(1) This Act may be called the Companies Act, 2013.

(2) It extends to the whole of India.

(3) This section shall come into force at once and the remaining provisions of this Act shall come into force on such date¹ as the Central Government may, by notification in the Official Gazette, appoint and different dates may be appointed for different provisions of this Act and any reference in any provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

(4) The provisions of this Act shall apply to--

(a) companies incorporated under this Act or under any previous company law;

(b) insurance companies, except in so far as the said provisions are inconsistent with theprovisions of the Insurance Act, 1938 (4 of 1938) or the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);

(c) banking companies, except in so far as the said provisions are inconsistent with the provisions of the Banking Regulation Act, 1949 (10 of 1949);

(d) companies engaged in the generation or supply of electricity, except in so far as the saidprovisions are inconsistent with the provisions of the Electricity Act, 2003 (36 of 2003);

(e) any other company governed by any special Act for the time being in force, except in so far as the said provisions are inconsistent with the provisions of such special Act; and

(f) such body corporate, incorporated by any Act for the time being in force, as the Central Government may, by notification, specify in this behalf, subject to such exceptions,

modifications or adaptation, as may be specified in the notification.To be deleted

, 1. 12th September, 2013 -- S. 2(1),(3), (4), (5), (6), (8), (9), (10), (11), (12), (14), (15), (16), (17), (18), (19), (20), (21), (22), (24), (25), (26), (27), (28), (29) [exceptsub-clause (iv)], (30), (32), (33), (34), (35), (36), (37), (38), (39), (40), (43), (44), (45), (46), (49), (50), (51), (52), (53), (54), (55), (56), (57), (58), (59), (60), (61),(63), (64), (65), (66), (67) [except sub-clause (ix)], (84), (86),(87) [except the proviso and Explanation (d)], (88), (89), (90), (91), (92), (93), (94), (95); s. 19, 21, 22,23 [except clause (b) of sub-section (1) and sub-section (2)], 24, 25 [except sub-section (3)], 29, 30, 31, 32, 33 [except sub-section (3)], 34, 35 [except clause (e) ofsub-section (1)], 36, 37, 38 39 [except sub-section (4)], 40 [except sub-section (6)], 44, 45, 49, 50, 51, 57, 58, 59, 60, 65, 69, 70 [except sub-section (2)], 86, 91, 100 [except sub-section (6)], 102, 103, 104, 105 [except the third and fourth provisos of sub-section (1) and sub-section (7)], 106, 107, 111, 112, 113 [except clause (b) ofsub-section (1)], 114, 116, 127, 133, 161 [except sub-section (2)], 162, 163, 176, 180, 181, 182, 183, 185, 192, 194,195, 202, 379, 382, 383, 386 [except clause (a)],394, 405, 407, 408, 409, 410, 411, 412, 413, 414, 439, 443, 444, 445, 446, 447, 448, 449, 450, 451, 452, 453, 456, 457, 458, 459, 460, 461, 462, 463, 467, 468, 469,470, vide notification No. S.O. 2754(E), dated 12th September, 2013, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

1st April 2014 S. 2(2), (7), (13), (31), (41), (42), (47), (48), (62), (83), (85) and Explanation (d) of clause (87); ss. 3, 4, 5, 6; s. 7 [except sub-section (7)]; s. 8 [except sub-section (9)]; ss. 9, 10, 11, 12 and 13; s. 14 [except second proviso to sub-section (1) and sub-section (2)]; ss. 15, 16, 17 and 18; section 20; clause (b) ofsub-section (1) and sub-section (2) of section 23; sub-section (3) of section 25; ss. 26, 27 and 28; sub-section (3) of s. 33; clause (e) of sub-section (1) of s. 35; subsection (4) of s. 39; sub-section (6) of s. 40; ss. 41, 42 and 43; ss. 46 and 47; ss. 52, 53 and 54; s. 55 [except sub-section (3)]; s. 56; s. 61 [except proviso to clause(b) of sub-section (1)]; s. 62 [except sub-sections (4) to (6)]; ss. 63 and 64; ss. 67 and 68; sub-section (2) of section 70; s. 71 [except sub-sections (9) to (11)]; ss. 72and 73; sub-section (1) of s. 74; ss. 76, 77, 78, 79, 80, 81, 82, 83, 84 and 85; ss. 87, 88, 89 and 90; ss. 92, 93, 94, 95 and 96; sub-section (6) of s.100; s. 101; third andfourth provisos to sub-section (1) and sub-section (7) of s. 105; ss. 108, 109 and 110; clause (b) of sub-section (1) of s. 113; s. 115; ss. 117and 118; s. 119 [exceptsub-section (4)]; ss. 120, 121, 122 and 123; s. 126; ss. 128 and 129; s.134; ss. 136, 137, 138 and 139; s. 140 [except second proviso to sub-section (4) and sub-section(5)]; ss. 141, 142, 143, 144, 145, 146, 147, 148, 149, 150, 151, 152, 153, 154, 155, 156, 157, 158, 159 and 160; sub-section (2) of s. 161; ss. 164, 165, 166, 167 and168; s. 169 [except sub-section (4)]; ss. 170, 171, 172, 173, 174 and 175; ss. 177, 178 and 179; s. 184; ss. 186, 187, 188, 189, 190 and 191; s. 193; ss. 196, 197, 198,199, 200 and 201; ss. 203, 204, 205, 206, 207, 208, 209, 210 and 211; s. 212 [except references of sub-section (10) of s. 66, sub-section (5) of s. 140], s. 213, subsection (1) of s. 251 and sub-section (3) of s. 339 made in sub-section (6) and also sub-sections (8) to (10)]; ss. 214, 215; s. 216 [except sub-section (2)]; s. 217; ss.219 and 220; s. 223; s. 224 [except sub-sections (2) and (5)]; s. 225; ss. 228 and 229; ss. 366, 367, 368and 369; s. 370 (except the proviso); s. 371; s. 374; ss. 380and381; ss. 384 and 385; clause (a) of s. 386; ss. 387, 388, 389 and 390; sub-section (1) of s. 391; ss. 392 and 393; ss. 395, 396, 397 and 398; s. 399 [except reference ofword Tribunal in sub-section (2)]; ss. 400, 401, 402, 403 and 404; s. 406; s. 442; ss. 454and 455; s. 464; Schs. I, II, III, IV, V and VI, vide notification No. S.O. 902(E),dated 26th March, 2014, see Gazette of India, Extraordinary, Part II, sec.3(ii).

1st April, 2014 -- S. 135 and Sch. VII, vide notification No. S.O. 582(E), dated 27th February, 2014, see Gazette of India, Extraordinary, Part II, sec. 3 (ii).

6th June, 2014 "Sub-sections (2) and (3) of s. 74, vide notification No. S.O. 1459(E), dated 6th June, 2014, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

13th January, 2016 -- S. 125(5), (6) [except with respect to the manner of administration of the Investor Education and Protection Fund] and (7), vide notification No.S.O. 125(E), see Gazette of India, Extraordinary, Part II, sec. 3(ii).

18th May, 2016 --S. 2(29) (iv), ss. 435 to 438 and s. 440, vide notification No. S.O. 1795(E), dated 18th May, 2016, see Gazette of India, Extraordinary, Part II, sec.3(ii).

1st June, 2016 --S. 7(7) [except clause (c) and (d)], s. 14(2), second proviso to sub-section (1) of s. 14, s. 55 (3), proviso to clause (b) of sub-section (1) of s. 61; s. 62(4) to (6), s. 71 (9), (10) and (11), s. 75; s. 97; s. 98 and s. 99; S. 119 (4), s. 130 and 131; second proviso to sub-section (4) and (5) of s. 140, s. 169(4), s. 213, s. 216(2), s. 218, s. 221, s. 222, s. 224 (5), ss. 241, 242 [except clause (b) of sub-section (1), cls. (c) and (g) of sub-section (2), 243, 244 and 245; Reference of word"Tribunal" s. 399 (2),ss. 415 to 433, s. 434 (1) (a) and (b) & (2), s. 441and 466, vide notification No. S.O. 1934(E), dated 1st June, 2016, see Gazette of India,Extraordinary Part II, sec. 3(ii).

7th September, 2016 -S. 124, s. 125 (1) to (4), (6) [with respect to the manner of administration of the Investor Education and Protection Fund] and (8) to (11) videNotification No. S.O. 2866(E), dated 5th September, 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

9th September, 2016 -- S. 227, 242 (1) (b), (2) (c) & (g), s. 246, Ss. 337 to 341 (to the extent of their applicability for s. 246), vide notification No. S.O. 2912(E), dated9th September, 2016, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

15th December, 2016-S. 2 (23), s.7 (7) (c) and (d), s. 8 (9), s. 48, s. 66, s. 224 (2), s. 226, s. 230 [except sub-section (11) and (12)], and ss. 231 to 233, ss. 235 to 240,ss. 270 to 288, ss. 290 to 303, ss. 324, ss. 326 to 365, proviso to s. 370, ss. 372 to 373, ss. 375 to 378, s. 391 (2), s. 434 (1) cl. (c) vide notification No. S.O. 3677(E),dated 7th December, 2016, see Gazette of India, Extraordinary Part II, sec. 3 (ii).

26th December, 2016 --Ss. 248 to 252, vide notification No. S.O. 4167(E), dated 26th December, 2016, see Gazette of India, Extraordinary Part II, sec. 3 (ii).

13th April, 2017 -- S. 234, vide notification No. S.O. 1182(E), dated 13th April, 2017, see Gazette of India, Extraordinary Part II, sec. 3 (ii).

24th August, 2017 --S. 212 (8), (9) and (10), vide notification No. S.O. 2751(E), dated 24th August, 2017, see Gazette of India, Extraordinary Part II, sec. 3 (ii).

20th September, 2017 --Proviso to clause (87) of s. 2, vide notification No. S.O. 3086(E), dated 20th September, 2017, see Gazette of India, Extraordinary Part II, sec.3 (ii).

18th October, 2017 --S. 247, vide notification No. S.O. 3393(E), dated 18th October, 2017, see Gazette of India, Extraordinary Part II, sec. 3(ii).

21st March, 2018- S. 132 (3) and (11), vide notification No. S.O. 1316(E), dated 21st March, 2018, see Gazette of India, Extraordinary Part II, sec. 3(ii).

1st October, 2018 -- S 132 (1) and (12), vide notification No. S.O. 5098(E), dated 1st October, 2018, see Gazette of India, Extraordinary Part II, sec. 3(ii).

24th October, 2018 -- S 132 (2), (4), (5), (10), (13), (14) and (15) vide notification No. S.O. 5385(E), dated 24th October, 2018, see Gazette of India, Extraordinary PartII, sec. 3(ii).

30th January, 2019 -- S465in so far as they relate to the repeal of the Companies Act, 1956 (1 of 1956) that in except in so far as they relate to the repeal of theRegistration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961) vide notification No. S.O. 560(E), dated 30th January 2019, see Gazette of India,Extraordinary Part II, sec. 3(ii).

1st July, 2019-S. 81 vide notification No. S.O. 2269(E), dated 15th August, 2019, see Gazette of India, Extraordinary Part II, sec. 3(ii).

3rd February, 2020-S. 230 (11) and (12), vide notification No. S.O. 525(E), dated 3rd February, 2020, see Gazette of India, Extraordinary, Part II, sec. 3(ii).

. Vide Notification No. S.O. 3912 (E), dated 30th October, 2019, this Act is made applicable to the Union territory of Jammu and Kashmir and the Union territory ofLadakh.

In this Act, unless the context otherwise requires,--

(1) "abridged prospectus" means a memorandum containing such salient features of a prospectus asmay be specified by the Securities and Exchange Board by making regulations in this behalf;

(2) "accounting standards" means the standards of accounting or any addendum thereto forcompanies or class of companies referred to in section 133;

(3) "alter" or "alteration" includes the making of additions, omissions and substitutions;

(4) "Appellate Tribunal" means the National Company Law Appellate Tribunal constituted undersection 410;

(5) "articles" means the articles of association of a company as originally framed or as altered fromtime to time or applied in pursuance of any previous company law or of this Act;

(6) "associate company", in relation to another company, means a company in which that othercompany has a significant influence, but which is not a subsidiary company of the company havingsuch influence and includes a joint venture company.

