interest:
Alone, or
Together with others, or
Through one or more persons or trusts,
Including persons or trusts outside India.
The individual must hold a beneficial interest in the shares of a company.
The beneficial interest must be not less than 25%, or such other percentage as may be prescribed.
Such an individual is regarded as a Significant Beneficial Owner (SBO).
An individual is also considered an SBO if he or she has the right to exercise or actually exercises significant influence or control over the company.
A person is considered an SBO even if such shareholding is indirect.
Every such individual must make a declaration to the company, specifying:
The nature of his or her interest.
Other required particulars.
in the prescribed form and within the prescribed time whenever the beneficial interest or rights are acquired or changed.
The Central Government has the power to exempt certain classes of persons from making this declaration, as it may prescribe.
90(2).
Every company is required to maintain a register containing the details of the interests declared by individuals under 90(1) and any subsequent changes.
This register must include the name, date of birth, address, details of ownership in the company, and any other particulars as may be prescribed.
The register must be maintained at the company’s registered office.
90(3).
The register maintained under 90(2) shall be open for inspection by any member of the company upon payment of the prescribed fee.
90(4).
Every company must file a return of its significant beneficial owners and any changes therein with the Registrar of Companies.
This return must contain the:
Names, addresses, and other prescribed details and must be filed within such time, in such form, and in such manner as may be prescribed.
90(4A).
Every company has a duty to take necessary steps to identify an individual who is a significant beneficial owner in relation to the company.
This is done to ensure that such an individual complies with the provisions of this section.
90(5).
A company is required to issue a notice, in the prescribed manner, to any person, whether or not that person is a member of the company, in these cases:
The company knows or has reasonable cause to believe that the person is a Significant Beneficial Owner (SBO) of the company.
The company believes that a person:
Has knowledge of the identity of a Significant Beneficial Owner (SBO).
Knows another person who is likely to have such knowledge.
Was a significant beneficial owner of the company at any time during the 3 years immediately preceding the date of issuing the notice.
This notice must be issued to such persons who are not yet registered as significant beneficial owners in accordance with the requirements of this section.
90(6).
Any person who receives a notice under 90(5) must provide the information required by the company within a period not exceeding thirty days from the date of the notice.
90(7).
If a person fails to provide the required information within the time specified in the company’s notice, or
If the information provided is found to be unsatisfactory, the company must take further action.
1. The company is required to apply to the National Company Law Tribunal (NCLT) within 15 days of the expiry of the period mentioned in the notice.
2. The company’s application should request the Tribunal to issue an order imposing restrictions on the shares in question, which may include:
Restriction on transfer of shares.
Suspension of rights attached to the shares (such as voting or dividend rights).
Any other prescribed restrictions as provided under the law.
90(8).
When a company makes an application to the NCLT under Section 90(7), the Tribunal will follow a fair process before making any decision.
The Tribunal must give an opportunity of being heard to all the parties concerned, including the company and the person affected.
After considering the matter, the Tribunal may pass an order within 60 days from the date of receiving the application.
The Tribunal can also pass an order within any other prescribed period allowed by law.
The Tribunal’s order may impose restrictions on the rights attached to the shares in question.
These restrictions can include restrictions on voting, transfer, or dividend rights until compliance with the law is ensured.
90(9).
The company or any person aggrieved by the order of the Tribunal may apply to the Tribunal for relaxation or removal of the restrictions imposed 90(8).
This application must be made within one year from the date of the Tribunal’s order.
If no such application is filed within a year, the shares will be transferred without any restrictions to the authority constituted under 90(5) of Section 125.
This Authority is the the Investor Education and Protection Fund.
The transfer must be carried out in the manner prescribed by law.
90(9A).
The Central Government is empowered to make rules for carrying out the provisions of this section.
These rules may cover the procedures, forms, and requirements for declarations, maintenance of registers, filings, and related matters.
90(10).
If any person fails to make a declaration as required under 90(1), he or she shall be liable to a penalty of fifty thousand rupees.
In the case of a continuing failure, there will be a further penalty of one thousand rupees for each day after the first day of default.
This default is subject to a maximum of two lakh rupees.
90(11).
If a company fails t0:
Maintain the register as required under 90(2).
Fails to file the information under 90(4).
Does not take the necessary steps under 90(4A).
Denies inspection as provided in 90(3), it will be liable for penalties.
The company shall pay a penalty of one lakh rupees.
In case the failure continues, an additional penalty of five hundred rupees per day after the first day will apply, subject to a maximum of five lakh rupees.
Every officer of the company who is responsible for the default shall pay a penalty of twenty-five thousand rupees.
If the officer’s failure continues, an additional penalty of two hundred rupees per day after the first day will apply, subject to a maximum of one lakh rupees.
90(12).
Any person who:
Will fully provides false or incorrect information.
Suppresses any material information in the declaration made under this section.
Will be held accountable.
Such a person shall be liable to action under Section 447 of the Companies Act.
Section 447 deals with punishment for fraud and may include imprisonment and fines depending on the seriousness of the offence.
Section 91. Power to close register of members or debenture holders or other security holders.
91(1).
A company may close the register of members, the register of debenture-holders, or the register of other security holders for certain periods.
The total closure period in a year cannot exceed forty-five days, and no single closure can exceed thirty days.
The company must give at least seven days’ prior notice of such closure.
The term can be shorter period as specified by the Securities and Exchange Board for listed companies or companies intending to list their securities.
The notice must be given in the manner prescribed by law.
91(2).
If the company closes the register of members, debenture-holders, or other security holders
Without giving the required notice.
With a notice period shorter than prescribed.
For a continuous period or total period exceeding the specified limits,
then the company will be liable for a penalty.
Every officer of the company responsible for the default will also be liable.
The penalty is five thousand rupees for each day the register is kept closed in violation of the rules.
The maximum penalty that can be imposed is one lakh rupees.
Section 92. Annual return.
92(1).
Every company shall prepare an annual return in the prescribed form containing particulars as they stood on the close of the financial year regarding:
Its registered office, principal business activities, and details of holding, subsidiary, and associate companies.
Its shares, debentures, other securities, and shareholding pattern.
Its members and debenture-holders, along with changes since the close of the previous financial year.
Its promoters, directors, and key managerial personnel, along with changes since the close of the previous financial year.
Meetings of members or a class thereof, Board meetings, and committee meetings, along with attendance details.
Remuneration of directors and key managerial personnel.
Penalty or punishment imposed on the company, its directors or officers, including details of compounding of offences and appeals made against such penalty or punishment.
Matters relating to certification of compliances and disclosures as may be prescribed.
Details, as may be prescribed, regarding shares held by or on behalf of Foreign Institutional Investors.
Any other matters as may be prescribed.
The annual return must be signed by a director and the company secretary, or if there is no company secretary, by a company secretary in practice.
For One Person Companies and small companies, the return shall be signed by the company secretary, or if none, by the director.
The Central Government may prescribe an abridged form of annual return for One Person Companies, small companies, and other classes of companies.
92(2).
This requirement applies to a listed company, or a company having prescribed paid-up capital or turnover.
Such a company must file an annual return.
The annual return must be certified by a company secretary in practice.
The certification must be done in the prescribed form.
The certification must confirm that the annual return discloses facts correctly and adequately.
The annual return must also declare that the company has complied with all provisions of the Act.
92(3).
An extract of the annual return in the prescribed form shall form part of the Board’s report.
92(4).
Every company shall file a copy of the annual return with the Registrar within sixty days from the date of the annual general meeting.
If no annual general meeting is held in a year, the return must be filed within sixty days from the date the meeting should have been held.
The return must be filed along with a statement specifying the reasons for not holding the annual general meeting and with prescribed fees or additional fees.
92(5).
If a company fails to file its annual return within the specified period then:
The company and every officer in default shall be liable to a penalty of ten thousand rupees.
In case of continuing failure, a further penalty of one hundred rupees per day after the first day will apply.
This is subject to a maximum of two lakh rupees for the company and fifty thousand rupees for the officer in default.
92(6).
If a company secretary in practice certifies the annual return, and if the certification is not in conformity with the requirements of this section or the rules, then:
The company secretary shall be liable to a penalty of ₹2,00,000 (two lakh rupees).