1[Explanation.-- For the purpose of this clause,--

(a) the expression "significant influence" means control of at least twenty per cent. of totalvoting power, or control of or participation in business decisions under an agreement;

(b) the expression "joint venture" means a joint arrangement whereby the parties that have jointcontrol of the arrangement have rights to the net assets of the arrangement;]

(7) "auditing standards" means the standards of auditing or any addendum thereto for companies orclass of companies referred to in sub-section (10) of section 143;

(8) "authorised capital" or "nominal capital" means such capital as is authorised by thememorandum of a company to be the maximum amount of share capital of the company;

(9) "banking company" means a banking company as defined in clause (c) of section 5 of theBanking Regulation Act, 1949 (10 of 1949);

(10) "Board of Directors" or "Board", in relation to a company, means the collective body of thedirectors of the company;

(11) "body corporate" or "corporation" includes a company incorporated outside India, but doesnot include--

(i) a co-operative society registered under any law relating to co-operative societies; and

(ii) any other body corporate (not being a company as defined in this Act), which the CentralGovernment may, by notification, specify in this behalf;

(12) "book and paper" and "book or paper" include books of account, deeds, vouchers, writings,documents, minutes and registers maintained on paper or in electronic form;

(13) "books of account" includes records maintained in respect of--

(i) all sums of money received and expended by a company and matters in relation to which thereceipts and expenditure take place;

(ii) all sales and purchases of goods and services by the company;

(iii) the assets and liabilities of the company; and

(iv) the items of cost as may be prescribed under section 148 in the case of a company whichbelongs to any class of companies specified under that section;

(14) "branch office", in relation to a company, means any establishment described as such by thecompany;

(15) "called-up capital" means such part of the capital, which has been called for payment;

(16) "charge" means an interest or lien created on the property or assets of a company or any of itsundertakings or both as security and includes a mortgage;

(17) "chartered accountant" means a chartered accountant as defined in clause (b) of sub-section(1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) who holds a valid certificate ofpractice under sub-section (1) of section 6 of that Act;

(18) "Chief Executive Officer" means an officer of a company, who has been designated as such byit;

(19) "Chief Financial Officer" means a person appointed as the Chief Financial Officer of acompany;

(20) "company" means a company incorporated under this Act or under any previous companylaw;

(21) "company limited by guarantee" means a company having the liability of its members limitedby the memorandum to such amount as the members may respectively undertake to contribute to theassets of the company in the event of its being wound up;

(22) "company limited by shares" means a company having the liability of its members limited bythe memorandum to the amount, if any, unpaid on the shares respectively held by them;

2[(23) "Company Liquidator" means a person appointed by the Tribunal as the CompanyLiquidator in accordance with the provisions of section 275 for the winding up of a company underthis Act;]

(24) "company secretary" or "secretary" means a company secretary as defined in clause (c) ofsub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) who is appointed by acompany to perform the functions of a company secretary under this Act;

(25) "company secretary in practice" means a company secretary who is deemed to be in practiceunder sub-section (2) of section 2 of the Company Secretaries Act, 1980 (56 of 1980);

(26) "contributory" means a person liable to contribute towards the assets of the company in theevent of its being wound up.

Explanation.--For the purposes of this clause, it is hereby clarified that a person holding fullypaid-up shares in a company shall be considered as a contributory but shall have no liabilities of acontributory under the Act whilst retaining rights of such a contributory;

(27) "control" shall include the right to appoint majority of the directors or to control themanagement or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholdersagreements or voting agreements or in any other manner;

3[(28) "Cost Accountant" means a cost accountant as defined in clause (b) of sub-section (1) ofsection 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who holds a valid certificate ofpractice under sub-section (1) of section 6 of that Act;]

(29) "court" means--

(i) the High Court having jurisdiction in relation to the place at which the registered office of thecompany concerned is situate, except to the extent to which jurisdiction has been conferred on anydistrict court or district courts subordinate to that High Court under sub-clause (ii);

(ii) the district court, in cases where the Central Government has, by notification, empowered anydistrict court to exercise all or any of the jurisdictions conferred upon the High Court, within thescope of its jurisdiction in respect of a company whose registered office is situate in the district;

(iii) the Court of Session having jurisdiction to try any offence under this Act or under anyprevious company law;

(iv) the Special Court established under section 435;

(v) any Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction totry any offence under this Act or under any previous company law;

(30) "debenture" includes debenture stock, bonds or any other instrument of a company evidencing adebt, whether constituting a charge on the assets of the company or not:

4[Provided that--

(a) the instruments referred to in Chapter III-D of the Reserve Bank of India Act, 1934 (2 of 1934);and

(b) such other instrument, as may be prescribed by the Central Government in consultation withthe Reserve Bank of India, issued by a company,

shall not be treated as debenture;]

(31) "deposit" includes any receipt of money by way of deposit or loan or in any other form by acompany, but does not include such categories of amount as may be prescribed in consultation withthe Reserve Bank of India;

(32) "depository" means a depository as defined in clause (e) of sub-section (1) of section 2 of theDepositories Act, 1996 (22 of 1996);

(33) "derivative" means the derivative as defined in clause (ac) of section 2 of the SecuritiesContracts (Regulation) Act, 1956 (42 of 1956);

(34) "director" means a director appointed to the Board of a company;

(35) "dividend" includes any interim dividend;

(36) "document" includes summons, notice, requisition, order, declaration, form and register,whether issued, sent or kept in pursuance of this Act or under any other law for the time being in forceor otherwise, maintained on paper or in electronic form;

(37) "employees stock option means the option given to the directors, officers or employees of acompany or of its holding company or subsidiary company or companies, if any, which gives suchdirectors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of thecompany at a future date at a pre-determined price;

(38) "expert" includes an engineer, a valuer, a chartered accountant, a company secretary, a costaccountant and any other person who has the power or authority to issue a certificate in pursuance ofany law for the time being in force;

(39) "financial institution" includes a scheduled bank, and any other financial institution defined ornotified under the Reserve Bank of India Act, 1934 (2 of 1934);

(40) "financial statement" in relation to a company, includes--

(i) a balance sheet as at the end of the financial year;

(ii) a profit and loss account, or in the case of a company carrying on any activity not for profit,an income and expenditure account for the financial year;

(iii) cash flow statement for the financial year;

(iv) a statement of changes in equity, if applicable; and

(v) any explanatory note annexed to, or forming part of, any document referred to in sub-clause(i) to sub-clause (iv):

Provided that the financial statement, with respect to One Person Company, small company anddormant company, may not include the cash flow statement;

(41) "financial year", in relation to any company or body corporate, means the period ending on the31st day of March every year, and where it has been incorporated on or after the 1st day of January ofa year, the period ending on the 31st day of March of the following year, in respect whereof financialstatement of the company or body corporate is made up:

5[Provided that where a company or body corporate, which is a holding company or a subsidiaryor associate company of a company incorporated outside India and is required to follow a differentfinancial year for consolidation of its accounts outside India, the Central Government may, on anapplication made by that company or body corporate in such form and manner as may be prescribed,allow any period as its financial year, whether or not that period is a year:

Provided further that any application pending before the Tribunal as on the date ofcommencement of the Companies (Amendment) Act, 2019, shall be disposed of by the Tribunal inaccordance with the provisions applicable to it before such commencement;]

6[Provided also that] a company or body corporate, existing on the commencement of this Act,shall, within a period of two years from such commencement, align its financial year as per theprovisions of this clause;

(42) "foreign company" means any company or body corporate incorporated outside India which--

(a) has a place of business in India whether by itself or through an agent, physically or throughelectronic mode; and

(b) conducts any business activity in India in any other manner;

(43) "free reserves" means such reserves which, as per the latest audited balance sheet of acompany, are available for distribution as dividend:

Provided that--

(i) any amount representing unrealised gains, notional gains or revaluation of assets, whethershown as a reserve or otherwise, or

(ii) any change in carrying amount of an asset or of a liability recognised in equity, includingsurplus in profit and loss account on measurement of the asset or the liability at fair value,

shall not be treated as free reserves;

(44) "Global Depository Receipt" means any instrument in the form of a depository receipt, bywhatever name called, created by a foreign depository outside India and authorised by a companymaking an issue of such depository receipts;

(45) "Government company" means any company in which not less than fifty-one per cent. of thepaid-up share capital is held by the Central Government, or by any State Government or Governments,or partly by the Central Government and partly by one or more State Governments, and includes acompany which is a subsidiary company of such a Government company;

(46) "holding company", in relation to one or more other companies, means a company of whichsuch companies are subsidiary companies;

7[Explanation.-- For the purposes of this clause, the expression "company" includes any body corporate;]

(47) "independent director" means an independent director referred to in sub-section (6) of section149;

(48) "Indian Depository Receipt" means any instrument in the form of a depository receipt createdby a domestic depository in India and authorised by a company incorporated outside India making anissue of such depository receipts;

8

(50) "issued capital" means such capital as the company issues from time to time for subscription;

(51) "key managerial personnel", in relation to a company, means--

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the company secretary;

(iii) the whole-time director;

(iv) the Chief Financial Officer; 9

10[(v) such other officer, not more than one level below the directors who is in whole-time employment,designated as key managerial personnel by the Board; and

(vi) such other officer as may be prescribed;]

(52) "listed company" means a company which has any of its securities listed on any recognisedstock exchange;

(53) "manager" means an individual who, subject to the superintendence, control and direction ofthe Board of Directors, has the management of the whole, or substantially the whole, of the affairs of acompany, and includes a director or any other person occupying the position of a manager, bywhatever name called, whether under a contract of service or not;

(54) "managing director" means a director who, by virtue of the articles of a company or anagreement with the company or a resolution passed in its general meeting, or by its Board of Directors,is entrusted with substantial powers of management of the affairs of the company and includes adirector occupying the position of managing director, by whatever name called.

Explanation.--For the purposes of this clause, the power to do administrative acts of a routinenature when so authorised by the Board such as the power to affix the common seal of the company toany document or to draw and endorse any cheque on the account of the company in any bank or todraw and endorse any negotiable instrument or to sign any certificate of share or to direct registration of transfer of any share, shall not be deemed to be included within the substantial powers ofmanagement;

(55) "member", in relation to a company, means--

(i) the subscriber to the memorandum of the company who shall be deemed to have agreed tobecome member of the company, and on its registration, shall be entered as member in its registerof members;

(ii) every other person who agrees in writing to become a member of the company and whosename is entered in the register of members of the company;

(iii) every person holding shares of the company and whose name is entered as a beneficialowner in the records of a depository;

(56) "memorandum" means the memorandum of association of a company as originally framed oras altered from time to time in pursuance of any previous company law or of this Act;

(57) "net worth" means the aggregate value of the paid-up share capital and all reserves created outof the profits 11[, securities premium account and debit or credit balance of profit and loss account,]

after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneousexpenditure not written off, as per the audited balance sheet, but does not include reserves created outof revaluation of assets, write-back of depreciation and amalgamation;

(58) "notification" means a notification published in the Official Gazette and the expression"notify" shall be construed accordingly;

(59) "officer" includes any director, manager or key managerial personnel or any person inaccordance with whose directions or instructions the Board of Directors or any one or more of thedirectors is or are accustomed to act;

(60) "officer who is in default", for the purpose of any provision in this Act which enacts that anofficer of the company who is in default shall be liable to any penalty or punishment by way ofimprisonment, fine or otherwise, means any of the following officers of a company, namely:--

(i) whole-time director;

(ii) key managerial personnel;

(iii) where there is no key managerial personnel, such director or directors as specified by theBoard in this behalf and who has or have given his or their consent in writing to the Board to suchspecification, or all the directors, if no director is so specified;

(iv) any person who, under the immediate authority of the Board or any key managerialpersonnel, is charged with any responsibility including maintenance, filing or distribution ofaccounts or records, authorises, actively participates in, knowingly permits, or knowingly fails totake active steps to prevent, any default;

(v) any person in accordance with whose advice, directions or instructions the Board ofDirectors of the company is accustomed to act, other than a person who gives advice to the Boardin a professional capacity;

(vi) every director, in respect of a contravention of any of the provisions of this Act, who isaware of such contravention by virtue of the receipt by him of any proceedings of the Board orparticipation in such proceedings without objecting to the same, or where such contravention hadtaken place with his consent or connivance;

(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents,registrars and merchant bankers to the issue or transfer;

(61) "Official Liquidator" means an Official Liquidator appointed under sub-section (1) ofsection 59;