93. Omitted
Section 94. Place of keeping and inspection of registers, returns, etc.
94(1).
A company must keep the registers required under section 88 and the copies of the annual return filed under section 92 at its registered office.
1. These registers/copies of returns may also be kept at another place in India if more than 1/10th of the total members in the register of reside there.
2. Such alternative location must be approved by a special resolution passed at a general meeting of the company.
3. The period for which these registers, returns, and records must be maintained shall be as prescribed.
94(2).
The registers and their indices, except when closed under the provisions of this Act, shall be open for inspection.
Copies of all returns shall also be open for inspection.
Any member, debenture-holder, other security holder, or beneficial owner can inspect these during business hours without paying any fees.
Any other person may inspect them on payment of the prescribed fees.
94(3).
Any member, debenture-holder, other security holder, beneficial owner, or any other person may:
Take extracts from any register, index, or return without payment of any fee.
Require a copy of any register, entries therein, or return on payment of fees as prescribed.
Certain particulars of the register, index, or return, as prescribed, shall not be available for inspection, extraction, or copying under this section.
94(4).
If any inspection, extraction, or copying required under this section is refused, then:
The company and every officer in default shall be liable to a penalty of one thousand rupees for each day.
This is subject to a maximum of one lakh rupees, for the duration of the refusal or default.
94(5).
The Central Government may, by order, direct immediate inspection of the document.
The Central Government by order may also direct that the required extract be allowed to be taken immediately by the person requiring it.
Section 95. Registers, etc., to be evidence.
The registers, their indices, and copies of annual returns maintained under Sections 88 and 94 are considered prima facie evidence.
Prima Facie essentially means assumed to be correct unless proven otherwise.
Any matter recorded in these documents as required by law is legally accepted as true on first appearance.
These records carry legal credibility for authorities, courts, and other stakeholders.
Section 96. Annual general meeting.
96(1)
Every company, except a One Person Company (OPC), must hold an annual general meeting (AGM) each year.
The notice for the meeting must clearly specify it as an AGM.
There cannot be more than 15 months between two consecutive AGMs.
For the first AGM, it must be held within 9 months of the end of the company’s first financial year.
For subsequent AGMs, they must be held within 6 months from the end of the financial year.
If the first AGM is held as required, the company does not need another AGM in the year of incorporation.
The Registrar of Companies can extend the time for holding an AGM (except the first AGM) by up to 3 months for special reasons.
96(2)
AGMs must be called during business hours (9 a.m. to 6 p.m.) on a day that is not a National Holiday.
The meeting should be held at the registered office or somewhere within the city, town, or village where the registered office is located.
For unlisted companies, the AGM can be held anywhere in India if all members give prior consent in writing or electronically.
The Central Government may exempt certain companies from these provisions, with specific conditions.
National Holiday refers to days officially declared as holidays by the Central Government.
Section 97. Power of Tribunal to call annual general meeting.
97(1).
If a company fails to hold its AGM as required under Section 96, the Tribunal (National Company Law Tribunal) has the power to step in.
Any member of the company can apply to the Tribunal to call or direct the holding of the AGM.
The Tribunal can also give additional directions as it thinks necessary to ensure the meeting happens properly.
The directions can include a rule that even one member present in person or by proxy can be considered a valid meeting.
97(2).
Any general meeting held under the Tribunal’s directions is legally treated as an annual general meeting under the Companies Act.
If a company misses its AGM, the Tribunal can make sure the meeting happens, and that meeting will still count as a valid AGM.
98. Power of Tribunal to call meetings of members.
98(1).
If it is impractical to call or conduct a meeting of a company (other than an AGM) in the usual way:
The Tribunal can step in either on its own initiative (Suo motu) or on the application of any director or member who can vote.
The Tribunal can:
Order the meeting to be called, held, and conducted in any way it considers appropriate.
Give ancillary directions to modify or supplement the rules in the Act or company articles for the meeting.
Include a provision that even one member present in person or by proxy can be considered a valid meeting.
98(2).
Any meeting held according to the Tribunal’s directions is legally valid as a meeting of the company for all purposes.
If a company cannot hold a meeting in the usual way, the Tribunal can arrange it and make it fully valid, even if only one member attends.
Section 99. Punishment for default in complying with provisions of sections 96 to 98.
If a company fails to hold a meeting as required under sections 96, 97, or 98, or fails to follow directions of the Tribunal, then:
The company and every officer in default are liable to a fine.
The fine can be up to ₹1 lakh for the initial default.
If the default continues, an additional fine of up to ₹5,000 per day can be imposed for each day the default continues.
Companies and responsible officers must hold meetings as required and follow Tribunal directions.
If they fail to do so they face significant fines, increasing for ongoing non-compliance.
Section 100. Calling of extraordinary general meeting.
100(1).
The Board of Directors has the authority to call an extraordinary general meeting (EGM) whenever it deems it necessary.
There is a geographical restriction: an EGM of the company, except in the case of a wholly-owned subsidiary of a foreign company, must be held within India.
100(2).
Shareholders also have the right to requisition an EGM. The law specifies:
For companies with share capital, members holding at least one-tenth of the paid-up share capital with voting rights can requisition an EGM.
For companies without share capital, members holding at least one-tenth of total voting power can requisition an EGM.
100(3).
The requisition made by shareholders must:
Specify the matters that the meeting is to consider.
Be signed by all requisitionists.
Be sent to the registered office of the company.
100(4).
If the Board fails to call the meeting within 21 days of receiving a valid requisition:
The requisitionists can call and hold the meeting themselves.
The meeting must be held within 3 months from the date of the requisition.
100(5).
An EGM called by requisitionists (people who request an EGM) must follow the same procedure as if it were called by the Board.
This means that notices, quorum, voting, and other statutory requirements are identical to a Board-called meeting, ensuring legal validity and fairness.
100(6).
Expenses incurred by the requisitionists in calling the meeting must be reimbursed by the company.
These expenses can be recovered from the fees or remuneration of directors who were in default for failing to call the meeting.
This ensures accountability: directors cannot ignore requisitions without bearing financial consequences.
Section 101. Notice of meeting.
101(1).
A general meeting of a company must be called by giving at least 21 clear days’ notice.
Notice can be given either in writing or electronically, as prescribed.
A meeting may be called on shorter notice if consent is obtained from the required members.
For an Annual General Meeting (AGM), consent must come from 95% of members entitled to vote.
For any other General Meeting (EGM):
If the company has a share capital, consent must come from a majority in number of members.
These members must represent at least 95% of the paid-up share capital carrying voting rights.
If the company has no share capital, consent must come from members holding 95% of the total voting power.
Members entitled to vote on only specific resolutions are counted only for those resolutions, not for others.
101(2).
The notice must clearly state the place, date, day, and time of the meeting.
It must also provide a:
Statement of the business to be transacted at the meeting.
Covering ordinary business like approval of accounts.
Special business such as amendments to articles, issuing shares, mergers, etc.
101(3).
The notice must be sent to:
Every member.
The legal representative of any deceased member.
The assignee of an insolvent member, the auditors of the company, and every director.
101(4).
If a notice is accidentally not sent or not received by any member or other person entitled to it, this does not invalidate the proceedings of the meeting.
The meeting remains valid provided that the notice was sent in accordance with the Act.
Section 102. Statement to be annexed to notice.
102(1)
A statement containing material facts must be annexed to the notice of a general meeting for each item of special business.
The statement must include:
Nature of concern or interest (financial or otherwise) in the item for:
Every director and the manager (if any).
Every key managerial personnel.
Relatives of the above persons.
Any other information or facts enabling members to understand the meaning, scope, and implications of the item of business and to make an informed decision.
102(2).
Definition of Special business:
For an Annual General Meeting (AGM), all business is considered special, except:
Consideration of financial statements and reports of the Board of Directors and auditors.
Declaration of any dividend.
Appointment of directors in place of retiring directors.
Appointment and fixing remuneration of auditors.
For any other meeting, all business is considered special.