(62) "One Person Company" means a company which has only one person as a member;

(63) "ordinary or special resolution" means an ordinary resolution, or as the case may be, specialresolution referred to in section 114;

(64) "paid-up share capital" or "share capital paid-up" means such aggregate amount of moneycredited as paid-up as is equivalent to the amount received as paid-up in respect of shares issued andalso includes any amount credited as paid-up in respect of shares of the company, but does not includeany other amount received in respect of such shares, by whatever name called;

(65) "postal ballot" means voting by post or through any electronic mode;

(66) "prescribed" means prescribed by rules made under this Act;

(67) "previous company law" means any of the laws specified below:--

(i) Acts relating to companies in force before the Indian Companies Act, 1866 (10 of 1866);

(ii) the Indian Companies Act, 1866 (10 of 1866);

(iii) the Indian Companies Act, 1882 (6 of 1882);

(iv) the Indian Companies Act, 1913 (7 of 1913);

(v) the Registration of Transferred Companies Ordinance, 1942 (Ord. 54 of 1942);

(vi) the Companies Act, 1956 (1 of 1956); and

(vii) any law corresponding to any of the aforesaid Acts or the Ordinances and in force--

(A) in the merged territories or in a Part B State (other than the State of Jammu andKashmir), or any part thereof, before the extension thereto of the Indian Companies Act,1913 (7 of 1913); or

(B) in the State of Jammu and Kashmir, or any part thereof, before the commencement ofthe Jammu and Kashmir (Extension of Laws) Act, 1956 (62 of 1956), in so far as banking,insurance and financial corporations are concerned, and before the commencement of theCentral Laws (Extension to Jammu and Kashmir) Act, 1968 (25 of 1968), in so far as othercorporations are concerned;

(viii) the Portuguese Commercial Code, in so far as it relates to sociedades anonimas; and

(ix) the Registration of Companies (Sikkim) Act, 1961 (Sikkim Act 8 of 1961);

(68) "private company" means a company having a minimum paid-up share capital 12 as may beprescribed, and which by its articles,--

(i) restricts the right to transfer its shares;

(ii) except in case of One Person Company, limits the number of its members to two hundred:

Provided that where two or more persons hold one or more shares in a company jointly, they shall,for the purposes of this clause, be treated as a single member:

Provided further that--

(A) persons who are in the employment of the company; and

(B) persons who, having been formerly in the employment of the company, were members ofthe company while in that employment and have continued to be members after the employmentceased,

shall not be included in the number of members; and

(iii) prohibits any invitation to the public to subscribe for any securities of the company;

(69) "promoter" means a person--

(a) who has been named as such in a prospectus or is identified by the company in the annualreturn referred to in section 92; or

(b) who has control over the affairs of the company, directly or in directly whether as a shareholder, director or otherwise; or

(c) in accordance with whose advice, directions or instructions the Board of Directors of thecompany is accustomed to act:

Provided that nothing in sub-clause (c) shall apply to a person who is acting merely in aprofessional capacity;

(70) "prospectus" means any document described or issued as a prospectus and includes a redherring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice,circular, advertisement or other document inviting offers from the public for the subscription orpurchase of any securities of a body corporate;

(71) "public company" means a company which--

(a) is not a private company; 13[and]

(b) has a minimum paid-up share capital 14 as may be prescribed:

Provided that a company which is a subsidiary of a company, not being a private company, shall bedeemed to be public company for the purposes of this Act even where such subsidiary companycontinues to be a private company in its articles ;

(72) "public financial institution" means--

(i) the Life Insurance Corporation of India, established under section 3 of the Life InsuranceCorporation Act, 1956 (31 of 1956);

(ii) the Infrastructure Development Finance Company Limited, referred to in clause (vi) ofsub-section (1) of section 4A of the Companies Act, 1956 (1 of 1956) so repealed under section465 of this Act;

(iii) specified company referred to in the Unit Trust of India (Transfer of Undertaking andRepeal) Act, 2002 (58 of 2002);

(iv) institutions notified by the Central Government under sub-section (2) of section 4A of theCompanies Act, 1956 (1 of 1956) so repealed under section 465 of this Act;

(v) such other institution as may be notified by the Central Government in consultation with theReserve Bank of India:

Provided that no institution shall be so notified unless--

(A) it has been established or constituted by or under any Central or State Act 15[other than thisAct or the previous company law]; or

(B) not less than fifty-one per cent. of the paid-up share capital is held or controlled by theCentral Government or by any State Government or Governments or partly by the CentralGovernment and partly by one or more State Governments;

(73) "recognised stock exchange" means a recognised stock exchange as defined in clause (f) ofsection 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);

(74) "register of companies" means the register of companies maintained by the Registrar on paperor in any electronic mode under this Act;

(75) "Registrar" means a Registrar, an Additional Registrar, a Joint Registrar, a Deputy Registrar oran Assistant Registrar, having the duty of registering companies and discharging various functionsunder this Act;

(76) "related party", with reference to a company, means--

(i) a director or his relative;

(ii) a key managerial personnel or his relative;

(iii) a firm, in which a director, manager or his relative is a partner;

(iv) a private company in which a director or manager 15[or his relative] is a member or director;

(v) a public company in which a director or manager is a director 16[and holds] along with hisrelatives, more than two per cent. of its paid-up share capital;

(vi) any body corporate whose Board of Directors, managing director or manager is accustomedto act in accordance with the advice, directions or instructions of a director or manager;

(vii) any person on whose advice, directions or instructions a director or manager is accustomedto act:

Provided that nothing in sub-clauses (vi) and (vii) shall apply to the advice, directions orinstructions given in a professional capacity;

17[(viii) any body corporate which is--

(A) a holding, subsidiary or an associate company of such company;

(B) a subsidiary of a holding company to which it is also a subsidiary; or

(C) an investing company or the venturer of the company.

Explanation.-- For the purpose of this clause, "the investing company or the venturer of acompany" means a body corporate whose investment in the company would result in the companybecoming an associate company of the body corporate];

(ix) such other person as may be prescribed;

(77) "relative", with reference to any person, means any one who is related to another, if--

(i) they are members of a Hindu Undivided Family;

(ii) they are husband and wife; or

(iii) one person is related to the other in such manner as may be prescribed;

(78) "remuneration" means any money or its equivalent given or passed to any person for servicesrendered by him and includes perquisites as defined under the Income-tax Act, 1961 (43 of 1961);

(79) "Schedule" means a Schedule annexed to this Act;

(80) "scheduled bank" means the scheduled bank as defined in clause (e) of section 2 of theReserve Bank of India Act, 1934 (2 of 1934);

(81) "securities" means the securities as defined in clause (h) of section 2 of the SecuritiesContracts (Regulation) Act, 1956 (42 of 1956);

(82) "Securities and Exchange Board" means the Securities and Exchange Board of Indiaestablished under section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);

(83) "Serious Fraud Investigation Office" means the office referred to in section 211;

(84) "share" means a share in the share capital of a company and includes stock;

(85) "small company" means a company, other than a public company,--

(i) paid-up share capital of which does not exceed fifty lakh rupees or such higher amount asmay be prescribed which shall not be more than 18[ten crore rupees]; 19[and]

(ii) turnover of which 20[as per profit and loss account for the immediately preceding financialyear] does not exceed two crore rupees or such higher amount as may be prescribed which shall notbe more than 21[one hundred crore rupees]:

Provided that nothing in this clause shall apply to--

(A) a holding company or a subsidiary company;

(B) a company registered under section 8; or

(C) a company or body corporate governed by any special Act;

(86) "subscribed capital" means such part of the capital which is for the time being subscribed bythe members of a company;

(87) "subsidiary company" or "subsidiary", in relation to any other company (that is to say theholding company), means a company in which the holding company--

(i) controls the composition of the Board of Directors; or

(ii) exercises or controls more than one-half of the 22[total voting power] either at its own ortogether with one or more of its subsidiary companies:

Provided that such class or classes of holding companies as may be prescribed shall not have layersof subsidiaries beyond such numbers as may be prescribed.

Explanation.--For the purposes of this clause,--

(a) a company shall be deemed to be a subsidiary company of the holding company even if thecontrol referred to in sub-clause (i) or sub-clause (ii) is of another subsidiary company of theholding company;

(b) the composition of a company's Board of Directors shall be deemed to be controlled byanother company if that other company by exercise of some power exercisable by it at its discretioncan appoint or remove all or a majority of the directors;

(c) the expression "company" includes any body corporate;

(d) "layer" in relation to a holding company means its subsidiary or subsidiaries;

(88) "sweat equity shares" means such equity shares as are issued by a company to its directors oremployees at a discount or for consideration, other than cash, for providing their know-how or makingavailable rights in the nature of intellectual property rights or value additions, by whatever name called;

(89) "total voting power", in relation to any matter, means the total number of votes which may becast in regard to that matter on a poll at a meeting of a company if all the members thereof or theirproxies having a right to vote on that matter are present at the meeting and cast their votes;

(90) "Tribunal" means the National Company Law Tribunal constituted under section 408;23[(91) "turnover" means gross amount of revenue recognised in the profit and loss account from the sale,supply, or distribution of goods or on account of services rendered, or both, by a company during a financialyear;]

(92) "unlimited company" means a company not having any limit on the liability of its members;

(93) "voting right" means the right of a member of a company to vote in any meeting of thecompany or by means of postal ballot;

(94) "whole-time director" includes a director in the whole-time employment of the company;

24[(94A) "winding up" means winding up under this Act or liquidation under the Insolvency andBankruptcy Code, 2016 (31 of 2016), as applicable;]

(95) words and expressions used and not defined in this Act but defined in the Securities Contracts(Regulation) Act, 1956 (42 of 1956) or the Securities and Exchange Board of India Act, 1992(15 of 1992) or the Depositories Act, 1996 (22 of 1996) shall have the meanings respectively assignedto them in those Acts.

1. The Explanation subs. by Act 1 of 2018, s. 2 (w.e.f. 7-5-2018).

2. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for clause (23) (w.e.f. 15-11-2016).

3. Subs. by Act 1 of 2018, s. 2, for clause (28) (w.e.f. 9-2-2018).

4. The Proviso ins. by s. 2, ibid. (w.e.f. 9-2-2018).

5. The proviso subs. by Act 22 of 2019, s. 2 (w.e.f. 2-11-2018).

6. Subs. by s. 2, ibid., for "Provided further that" (w.e.f. 2-11-2018).

7. The Explanation ins. by Act 1 of 2018, s. 2 (w.e.f. 9-2-2018).

8. Clause (49) omitted by s. 2, ibid. (w.e.f. 9-2-2018).

9. The word "and" omitted by s. 2, ibid. (w.e.f. 9-2-2018).

10. Subs. by s. 2, ibid., for sub-clause (v) (w.e.f. 9-2-2018).

11. Subs. by Act 1 of 2018, s. 2, for "and securities premium account" (w.e.f. 9-2-2018).

12. The words "of one lakh rupees or such higher paid-up share capital" omitted by Act 21 of 2015, s. 2 (w.e.f. 29-5-2015).

13. Ins. by Act 1 of 2018, s. 2 (w.e.f. 9-2-2018).

14. The words "of five lakh rupees or such higher paid-up capital," omitted by Act 21 of 2015, s. 2 (w.e.f. 29-5-2015).

15. Ins. by S.O. 1894 (E), dated 24th July, 2014.

16. Subs. by S.O. 1820 (E), dated 9th July, 2014 for "or holds" .

17. Subs. by Act 1 of 2018, s. 2, for sub-clause (viii) (w.e.f. 9-2-2018).

18. Subs. by Act 1 of 2018, s. 2, for "five crore rupees" (w.e.f. 9-2-2018).

19. Subs. by notification No. S.O. 504(E), dated 13th February, 2015, for word "or" (w.e.f. 13-2-2015).

20. Subs. by Act 1 of 2018, s. 2, for "as per its last profit and loss account" (w.e.f. 9-2-2018).

21. Subs. by s. 2, ibid., for "twenty crore rupees" (w.e.f. 9-2-2018).

22. Subs. by s. 2, ibid., for "total share capital" (w.e.f. 7-5-2018).

23. Subs. by Act 1 of 2018, s. 2, for clause (91) (w.e.f. 9-2-2018).

24. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016).

. Vide notification No. S.O. 3912(E), dated 30th October, 2019, this Act is made applicable to the Union territory of Jammuand Kashmir and the Union territory of Ladakh.

(1) A company may be formed for any lawful purpose by--

(a) seven or more persons, where the company to be formed is to be a public company;

(b) two or more persons, where the company to be formed is to be a private company; or

(c) one person, where the company to be formed is to be One Person Company that is to say, a private company,

by subscribing their names or his name to a memorandum and complying with the requirements of this Act in respect of registration:

Provided that the memorandum of One Person Company shall indicate the name of the other person,with his prior written consent in the prescribed form, who shall, in the event of the subscribers death or his incapacity to contract become the member of the company and the written consent of such person shall also be filed with the Registrar at the time of incorporation of the One Person Company along with its memorandum and articles:

Provided further that such other person may withdraw his consent in such manner as may be prescribed:

Provided also that the member of One Person Company may at any time change the name of such other person by giving notice in such manner as may be prescribed:Provided also that it shall be the duty of the member of One Person Company to intimate thecompany the change, if any, in the name of the other person nominated by him by indicating in the memorandum or otherwise within such time and in such manner as may be prescribed, and the company shall intimate the Registrar any such change within such time and in such manner as may be prescribed:Provided also that any such change in the name of the person shall not be deemed to be an alteration of the memorandum.

(2) A company formed under sub-section (1) may be either--

(a) a company limited by shares; or

(b) a company limited by guarantee; or

(c) an unlimited company.

1[3A. Members severally liable in certain cases. If at any time the number of members of a companyis reduced, in the case of a public company, below seven, in the case of a private company, below two,and the company carries on business for more than six months while the number of members is soreduced, every person who is a member of the company during the time that it so carries on business afterthose six months and is cognisant of the fact that it is carrying on business with less than seven membersor two members, as the case may be, shall be severally liable for the payment of the whole debts of thecompany contracted during that time, and may be severally sued therefor.]

1. Ins. by Act 1 of 2018, s. 3 (w.e.f. 9-2-2018).

(1) The memorandum of a company shall state--

(a) the name of the company with the last word "Limited" in the case of a public limitedcompany, or the last words "Private Limited" in the case of a private limited company:

Provided that nothing in this clause shall apply to a company registered under section 8;

(b) the State in which the registered office of the company is to be situated;

(c) the objects for which the company is proposed to be incorporated and any matter considered necessary in furtherance thereof;

(d) the liability of members of the company, whether limited or unlimited, and also state,--

(i) in the case of a company limited by shares, that liability of its members is limited to theamount unpaid, if any, on the shares held by them; and

(ii) in the case of a company limited by guarantee, the amount up to which each memberundertakes to contribute --

(A) to the assets of the company in the event of its being wound-up while he is a memberor within one year after he ceases to be a member, for payment of the debts and liabilities ofthe company or of such debts and liabilities as may have been contracted before he ceases to be a member, as the case may be; and

(B) to the costs, charges and expenses of winding-up and for adjustment of the rights ofthe contributories among themselves;

(e) in the case of a company having a share capital,--

(i) the amount of share capital with which the company is to be registered and the divisionthereof into shares of a fixed amount and the number of shares which the subscribers to thememorandum agree to subscribe which shall not be less than one share; and

(ii) the number of shares each subscriber to the memorandum intends to take, indicatedopposite his name;

(f) in the case of One Person Company, the name of the person who, in the event of death of thesubscriber, shall become the member of the company.

(2) The name stated in the memorandum shall not--

(a) be identical with or resemble too nearly to the name of an existing company registered under this Act or any previous company law; or

(b) be such that its use by the company--

(i) will constitute an offence under any law for the time being in force; or

(ii) is undesirable in the opinion of the Central Government.

(3) Without prejudice to the provisions of sub-section (2), a company shall not be registered with a name which contains--

(a) any word or expression which is likely to give the impression that the company is in any way connected with, or having the patronage of, the Central Government, any State Government, or any local authority, corporation or body constituted by the Central Government or any State Government under any law for the time being in force; or

(b) such word or expression, as may be prescribed, unless the previous approval of the Central Government has been obtained for the use of any such word orexpression.

(4) A person may make an application, in such form and manner and accompanied by such fee, as may be prescribed, to the Registrar for the reservation of a name set out in the application as--

(a) the name of the proposed company; or

(b) the name to which the company proposes to change its name.

(5) 1[(i) Upon receipt of an application under sub-section (4), the Registrar may, on the basis of information anddocuments furnished along with the application, reserve the name for a period of twenty days from the date ofapproval or such other period as may be prescribed:

Provided that in case of an application for reservation of name or for change of its name by an existingcompany, the Registrar may reserve the name for a period of sixty days from the date of approval.]

(ii) Where after reservation of name under clause (i), it is found that name was applied by furnishing wrong or incorrect information, then,--

(a) if the company has not been incorporated, the reserved name shall be cancelled and the person making application under sub-section (4) shall be liable to a penalty which may extend to one lakh rupees;

(b) if the company has been incorporated, the Registrar may, after giving the company anopportunity of being heard--

(i) either direct the company to change its name within a period of three months, after passingan ordinary resolution;

(ii) take action for striking off the name of the company from the register of companies; or

(iii) make a petition for winding up of the company.

(6) The memorandum of a company shall be in respective forms specified in Tables A, B, C, D and E in Schedule I as may be applicable to such company.

(7) Any provision in the memorandum or articles, in the case of a company limited by guarantee and not having a share capital, purporting to give any person a right to participate in the divisible profits of thecompany otherwise than as a member, shall be void.

1. Subs. by Act 1 of 2018, s. 4, for clause (i) (w.e.f. 26-1-2018).

(1) The articles of a company shall contain the regulations for management of the company.

(2) The articles shall also contain such matters, as may be prescribed:

Provided that nothing prescribed in this sub-section shall be deemed to prevent a company from including such additional matters in its articles as may be considered necessary for its management.

(3) The articles may contain provisions for entrenchment to the effect that specified provisions of the articles may be altered only if conditions or procedures as that are more restrictive than those applicable in the case of a special resolution, are met or complied with.

(4) The provisions for entrenchment referred to in sub-section (3) shall only be made either on formation of a company, or by an amendment in the articles agreed to by all the members of the company in the case of a private company and by a special resolution in the case of a public company.

(5) Where the articles contain provisions for entrenchment, whether made on formation or byamendment, the company shall give notice to the Registrar of such provisions in such form and manner as may be prescribed.

(6) The articles of a company shall be in respective forms specified in Tables, F, G, H, I and J in Schedule I as may be applicable to such company.

(7) A company may adopt all or any of the regulations contained in the model articles applicable to such company.

(8) In case of any company, which is registered after the commencement of this Act, in so far as the registered articles of such company do not exclude or modify the regulations contained in the model articles applicable to such company, those regulations shall, so far as applicable, be the regulations of that company in the same manner and to the extent as if they were contained in the duly registered articles of the company.

(9) Nothing in this section shall apply to the articles of a company registered under any previous company law unless amended under this Act.

Save as otherwise expressly provided in thisAct--

(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in the memorandum or articles of a company, or in any agreement executed by it, or in any resolution passed by the company in general meeting or by its Board of Directors, whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and

(b) any provision contained in the memorandum, articles, agreement or resolution shall, to theextent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.

(1) There shall be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated, the following documents and information for registration, namely:--

(a) the memorandum and articles of the company duly signed by all the subscribers to thememorandum in such manner as may be prescribed;

(b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the rules made thereunder in respect of registration and matters precedent or incidental thereto have been complied with;

(c) 1[a declaration] from each of the subscribers to the memorandum and from persons named as the first directors, if any, in the articles that he is not convicted of any offence in connection with the promotion, formation or management of any company, or that he has not been found guilty of any fraud or misfeasance or of any breach of duty to any company under this Act or any previous company law during the preceding five years and that all the documents filed with the Registrar for registration of the company contain information that is correct and complete and true to the best of his knowledge and belief;

(d) the address for correspondence till its registered office is established;

(e) the particulars of name, including surname or family name, residential address, nationality and such other particulars of every subscriber to the memorandum along with proof of identity, as may be prescribed, and in the case of a subscriber being a body corporate, such particulars as may be prescribed;

(f) the particulars of the persons mentioned in the articles as the first directors of the company, their names, including surnames or family names, the Director Identification Number, residential address, nationality and such other particulars including proof of identity as may be prescribed; and

(g) the particulars of the interests of the persons mentioned in the articles as the first directors of the company in other firms or bodies corporate along with their consent to act as directors of the company in such form and manner as may be prescribed.

(2) The Registrar on the basis of documents and information filed under sub-section (1) shall register all the documents and information referred to in that subsection in the register and issue a certificate of incorporation in the prescribed form to the effect that the proposed company is incorporated under this Act.

(3) On and from the date mentioned in the certificate of incorporation issued under sub-section (2), the Registrar shall allot to the company a corporate identity number, which shall be a distinct identity for the company and which shall also be included in the certificate.

(4) The company shall maintain and preserve at its registered office copies of all documents and information as originally filed under sub-section (1) till its dissolution under this Act.

(5) If any person furnishes any false or incorrect particulars of any information or suppresses any material information, of which he is aware in any of the documents filed with the Registrar in relation to the registration of a company, he shall be liable for action under section 447.

(6) Without prejudice to the provisions of sub-section (5) where, at any time after the incorporation of a company, it is proved that the company has been got incorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such company, or by any fraudulent action, the promoters, the persons named as the first directors of the company and the persons making declaration under clause (b) of subsection (1) shall each be liable for action under section 447.

(7) Without prejudice to the provisions of sub-section (6), where a company has been gotincorporated by furnishing any false or incorrect information or representation or by suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such--

company or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation so warrants,

(a) pass such orders, as it may think fit, for regulation of the management of the companyincluding changes, if any, in its memorandum and articles, in public interest or in the interest of the company and its members and creditors; or

(b) direct that liability of the members shall be unlimited; or

(c) direct removal of the name of the company from the register of companies; or

(d) pass an order for the winding up of the company; or

(e) pass such other orders as it may deem fit:

Provided that before making any order under this sub-section,--

(i) the company shall be given a reasonable opportunity of being heard in the matter; and

(ii) the Tribunal shall take into consideration the transactions entered into by the company,

including the obligations, if any, contracted or payment of any liability.

1. Subs. by Act 1 of 2018, s. 5, for "an affidavit" (w.e.f. 27-7-2018).

(1) Where it is proved to thesatisfaction of the Central Government that a person or an association of persons proposed to be registered under this Act as a limited company--

(a) has in its objects the promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of environment or any such other object;

(b) intends to apply its profits, if any, or other income in promoting its objects; and

(c) intends to prohibit the payment of any dividend to its members,

the Central Government may, by licence issued in such manner as may be prescribed, and on such conditions as it deems fit, allow that person or association of persons to be registered as a limited company under this section without the addition to its name of the word "Limited", or as the case may be, the words "Private Limited', and thereupon the Registrar shall, on application, in the prescribed form, register such person or association of persons as a company under this section.

(2) The company registered under this section shall enjoy all the privileges and be subject to all the obligations of limited companies.

(3) A firm may be a member of the company registered under this section.

(4) (i) A company registered under this section shall not alter the provisions of its memorandum or articles except with the previous approval of the Central Government.

(ii) A company registered under this section may convert itself into company of any other kind only after complying with such conditions as may be prescribed.

(5) Where it is proved to the satisfaction of the Central Government that a limited company registered under this Act or under any previous company law has been formed with any of the objects specified in clause (a) of sub-section (1) and with the restrictions and prohibitions as mentioned respectively in clauses (b) and (c) of that sub-section, it may, by licence, allow the company to be registered under this section subject to such conditions as the Central Government deems fit and to change its name by omitting the word Limited, or as the case may be, the words Private Limited from its name andthereupon the Registrar shall, on application, in the prescribed form, register such company under this section and all the provisions of this section shall apply to that company.

(6) The Central Government may, by order, revoke the licence granted to a company registered under this section if the company contravenes any of the requirements of this section or any of the conditions subject to which a licence is issued or the affairs of the company are conducted fraudulently or in a manner violative of the objects of the company or prejudicial to public interest, and without prejudice to any other action against the company under this Act, direct the company to convert its status and change its name to add the word Limited or the words Private Limited, as the case may be, to its name andthereupon the Registrar shall, without prejudice to any action that may be taken under sub-section (7), onapplication, in the prescribed form, register the company accordingly:

Provided that no such order shall be made unless the company is given a reasonable opportunity ofbeing heard:

Provided further that a copy of every such order shall be given to the Registrar

(7) Where a licence is revoked under sub-section (6), the Central Government may, by order, if it is satisfied that it is essential in the public interest, direct that the company be wound up under this Act or amalgamated with another company registered under this section:

Provided that no such order shall be made unless the company is given a reasonable opportunity of being heard.