Additional requirement:
If the special business affects another company, the statement must also disclose the shareholding interest in that other company for:
Promoters, directors, managers, and key managerial personnel
Only if their shareholding is ≥ 2% of the paid-up share capital of that company.
102(3)
If any item of business refers to a document to be considered at the meeting, the statement must specify:
The time and place where the document can be inspected.
102(4)
If there is non-disclosure or insufficient disclosure in the statement:
Any benefit received directly or indirectly by a promoter, director, manager, or key managerial personnel (or their relatives) must be held in trust for the company.
They are liable to compensate the company for the benefit received.
This is in addition to any other legal action under this Act or other laws.
102(5)
If there is default in complying with the provisions of this section:
Every promoter, director, manager, or key managerial personnel in default is liable to a penalty:
₹50,000, or
Five times the amount of benefit accruing to them or their relatives, whichever is higher.
Section 103. Quorum for meetings.
103(1).
The minimum number of members required to hold a valid meeting depends on the type and size of the company:
(a). Public Company:
Up to 1,000 members: 5 members personally present.
1,001 to 5,000 members: 15 members personally present.
More than 5,000 members: 30 members personally present.
(b). Private Company:
Only 2 members personally present are required.
The articles of association of a company may provide for a larger number, which will then apply.
103(2).
If the required number of members is not present within 30 minutes from the scheduled time:
(a). Meeting called by the Board:
The meeting is adjourned to:
Same day next week, same time and place, or
Another day, time, and place as decided by the Board.
The company must give at least 3 days’ notice of the adjourned meeting:
Either individually to members, or
By newspaper advertisement (one in English and one in the local language) circulating where the registered office is located.
(b). Meeting called by requisitionists under Section 100:
The meeting stands cancelled if quorum is not present.
103(3).
If the adjourned meeting still doesn’t have the required quorum within 30 minutes:
Then the members present at that time are considered sufficient to form the quorum.
Section 104. Chairman of meetings.
104(1).
Unless the articles of association provide otherwise, the members present personally at the meeting:
Elect one of themselves to act as Chairman.
The election is done by a show of hands.
104(2).
If a poll is demanded on the election of the Chairman:
The poll must be taken immediately according to the Act’s provisions.
The person elected as Chairman on the show of hands continues to act as Chairman until the poll result is declared.
If the poll results in a different person being elected, that person becomes Chairman for the remainder of the meeting.
105. Proxies.
105(1).
Any member entitled to attend and vote at a company meeting can appoint another person as a proxy to attend and vote on their behalf.
Limitations:
A proxy cannot speak at the meeting.
A proxy can vote only on a poll.
This provision does not apply to companies without share capital, unless the articles provide otherwise.
The Central Government can restrict certain classes of companies from allowing proxies.
A proxy can act on behalf of up to 50 members and a limited number of shares, as prescribed.
105(2).
Every notice calling a meeting must clearly state that a member:
Is entitled to appoint a proxy.
May appoint one or more proxies, if allowed.
A proxy need not be a member of the company.
105(3).
If a company fails to mention the right of proxy in the meeting notice, every officer responsible is liable to a fine of ₹5,000.
105(4).
Articles of a company may require instruments appointing proxies to be deposited earlier than 48 hours before the meeting.
For compliance, 48 hours before the meeting is treated as the minimum period for depositing proxy instruments.
105(5).
If the company sends invitations to appoint proxies at its expense, any officer issuing or authorising such invitations is liable to a penalty of ₹50,000.
Exceptions:
If a member requests a proxy form or list of persons willing to act as proxy, and it is provided on request, the officer is not liable.
105(6).
A proxy instrument must:
Be in writing.
Be signed by the appointer or their authorized attorney.
If the appointer is a body corporate, the proxy must be under the corporate seal or signed by an authorized officer/attorney.
105(7).
If the proxy instrument follows the prescribed form, it cannot be challenged for failing to comply with special requirements in the company’s articles.
105(8).
Members entitled to vote can inspect the proxy instruments deposited for the meeting:
Timeframe: From 24 hours before the meeting until its conclusion.
Notice: Must give at least 3 days’ written notice.
Inspection can be done during business hours of the company.