Provided that no such order shall be made unless the company is given a reasonable

(8) Where a licence is revoked under sub-section (6) and where the Central Government is satisfied that it is essential in the public interest that the company registered under this section should be amalgamated with another company registered under this section and having similar objects, then, notwithstanding anything to the contrary contained in this Act, the Central Government may, by order, provide for such amalgamation to form a single company with such constitution, properties, powers,rights, interest, authorities and privileges and with such liabilities, duties and obligations as may bespecified in the order.

((9) If on the winding up or dissolution of a company registered under this section, there remains, afterthe satisfaction of its debts and liabilities, any asset, they may be transferred to another companyregistered under this section and having similar objects, subject to such conditions as the Tribunal mayimpose, or may be sold and proceeds thereof credited to 1[Insolvency and Bankruptcy Fund formed undersection 224 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)].

(10) A company registered under this section shall amalgamate only with another company registeredunder this section and having similar objects.

(11) If a company makes any default in complying with any of the requirements laid down in this section, the company shall, without prejudice to any other action under the provisions of this section, be punishable with fine which shall not be less than ten lakh rupees but which may extend to one crore rupees and the directors and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than twentyfive thousand rupees but which may extend to twenty-five lakh rupees, or with both:

Provided that when it is proved that the affairs of the company were conducted fraudulently, everyofficer in default shall be liable for action under section 447.

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for u201cthe Rehabilitation and Insolvency Fund formed under section269u201d (w.e.f. 15-11-2016).

From the date of incorporation mentioned in the certificate ofincorporation, such subscribers to the memorandum and all other persons, as may, from time to time,become members of the company, shall be a body corporate by the name contained in the memorandum,capable of exercising all the functions of an incorporated company under this Act and having perpetualsuccession 1 with power to acquire, hold and dispose of property, both movable and immovable,tangible and intangible, to contract and to sue and be sued, by the said name.

1. The words and a common seal omitted by Act 21 of 2015, s.3 (w.e.f. 29-5-2015).

(1) Subject to the provisions of this Act, thememorandum and articles shall, when registered, bind the company and the members thereof to the same extent as if they respectively had been signed by the company and by each member, and contained covenants on its and his part to observe all the provisions of the memorandum and of the articles.

(2) All monies payable by any member to the company under the memorandum or articles shall be adebt due from him to the company.

[Commencement of business, etc.] Omitted by the Companies (Amendment) Act, 2015 (21 of2015), s. 4 (w.e.f. 29-5-2015).

(1) A company shall, 1[within thirty days of its incorporation]and at all times thereafter, have a registered office capable of receiving and acknowledging allcommunications and notices as may be addressed to it.

(2) The company shall furnish to the Registrar verification of its registered office within a period ofthirty days of its incorporation in such manner as may be prescribed.

(3) Every company shall--

(a) paint or affix its name, and the address of its registered office, and keep the same painted oraffixed, on the outside of every office or place in which its business is carried on, in a conspicuousposition, in legible letters, and if the characters employed therefor are not those of the language or ofone of the languages in general use in that locality, also in the characters of that language or of one ofthose languages;

2[(b) have its name engraved in legible characters on its seal, if any;]

(c) get its name, address of its registered office and the Corporate Identity Number along withtelephone number, fax number, if any, e-mail and website addresses, if any, printed in all its businessletters, billheads, letter papers and in all its notices and other official publications; and

(d) have its name printed on hundies, promissory notes, bills of exchange and such otherdocuments as may be prescribed:

Provided that where a company has changed its name or names during the last two years, it shall paintor affix or print, as the case may be, along with its name, the former name or names so changed during thelast two years as required under clauses (a) and (c):

Provided further that the words "One Person Company" shall be mentioned in brackets below thename of such company, wherever its name is printed, affixed or engraved.

(4) Notice of every change of the situation of the registered office, verified in the manner prescribed,after the date of incorporation of the company, shall be given to the Registrar 3[within thirty days] of thechange, who shall record the same.

(5) Except on the authority of a special resolution passed by a company, the registered office of thecompany shall not be changed,--

(a) in the case of an existing company, outside the local limits of any city, town or village wheresuch office is situated at the commencement of this Act or where it may be situated later by virtue ofa special resolution passed by the company; and

(b) in the case of any other company, outside the local limits of any city, town or village wheresuch office is first situated or where it may be situated later by virtue of a special resolution passed bythe company:

Provided that no company shall change the place of its registered office from the jurisdiction of oneRegistrar to the jurisdiction of another Registrar within the same State unless such change is confirmed bythe Regional Director on an application made in this behalf by the company in the prescribed manner.

(6) The confirmation referred to in sub-section (5) shall be communicated within a period of thirtydays from the date of receipt of application by the Regional Director to the company and the companyshall file the confirmation with the Registrar within a period of sixty days of the date of confirmation whoshall register the same and certify the registration within a period of thirty days from the date of filing ofsuch confirmation.

(7) The certificate referred to in sub-section (6) shall be conclusive evidence that all the requirementsof this Act with respect to change of registered office in pursuance of sub-section (5) have been compliedwith and the change shall take effect from the date of the certificate.

(8) If any default is made in complying with the requirements of this section, the company and everyofficer who is in default shall be liable to a penalty of one thousand rupees for every day during which thedefault continues but not exceeding one lakh rupees.

4[(9) If the Registrar has reasonable cause to believe that the company is not carrying on any businessor operations, he may cause a physical verification of the registered officer of the company in suchmanner as may be prescribed and if any default is found to be made in complying with the requirementsof sub-section (1), he may without prejudice to the provisions of sub-section (8), initiate action for theremoval of the name of the company from the register of companies under Chapter XVIII.]

1. Subs. by Act 1 of 2018, s. 6, for "on and from the fifteenth day of its incorporation" (w.e.f. 27-7-2018).

2. Subs. by Act 21 of 2015, s. 5, for clause (b) (w.e.f. 29-5-2015).

3. Subs. by Act 1 of 2018, s. 6, for "within fifteen days" (w.e.f. 27-7-2018).

4. Ins. by Act 22 of 2019, s. 4 (w.e.f. 2-11-2018).

(1)Save as provided in section 61, a company may, by a special resolution and after complying with the procedure specified in this section, alter the provisions of its memorandum.

(2) Any change in the name of a company shall be subject to the provisions of subsections (2) and (3) of section 4 and shall not have effect except with the approval of the Central Government in writing:

Provided that no such approval shall be necessary where the only change in the name of the company is the deletion therefrom, or addition thereto, of the word "Private", consequent on the conversion of any one class of companies to another class in accordance with the provisions of this Act.

(3) When any change in the name of a company is made under sub-section (2), the Registrar shall enter the new name in the register of companies in place of the old name and issue a fresh certificate of incorporation with the new name and the change in the name shall be complete and effective only on the issue of such a certificate.

(4) The alteration of the memorandum relating to the place of the registered office from one State to another shall not have any effect unless it is approved by the Central Government on an application in such form and manner as may be prescribed.

(5) The Central Government shall dispose of the application under sub-section (4) within a period of sixty days and before passing its order may satisfy itself that the alteration has the consent of the creditors, debenture-holders and other persons concerned with the company or that the sufficient provision has been made by the company either for the due discharge of all its debts and obligations or that adequate security has been provided for such discharge.

(6) Save as provided in section 64, a company shall, in relation to any alteration of its memorandum, file with the Registrar--

(a) the special resolution passed by the company under sub-section (1);

(b) the approval of the Central Government under sub-section (2), if the alteration involves any change in the name of the company.

(7) Where an alteration of the memorandum results in the transfer of the registered office of a company from one State to another, a certified copy of the order of the Central Government approving the alteration shall be filed by the company with the Registrar of each of the States within such time and in such manner as may be prescribed, who shall register the same, and the Registrar of the State where the registered office is being shifted to, shall issue a fresh certificate of incorporation indicating the alteration.

(8) A company, which has raised money from public through prospectus and still has any unutilised amount out of the money so raised, shall not change its objects for which it raised the money through prospectus unless a special resolution is passed by the company and--

(i) the details, as may be prescribed, in respect of such resolution shall also be published in the newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered office of the company is situated and shall also be placed on the website of the company, if any, indicating therein the justification for such change;

(ii) the dissenting shareholders shall be given an opportunity to exit by the promoters andshareholders having control in accordance with regulations to be specified by the Securities and Exchange Board.

(9) The Registrar shall register any alteration of the memorandum with respect to the objects of the company and certify the registration within a period of thirty days from the date of filing of the special resolution in accordance with clause (a) of sub-section (6) of this section.

(10) No alteration made under this section shall have any effect until it has been registered inaccordance with the provisions of this section.

(11) Any alteration of the memorandum, in the case of a company limited by guarantee and nothaving a share capital, purporting to give any person a right to participate in the divisible profits of thecompany otherwise than as a member, shall be void.

(1) Subject to the provisions of this Act and the conditions contained inits memorandum, if any, a company may, by a special resolution, alter its articles including alterationshaving the effect of conversion of--

(a) a private company into a public company; or

(b) a public company into a private company:

Provided that where a company being a private company alters its articles in such a manner that theyno longer include the restrictions and limitations which are required to be included in the articles of aprivate company under this Act, the company shall, as from the date of such alteration, cease to be aprivate company:

1[Provided further that any alteration having the effect of conversion of a public company into aprivate company shall not valid unless it its approved by an order of the Central Government on anapplication made in such form and manner as may be prescribed:

Provided also that any application pending before the Tribunal, as on the date of commencement ofthe Companies (amendment) Act, 2019, shall be disposed of by the Tribunal in accordance with theprovisions applicable to it before such commencement.]

(2) Every alteration of the articles under this section and a copy of the order of the 2[CentralGovernment] approving the alteration as per sub-section (1) shall be filed with the Registrar, togetherwith a printed copy of the altered articles, within a period of fifteen days in such manner as may beprescribed, who shall register the same.

(3) Any alteration of the articles registered under sub-section (2) shall, subject to the provisions ofthis Act, be valid as if it were originally in the articles.

1. Subs. by Act 22 of 2019, s. 5, for the Proviso (w.e.f. 2-11-2018).

2. Subs. by s. 5, ibid., for "Tribunal" (w.e.f. 2-11-2018).

(1) Every alteration made in the memorandum or articles of a company shall be noted in every copy of the memorandum or articles, as the case may be.

(2) If a company makes any default in complying with the provisions of sub-section (1), the company and every officer who is in default shall be liable to a penalty of one thousand rupees for every copy of the memorandum or articles issued without such alteration.

(1) If, through inadvertence or otherwise, a company on its first registration or on its registration by a new name, is registered by a name which,--

(a) in the opinion of the Central Government, is identical with or too nearly resembles the name by which a company in existence had been previously registered, whether under this Act or any previous company law, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of three months from the issue of such direction, after adopting an ordinary resolution for the purpose;

(b) on an application by a registered proprietor of a trade mark that the name is identical with or too nearly resembles to a registered trade mark of such proprietor under the Trade Marks Act, 1999, made to the Central Government within three years of incorporation or registration or change of name of the company, whether under this Act or any previous company law, in the opinion of the Central Government, is identical with or too nearly resembles to an existing trade mark, it may direct the company to change its name and the company shall change its name or new name, as the case may be, within a period of six months from the issue of such direction, after adopting an ordinary resolutionfor the purpose.

(2) Where a company changes its name or obtains a new name under sub-section (1), it shall within a period of fifteen days from the date of such change, give notice of the change to the Registrar along with the order of the Central Government, who shall carry out necessary changes in the certificate of incorporation and the memorandum.

(3) If a company makes default in complying with any direction given under sub-section (1), the company shall be punishable with fine of one thousand rupees for every day during which the default continues and every officer who is in default shall be punishable with fine which shall not be less than five thousand rupees but which may extend to one lakh rupees.

(1) A company shall, onbeing so requested by a member, send to him within seven days of the request and subject to the payment of such fees as may be prescribed, a copy of each of the following documents, namely:--

(a) the memorandum;

(b) the articles; and

(c) every agreement and every resolution referred to in sub-section (1) of section 117, if and in so far as they have not been embodied in the memorandum or articles.

(2) If a company makes any default in complying with the provisions of this section, the company and every officer of the company who is in default shall be liable for each default, to a penalty of one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less.

(1) A company of any class registered under this Act may convert itself as a company of other class under this Act by alteration of memorandum and articles of the company in accordance with the provisions of this Chapter.

(2) Where the conversion is required to be done under this section, the Registrar shall on anapplication made by the company, after satisfying himself that the provisions of this Chapter applicable for registration of companies have been complied with, close the former registration of the company and after registering the documents referred to in sub-section (1), issue a certificate of incorporation in the same manner as its first registration.

(3) The registration of a company under this section shall not affect any debts, liabilities, obligations or contracts incurred or entered into, by or on behalf of the company before conversion and such debts, liabilities, obligations and contracts may be enforced in the manner as if such registration had not been done.

(1) No company shall,either by itself or through its nominees, hold any shares in its holding company and no holding companyshall allot or transfer its shares to any of its subsidiary companies and any such allotment or transfer ofshares of a company to its subsidiary company shall be void:

Provided that nothing in this sub-section shall apply to a case--

(a) where the subsidiary company holds such shares as the legal representative of a deceasedmember of the holding company; or

(b) where the subsidiary company holds such shares as a trustee; or

(c) where the subsidiary company is a shareholder even before it became a subsidiary company ofthe holding company:

Provided further that the subsidiary company referred to in the preceding proviso shall have a right tovote at a meeting of the holding company only in respect of the shares held by it as a legal representativeor as a trustee, as referred to in clause (a) or clause (b) of the said proviso.

(2) The reference in this section to the shares of a holding company which is a company limited byguarantee or an unlimited company, not having a share capital, shall be construed as a reference to theinterest of its members, whatever be the form of interest.

(1) A document may be served on a company or an officer thereof by sending it to the company or the officer at the registered office of the company by registered post or by speed post or by courier service or by leaving it at its registered office or by means of such electronic or other mode as may be prescribed:

Provided that where securities are held with a depository, the records of the beneficial ownership may be served by such depository on the company by means of electronic or other mode.

(2) Save as provided in this Act or the rules made thereunder for filing of documents with theRegistrar in electronic mode, a document may be served on Registrar or any member by sending it to him by post or by registered post or by speed post or by courier or by delivering at his office or address, or by such electronic or other mode as may be prescribed:

Provided that a member may request for delivery of any document through a particular mode, for which he shall pay such fees as may be determined by the company in its annual general meeting.

Explanation.-- For the purposes of this section, the term courier means a person or agency which delivers the document and provides proof of its delivery.

Save as otherwise provided in this Act,

(a) a document or proceeding requiring authentication by a company; or

(b) contracts made by or on behalf of a company,

may be signed by any key managerial personnel or 1[an officer or employee of the company] dulyauthorised by the Board in this behalf.

1. Subs. by Act 1 of 2018, s. 7, for u201can officer of the companyu201d (w.e.f. 9-2-2018).

(1) A bill of exchange, hundi or promissory note shall be deemed to have been made, accepted, drawn or endorsed on behalf of a company if made, accepted, drawn, or endorsed in the name of, or on behalf of or on account of, the company by any person acting under its authority, express or implied.

(2) A company may, by writing 1[under its common seal, if any,] authorise any person, eithergenerally or in respect of any specified matters, as its attorney to execute other deeds on its behalf in any place either in or outside India:

2[Provided that in case a company does not have a common seal, the authorisation under this subsection shall be made by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.]

(3) A deed signed by such an attorney on behalf of the company and under his seal shall bind thecompany 3.

1. Subs. by Act 21 of 2015, s. 6, for "under its common seal" (w.e.f. 29-5-2015).

2. The proviso inserted by s. 6, ibid. (w.e.f. 29-5-2015).

3. The words "and have the effect as if it were made under its common seal" omitted by s. 6, ibid. (w.e.f. 29-5-2015).

(1) A public company may issue securities--

(a) to public through prospectus (herein referred to as "public offer") by complying with theprovisions of this Part; or

(b) through private placement by complying with the provisions of Part II of this Chapter; or

(c) through a rights issue or a bonus issue in accordance with the provisions of this Act and incase of a listed company or a company which intends to get its securities listed also with theprovisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the rules and regulations made thereunder.

(2) A private company may issue securities

(a) by way of rights issue or bonus issue in accordance with the provisions of this Act; or

(b) through private placement by complying with the provisions of Part II of this Chapter.

Explanation.-- For the purposes of this Chapter, "public offer" includes initial public offer or further public offer of securities to the public by a company, or an offer for sale of securities to the public by an existing shareholder, through issue of a prospectus.

(1) The provisions contained in this Chapter, Chapter IV and in section 127 shall,--

(a) in so far as they relate to--

(i) issue and transfer of securities; and

(ii) non-payment of dividend,

by listed companies or those companies which intend to get their securities listed on any recognised stock exchange in India, except as provided under this Act, be administered by the Securities and Exchange Board by making regulations in this behalf;

(b) in any other case, be administered by the Central Government.

Explanation.--For the removal of doubts, it is hereby declared that all powers relating to all other matters relating to prospectus, return of allotment, redemption of preference shares and any other matter specifically provided in this Act, shall be exercised by the Central Government, the Tribunal or the Registrar, as the case may be.

(2) The Securities and Exchange Board shall, in respect of matters specified in subsection (1) and the matters delegated to it under proviso to sub-section (1) of section 458, exercise the powers conferred upon it under sub-sections (1), (2A), (3) and (4) of section 11, sections 11A, 11B and 11D of the Securities and Exchange Board of India Act, 1992 (15 of 1992).

(1) Where acompany allots or agrees to allot any securities of the company with a view to all or any of those securities being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents of prospectus and as to liability in respect of mis-statements, in and omissions from, prospectus, or otherwise relating to prospectus, shall apply with the modificationsspecified in subsections (3) and (4) and shall have effect accordingly, as if the securities had been offered to the public for subscription and as if persons accepting the offer in respect of any securities were subscribers for those securities, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of mis-statements contained in the document or otherwise in respect thereof.

(2) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, securities was made with a view to the securities being offered for sale to the public if it is shown--

(a) that an offer of the securities or of any of them for sale to the public was made within sixmonths after the allotment or agreement to allot; or

(b) that at the date when the offer was made, the whole consideration to be received by thecompany in respect of the securities had not been received by it.

(3) Section 26 as applied by this section shall have effect as if--

(i) it required a prospectus to state in addition to the matters required by that section to be stated in a prospectus

(a) the net amount of the consideration received or to be received by the company in respectof the securities to which the offer relates; and

(b) the time and place at which the contract where under the said securities have been or are to be allotted may be inspected;

(ii) the persons making the offer were persons named in a prospectus as directors of a company.

(4) Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in sub-section (1) is signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be.

(1) Every prospectus issued by or on behalf of a publiccompany either with reference to its formation or subsequently, or by or on behalf of any person who is orhas been engaged or interested in the formation of a public company, shall be dated and signed and shall,1[state such information and set out such reports on financial information as may be specified by theSecurities and Exchange Board in consultation with the Central Government:

Provided that until the Securities and Exchange Board specifies the information and reports onfinancial information under this sub-section, the regulations made by the Securities and Exchange Boardunder the Securities and Exchange Board of India Act, 1992 (15 of 1992), in respect of such financialinformation or reports on financial information shall apply];

2

(c) make a declaration about the compliance of the provisions of this Act and a statement to theeffect that nothing in the prospectus is contrary to the provisions of this Act, the Securities Contracts(Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992(15 of 1992) and the rules and regulations made thereunder; and

4

(2) Nothing in sub-section (1) shall apply--

(a) to the issue to existing members or debenture-holders of a company, of a prospectus or formof application relating to shares in or debentures of the company, whether an applicant has a right torenounce the shares or not under sub-clause (ii) of clause (a) of sub-section (1) of section 62 in favourof any other person; or

(b) to the issue of a prospectus or form of application relating to shares or debentures which are,or are to be, in all respects uniform with shares or debentures previously issued and for the time beingdealt in or quoted on a recognised stock exchange.

(3) Subject to sub-section (2), the provisions of sub-section (1) shall apply to a prospectus or a formof application, whether issued on or with reference to the formation of a company or subsequently.

Explanation.--The date indicated in the prospectus shall be deemed to be the date of its publication.

(4) No prospectus shall be issued by or on behalf of a company or in relation to an intended companyunless on or before the date of its publication, there has been delivered to the Registrar for 3[filing], acopy thereof signed by every person who is named there in as a director or proposed director of thecompany or by his duly authorised attorney.

(5) A prospectus issued under sub-section (1) shall not include a statement purporting to be made byan expert unless the expert is a person who is not, and has not been, engaged or interested in the formationor promotion or management, of the company and has given his written consent to the issue of theprospectus and has not withdrawn such consent before the delivery of a copy of the prospectus to theRegistrar for 3[filing] and a statement to that effect shall be included in the prospectus.

(6) Every prospectus issued under sub-section (1) shall, on the face of it,--

(a) state that a copy has been delivered for 3[filing] to the Registrar as required undersub-section (4); and

(b) specify any documents required by this section to be attached to the copy so delivered or referto statements included in the prospectus which specify these documents.

4

(8) No prospectus shall be valid if it is issued more than ninety days after the date on which a copythereof is delivered to the Registrar under sub-section (4).

(9) If a prospectus is issued in contravention of the provisions of this section, the company shall bepunishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakhrupees and every person who is knowingly a party to the issue of such prospectus shall be punishable withimprisonment for a term which may extend to three years or with fine which shall not be less than fiftythousand rupees but which may extend to three lakh rupees, or with both.

1. Ins. by Act 1 of 2018, s. 8 (w.e.f. 7-5-2018).

2. Clauses (a), (b) and (d) omitted by s. 8, ibid. (w.e.f. 7-5-2018).

3. Subs. by Act 22 of 2019, s. 6, for "registration" (w.e.f. 15-8-2019).

4. Sub-section (7) omitted by s. 6, ibid. (w.e.f. 15-8-2019).

(1) A company shall not, at any time, vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued, except subject to the approval of, or except subject to an authority given by the company in general meeting by way of special resolution:

Provided that the details, as may be prescribed, of the notice in respect of such resolution toshareholders, shall also be published in the newspapers (one in English and one in vernacular language) in the city where the registered office of the company is situated indicating clearly the justification for such variation:

Provided further that such company shall not use any amount raised by it through prospectus for buying, trading or otherwise dealing in equity shares of any other listed company.

(2) The dissenting shareholders being those shareholders who have not agreed to the proposal to vary the terms of contracts or objects referred to in the prospectus, shall be given an exit offer by promoters or controlling shareholders at such exit price, and in such manner and conditions as may be specified by the Securities and Exchange Board by making regulations in this behalf.

(1) Where certain members of acompany propose, in consultation with the Board of Directors to offer, in accordance with the provisions of any law for the time being in force, whole or part of their holding of shares to the public, they may do so in accordance with such procedure as may be prescribed.

(2) Any document by which the offer of sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company and all laws and rules made thereunder as to the contents of the prospectus and as to liability in respect of mis-statements in and omission from prospectus or otherwise relating to prospectus shall apply as if this is a prospectus issued by the company.

(3) The members, whether individuals or bodies corporate or both, whose shares are proposed to be offered to the public, shall collectively authorise the company, whose shares are offered for sale to the public, to take all actions in respect of offer of sale for and on their behalf and they shall reimburse the company all expenses incurred by it on this matter.

(1) Notwithstanding anythingcontained in any other provisions of this Act,--

(a) every company making public offer; and

(b) such other class or classes of 1 companies as may be prescribed,

shall issue the securities only in dematerialised form by complying with the provisions of the DepositoriesAct, 1996 (22 of 1996) and the regulations made thereunder.

2[(1A) In case of such class or classes of unlisted companies as may be prescribed, the securities shallbe held or transferred only in dematerialised form in the manner laid down in the Depositories Act, 1996and the regulations made thereunder.]

(2) Any company, other than a company mentioned in sub-section (1), may convert its securities intodematerialised form or issue its securities in physical form in accordance with the provisions of this Actor in dematerialised form in accordance with the provisions of the Depositories Act, 1996 (22 of 1996)and the regulations made thereunder.

1. The word "public" omitted by Act 22 of 2019, s. 7 (w.e.f. 15-8-2019).

2. Ins. by s. 7, ibid. (w.e.f. 15-8-2019).

Where an advertisement of any prospectus of a company is published in any manner, it shall be necessary to specify therein the contents of its memorandum as

regards the objects, the liability of members and the amount of share capital of the company, and the names of the signatories to the memorandum and the number of shares subscribed for by them, and its capital structure.

(1) Any class or classes of companies, as the Securities and Exchange Board may provide by regulations in this behalf, may file a shelf prospectus with the Registrar at the stage of the first offer of securities included therein which shall indicate a period not exceeding one year as the period of validity of such prospectus which shall commence from the date of opening of the first offer of securities under that prospectus, and in respect of a second or subsequent offer of such securities issued during the period of validity of that prospectus, no further prospectus is required.

(2) A company filing a shelf prospectus shall be required to file an information memorandumcontaining all material facts relating to new charges created, changes in the financial position of the company as have occurred between the first offer of securities or the previous offer of securities and the succeeding offer of securities and such other changes as may be prescribed, with the Registrar within the prescribed time, prior to the issue of a second or subsequent offer of securities under the shelf prospectus:

Provided that where a company or any other person has received applications for the allotment of securities along with advance payments of subscription before the making of any such change, the company or other person shall intimate the changes to such applicants and if they express a desire to withdraw their application, the company or other person shall refund all the monies received as subscription within fifteen days thereof.

(3) Where an information memorandum is filed, every time an offer of securities is made under subsection (2), such memorandum together with the shelf prospectus shall be deemed to be a prospectus.

Explanation.-- For the purposes of this section, the expression "shelf prospectus" means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus.

(1) A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.

(2) A company proposing to issue a red herring prospectus under sub-section (1) shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer.

(3) A red herring prospectus shall carry the same obligations as are applicable to a prospectus and any variation between the red herring prospectus and a prospectus shall be highlighted as variations in the prospectus.

(4) Upon the closing of the offer of securities under this section, the prospectus stating therein the total capital raised, whether by way of debt or share capital, and the closing price of the securities and any other details as are not included in the red herring prospectus shall be filed with the Registrar and the Securities and Exchange Board.

Explanation.-- For the purposes of this section, the expression "red herring prospectus" means a prospectus which does not include complete particulars of the quantum or price of the securities included therein

(1) No form of application for the purchase of any of the securities of a company shall be issued unless such form is accompanied by an abridged prospectus:

Provided that nothing in this sub-section shall apply if it is shown that the form of application was issued--

(a) in connection with a bona fide invitation to a person to enter into an underwriting agreementwith respect to such securities; or

(b) in relation to securities which were not offered to the public.

(2) A copy of the prospectus shall, on a request being made by any person before the closing of the subscription list and the offer, be furnished to him.

(3) If a company makes any default in complying with the provisions of this section, it shall be liable to a penalty of fifty thousand rupees for each default.

Where a prospectus, issued, circulated or distributed under this Chapter, includes any statement which is untrue or misleading in form or context in which it is included or where any inclusion or omission of any matter is likely to mislead, every person who authorises the issue of such prospectus shall be liable under section 447:

Provided that nothing in this section shall apply to a person if he proves that such statement oromission was immaterial or that he had reasonable grounds to believe, and did up to the time of issue of the prospectus believe, that the statement was true or the inclusion or omission was necessary.

(1) Where a person has subscribed forsecurities of a company acting on any statement included, or the inclusion or omission of any matter, inthe prospectus which is misleading and has sustained any loss or damage as a consequence thereof, thecompany and every person who--

(a) is a director of the company at the time of the issue of the prospectus;

(b) has authorised himself to be named and is named in the prospectus as a director of thecompany, or has agreed to become such director, either immediately or after an interval of time;

(c) is a promoter of the company;

(d) has authorised the issue of the prospectus; and

(e) is an expert referred to in sub-section (5) of section 26,

shall, without prejudice to any punishment to which any person may be liable under section 36, be liableto pay compensation to every person who has sustained such loss or damage.

(2) No person shall be liable under sub-section (1), if he proves--

(a) that, having consented to become a director of the company, he withdrew his consent beforethe issue of the prospectus, and that it was issued without his authority or consent; or

(b) that the prospectus was issued without his knowledge or consent, and that on becoming awareof its issue, he forthwith gave a reasonable public notice that it was issued without his knowledge orconsent.

1[(c) that, as regards every misleading statement purported to be made by an expert or containedin what purports to be a copy of or an extract from a report or valuation of an expert, it was a correctand fair representation of the statement, or a correct copy of, or a correct and fair extract from, thereport or valuation; and he had reasonable ground to believe and did up to the time of the issue of theprospectus believe, that the person making the statement was competent to make it and that the saidperson had given the consent required by sub-section (5) of section 26 to the issue of the prospectusand had not withdrawn that consent before 2[filing of a copy of the prospectus with the Registrar] or,to the defendant's knowledge, before allotment thereunder.]

(3) Notwithstanding anything contained in this section, where it is proved that a prospectus has beenissued with intent to defraud the applicants for the securities of a company or any other person or for anyfraudulent purpose, every person referred to in sub-section (1) shall be personally responsible, withoutany limitation of liability, for all or any of the losses or damages that may have been incurred by anyperson who subscribed to the securities on the basis of such prospectus.

1. Ins. by Act 1 of 2018, s. 9 (w.e.f. 9-2-2018).

2. Subs. by Act 22 of 2019, s. 8, for "delivery of a copy of the prospectus for registration" (w.e.f. 15-8-2019).

Any person who, eitherknowingly or recklessly makes any statement, promise or forecast which is false, deceptive or misleading, or deliberately conceals any material facts, to induce another person to enter into, or to offer to enterinto,-

(a) any agreement for, or with a view to, acquiring, disposing of, subscribing for, or underwritingsecurities; or

(b) any agreement, the purpose or the pretended purpose of which is to secure a profit to any ofthe parties from the yield of securities or by reference to fluctuations in the value of securities; or

(c) any agreement for, or with a view to obtaining credit facilities from any bank or financial institution,

shall be liable for action under section 447.

A suit may be filed or any other action may be taken under section 34 or section 35 or section 36 by any person, group of persons or any association of persons affected byany misleading statement or the inclusion or omission of any matter in the prospectus.

(1) Any person who--

(a) makes or abets making of an application in a fictitious name to a company for acquiring, orsubscribing for, its securities; or

(b) makes or abets making of multiple applications to a company in different names or indifferent combinations of his name or surname for acquiring or subscribing for its securities; or

(c) otherwise induces directly or indirectly a company to allot, or register any transfer of,securities to him, or to any other person in a fictitious name,

shall be liable for action under section 447.

(2) The provisions of sub-section (1) shall be prominently reproduced in every prospectus issued by acompany and in every form of application for securities.

(3) Where a person has been convicted under this section, the Court may also order disgorgement of gain, if any, made by, and seizure and disposal of the securities in possession of, such person.

(4) The amount received through disgorgement or disposal of securities under subsection (3) shall becredited to the Investor Education and Protection Fund.

(1) No allotment of any securities of a company offered to the public for subscription shall be made unless the amount stated in the prospectus as the minimum amount has been subscribed and the sums payable on application for the amount so stated have been paid to and received by the company by cheque or other instrument.

(2) The amount payable on application on every security shall not be less than five per cent. of the nominal amount of the security or such other percentage or amount, as may be specified by the Securities and Exchange Board by making regulations in this behalf.

(3) If the stated minimum amount has not been subscribed and the sum payable on application is not received within a period of thirty days from the date of issue of the prospectus, or such other period as may be specified by the Securities and Exchange Board, the amount received under sub-section (1) shall be returned within such time and manner as may be prescribed.

(4) Whenever a company having a share capital makes any allotment of securities, it shall file with the Registrar a return of allotment in such manner as may be prescribed.

(5) In case of any default under sub-section (3) or sub-section (4), the company and its officer who is in default shall be liable to a penalty, for each default, of one thousand rupees for each day during whichsuch default continues or one lakh rupees, whichever is less.

(1) Every company making public offer shall,before making such offer, make an application to one or more recognised stock exchange or exchangesand obtain permission for the securities to be dealt with in such stock exchange or exchanges.

(2) Where a prospectus states that an application under sub-section (1) has been made, suchprospectus shall also state the name or names of the stock exchange in which the securities shall be dealtwith.

(3) All monies received on application from the public for subscription to the securities shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than--

(a) for adjustment against allotment of securities where the securities have been permitted to be dealt with in the stock exchange or stock exchanges specified in the prospectus; or

(b) for the repayment of monies within the time specified by the Securities and Exchange Board, received from applicants in pursuance of the prospectus, where the company is for any other reason unable to allot securities.

(4) Any condition purporting to require or bind any applicant for securities to waive compliance with any of the requirements of this section shall be void.

(5) If a default is made in complying with the provisions of this section, the company shall bepunishable with a fine which shall not be less than five lakh rupees but which may extend to fifty lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.

(6) A company may pay commission to any person in connection with the subscription to itssecurities subject to such conditions as may be prescribed.

A company may, after passing a special resolution in its generalmeeting, issue depository receipts in any foreign country in such manner, and subject to such conditions,as may be prescribed.

1[42. Issue of shares on private placement basis. (1) A company may, subject to the provisions ofthis section, make a private placement of securities.

(2) A private placement shall be made only to a select group of persons who have been identified bythe Board (herein referred to as identified persons), whose number shall not exceed fifty or such highernumber as may be prescribed excluding the qualified institutional buyers and employees of the companybeing offered securities under a scheme of employees stock option in terms of provisions of clause (b) ofsub-section (1) of section 62, in a financial year subject to such conditions as may be prescribed.

(3) A company making private placement shall issue private placement offer and application in suchform and manner as may be prescribed to identified persons, whose names and addresses are recorded bythe company in such manner as may be prescribed:

Provided that the private placement offer and application shall not carry any right of renunciation.

Explanation I.-- "private placement" means any offer or invitation to subscribe or issue of securitiesto a select group of persons by a company (other than by way of public offer) through private placementoffer-cum-application, which satisfies the conditions specified in this section.

Explanation II.-- "qualified institutional buyer" means the qualified institutional buyer as defined inthe Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended from time to time, made under the Securities and Exchange Board of India Act, 1992,(15 of 1992).

Explanation III.-- If a company, listed or unlisted, makes an offer to allot or invites subscription, orallots, or enters into an agreement to allot, securities to more than the prescribed number of persons,whether the payment for the securities has been received or not or whether the company intends to list itssecurities or not on any recognised stock exchange in or outside India, the same shall be deemed to be anoffer to the public and shall accordingly be governed by the provisions of Part I of this Chapter.

(4) Every identified person willing to subscribe to the private placement issue shall apply in theprivate placement and application issued to such person alongwith subscription money paid either bycheque or demand draft or other banking channel and not by cash:

Provided that a company shall not utilise monies raised through private placement unless allotment ismade and the return of allotment is filed with the Registrar in accordance with sub-section (8).

(5) No fresh offer or invitation under this section shall be made unless the allotments with respect toany offer or invitation made earlier have been completed or that offer or invitation has been withdrawn orabandoned by the company:

Provided that, subject to the maximum number of identified persons under sub-section (2), a companymay, at any time, make more than one issue of securities to such class of identified persons as may beprescribed.

(6) A company making an offer or invitation under this section shall allot its securities within sixtydays from the date of receipt of the application money for such securities and if the company is not able toallot the securities within that period, it shall repay the application money to the subscribers within fifteendays from the expiry of sixty days and if the company fails to repay the application money within theaforesaid period, it shall be liable to repay that money with interest at the rate of twelve per cent. perannum from the expiry of the sixtieth day:

Provided that monies received on application under this section shall be kept in a separate bankaccount in a scheduled bank and shall not be utilised for any purpose other than--

(a) for adjustment against allotment of securities; or

(b) for the repayment of monies where the company is unable to allot securities.

(7) No company issuing securities under this section shall release any public advertisements or utiliseany media, marketing or distribution channels or agents to inform the public at large about such an issue.

(8) A company making any allotment of securities under this section, shall file with the Registrar areturn of allotment within fifteen days from the date of the allotment in such manner as may beprescribed, including a complete list of all allottees, with their full names, addresses, number of securitiesallotted and such other relevant information as may be prescribed.

(9) If a company defaults in filing the return of allotment within the period prescribed under subsection (8), the company, its promoters and directors shall be liable to a penalty for each default of onethousand rupees for each day during which such default continues but not exceeding twenty-five lakhrupees.

(10) Subject to sub-section (11), if a company makes an offer or accepts monies in contravention ofthis section, the company, its promoters and directors shall be liable for a penalty which may extend to theamount raised through the private placement or two crore rupees, whichever is lower, and the companyshall also refund all monies with interest as specified in sub-section (6) to subscribers within a period ofthirty days of the order imposing the penalty.

(11) Notwithstanding anything contained in sub-section (9) and sub-section (10), any privateplacement issue not made in compliance of the provisions of sub-section (2) shall be deemed to be apublic offer and all the provisions of this Act and the Securities Contracts (Regulation) Act, 1956(42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall be applicable.]

1. Subs. by Act 1 of 2018, s. 10 (w.e.f. 7-8-2018).

The share capital of a company limited by shares shall be of two kinds,namely:--

(a) equity share capital--

(i) with voting rights; or

(ii) with differential rights as to dividend, voting or otherwise in accordance with such rulesas may be prescribed; and

(b) preference share capital:

Provided that nothing contained in this Act shall affect the rights of the preference shareholders whoare entitled to participate in the proceeds of winding up before the commencement of this Act.

Explanation.-- For the purposes of this section,--

(i) equity share capital, with reference to any company limited by shares, means all sharecapital which is not preference share capital;

(ii) preference share capital, with reference to any company limited by shares, means that partof the issued share capital of the company which carries or would carry a preferential right withrespect to

(a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate,which may either be free of or subject to income-tax; and

(b) repayment, in the case of a winding up or repayment of capital, of the amount of the sharecapital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to thepayment of any fixed premium or premium on any fixed scale, specified in the memorandum orarticles of the company;

(iii) capital shall be deemed to be preference capital, notwithstanding that it is entitled to either orboth of the following rights, namely:--

(a) that in respect of dividends, in addition to the preferential rights to the amounts specifiedin sub-clause (a) of clause (ii), it has a right to participate, whether fully or to a limited extent,with capital not entitled to the preferential right aforesaid;

(b) that in respect of capital, in addition to the preferential right to the repayment, on awinding up, of the amounts specified in sub-clause (b) of clause (ii), it has a right to participate,whether fully or to a limited extent, with capital not entitled to that preferential right in anysurplus which may remain after the entire capital has been repaid.

The shares or debentures or other interest of any member in acompany shall be movable property transferable in the manner provided by the articles of the company.

Every share in a company having a share capital shall be distinguishedby its distinctive number:

Provided that nothing in this section shall apply to a share held by a person whose name is entered asholder of beneficial interest in such share in the records of a depository.

(1) A certificate, 1[issued under the common seal, if any, of the companyor signed by two directors or by a director and the Company Secretary, wherever the company hasappointed a Company Secretary], specifying the shares held by any person, shall be prima facie evidenceof the title of the person to such shares.

(2) A duplicate certificate of shares may be issued, if such certificate--

(a) is proved to have been lost or destroyed; or

(b) has been defaced, mutilated or torn and is surrendered to the company.

(3) Notwithstanding anything contained in the articles of a company, the manner of issue of acertificate of shares or the duplicate thereof, the form of such certificate, the particulars to be entered inthe register of members and other matters shall be such as may be prescribed.

(4) Where a share is held in depository form, the record of the depository is the prima facie evidenceof the interest of the beneficial owner.

(5) If a company with intent to defraud issues a duplicate certificate of shares, the company shall bepunishable with fine which shall not be less than five times the face value of the shares involved in theissue of the duplicate certificate but which may extend to ten times the face value of such shares or rupeesten crores whichever is higher and every officer of the company who is in default shall be liable for actionunder section 447.

1. Subs. by Act 21 of 2015, s. 7, for "issued under the common seal of the company" (w.e.f. 29-5-2015).

(1) Subject to the 1[provisions of section 43, sub-section (2) of section 50 andsub-section (1) of section 188],--

(a) every member of a company limited by shares and holding equity share capital therein, shallhave a right to vote on every resolution placed before the company; and

(b) his voting right on a poll shall be in proportion to his share in the paid-up equity share capitalof the company.

(2) Every member of a company limited by shares and holding any preference share capital thereinshall, in respect of such capital, have a right to vote only on resolutions placed before the company whichdirectly affect the rights attached to his preference shares and, any resolution for the winding up of thecompany or for the repayment or reduction of its equity or preference share capital and his voting right ona poll shall be in proportion to his share in the paid-up preference share capital of the company:

Provided that the proportion of the voting rights of equity shareholders to the voting rights of thepreference shareholders shall be in the same proportion as the paid-up capital in respect of the equityshares bears to the paid-up capital in respect of the preference shares:

Provided further that where the dividend in respect of a class of preference shares has not been paidfor a period of two years or more, such class of preference shareholders shall have a right to vote on allthe resolutions placed before the company.

1. Subs. by Act 1 of 2018, s. 11, for "provisions of section 43 and sub-section (2) of section 50" (w.e.f. 9-2-2018).

(1) Where a share capital of the company is divided intodifferent classes of shares, the rights attached to the shares of any class may be varied with the consent inwriting of the holders of not less than three-fourths of the issued shares of that class or by means of aspecial resolution passed at a separate meeting of the holders of the issued shares of that class,--

(a) if provision with respect to such variation is contained in the memorandum or articles of thecompany; or

(b) in the absence of any such provision in the memorandum or articles, if such variation is notprohibited by the terms of issue of the shares of that class:

Provided that if variation by one class of shareholders affects the rights of any other class ofshareholders, the consent of three-fourths of such other class of shareholders shall also be obtained andthe provisions of this section shall apply to such variation.

(2) Where the holders of not less than ten per cent. of the issued shares of a class did not consent tosuch variation or vote in favour of the special resolution for the variation, they may apply to the Tribunalto have the variation cancelled, and where any such application is made, the variation shall not have effectunless and until it is confirmed by the Tribunal:

Provided that an application under this section shall be made within twenty-one days after the date onwhich the consent was given or the resolution was passed, as the case may be, and may be made on behalfof the shareholders entitled to make the application by such one or more of their number as they mayappoint in writing for the purpose.

(3) The decision of the Tribunal on any application under sub-section (2) shall be binding on theshareholders.

(4) The company shall, within thirty days of the date of the order of the Tribunal, file a copy thereofwith the Registrar.

(5) Where any default is made in complying with the provisions of this section, the company shall bepunishable with fine which shall not be less than twenty-five thousand rupees but which may extend tofive lakh rupees and every officer of the company who is in default shall be punishable withimprisonment for a term which may extend to six months or with fine which shall not be less than twentyfivethousand rupees but which may extend to five lakh rupees, or with both.

Where any calls for further sharecapital are made on the shares of a class, such calls shall be made on a uniform basis on all shares fallingunder that class.

Explanation.-- For the purposes of this section, shares of the same nominal value on which differentamounts have been paid-up shall not be deemed to fall under the same class.

(1) A company may, if soauthorised by its articles, accept from any member, the whole or a part of the amount remaining unpaid onany shares held by him, even if no part of that amount has been called up.

(2) A member of the company limited by shares shall not be entitled to any voting rights in respect ofthe amount paid by him under sub-section (1) until that amount has been called up.

A company may, if so authorised byits articles, pay dividends in proportion to the amount paid-up on each share.

(1) Where a company issues shares at apremium, whether for cash or otherwise, a sum equal to the aggregate amount of the premium received onthose shares shall be transferred to a securities premium account and the provisions of this Act relatingto reduction of share capital of a company shall, except as provided in this section, apply as if thesecurities premium account were the paid-up share capital of the company.

(2) Notwithstanding anything contained in sub-section (1), the securities premium account may beapplied by the company--

(a) towards the issue of unissued shares of the company to the members of the company as fullypaid bonus shares;

(b) in writing off the preliminary expenses of the company;

(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue ofshares or debentures of the company;

(d) in providing for the premium payable on the redemption of any redeemable preference sharesor of any debentures of the company; or

(e) for the purchase of its own shares or other securities under section 68.

(3) The securities premium account may, notwithstanding anything contained in sub-sections (1) and(2), be applied by such class of companies, as may be prescribed and whose financial statement complywith the accounting standards prescribed for such class of companies under section 133,

(a) in paying up unissued equity shares of the company to be issued to members of the companyas fully paid bonus shares; or

(b) in writing off the expenses of or the commission paid or discount allowed on any issue ofequity shares of the company; or

(c) for the purchase of its own shares or other securities under section 68.

(1) Except as provided in section 54, a companyshall not issue shares at a discount.

(2) Any share issued by a company at a 1[discount] shall be void.

2[(2A) Notwithstanding anything contained in sub-sections (1) and (2), a company may issue shares ata discount to its creditors when its debt is converted into shares in pursuance of any statutory resolutionplan or debt restructuring scheme in accordance with any guidelines or directions or regulations specifiedby the Reserve Bank of India under the Reserve Bank of India Act, 1934 (2 of 1934) or the Banking(Regulation) Act, 1949 (10 of 1949).]

3[(3) Where any company fails to comply with the provisions of this section, such company and everyofficer who is in default shall be liable to a penalty which may extend to an amount equal to the amountraised through the issue of shares at a discount of five lakh rupees, whichever is less, and the companyshall also be liable to refund all monies received with interest at the rate of twelve per cent. per annumfrom the date of issue of such shares to the persons to whom such shares have been issued.]

1. Subs. by Act 1 of 2018, s. 12, for "discounted price" (w.e.f. 9-2-2018).

2. Ins. by s. 12, ibid. (w.e.f. 9-2-2018).

3. Subs. by Act 22 of 2019, s. 9, for sub-section (3) (w.e.f. 2-11-2018).

(1) Notwithstanding anything contained in section 53, a companymay issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled,namely:--

(a) the issue is authorised by a special resolution passed by the company;

(b) the resolution specifies the number of shares, the current market price, consideration, if any,and the class or classes of directors or employees to whom such equity shares are to be issued;

1

(d) where the equity shares of the company are listed on a recognised stock exchange, the sweatequity shares are issued in accordance with the regulations made by the Securities and ExchangeBoard in this behalf and if they are not so listed, the sweat equity shares are issued in accordance withsuch rules as may be prescribed.

(2) The rights, limitations, restrictions and provisions as are for the time being applicable to equityshares shall be applicable to the sweat equity shares issued under this section and the holders of suchshares shall rank pari passu with other equity shareholders.

1. Clause (c) omitted by s. 13, ibid. (w.e.f. 7-5-2018).

(1) No company limited by shares shall, after thecommencement of this Act, issue any preference shares which are irredeemable.

(2) A company limited by shares may, if so authorised by its articles, issue preference shares whichare liable to be redeemed within a period not exceeding twenty years from the date of their issue subjectto such conditions as may be prescribed:

Provided that a company may issue preference shares for a period exceeding twenty years forinfrastructure projects, subject to the redemption of such percentage of shares as may be prescribed on anannual basis at the option of such preferential shareholders:

Provided further that--

(a) no such shares shall be redeemed except out of the profits of the company which wouldotherwise be available for dividend or out of the proceeds of a fresh issue of shares made for thepurposes of such redemption;

(b) no such shares shall be redeemed unless they are fully paid;

(c) where such shares are proposed to be redeemed out of the profits of the company, there shall,out of such profits, be transferred, a sum equal to the nominal amount of the shares to be redeemed, toa reserve, to be called the Capital Redemption Reserve Account, and the provisions of this Actrelating to reduction of share capital of a company shall, except as provided in this section, apply as ifthe Capital Redemption Reserve Account were paid-up share capital of the company; and

(d) (i) in case of such class of companies, as may be prescribed and whose financial statementcomply with the accounting standards prescribed for such class of companies under section 133, thepremium, if any, payable on redemption shall be provided for out of the profits of the company,before the shares are redeemed:

Provided also that premium, if any, payable on redemption of any preference shares issued on orbefore the commencement of this Act by any such company shall be provided for out of the profits ofthe company or out of the companys securities premium account, before such shares are redeemed.

(ii) in a case not falling under sub-clause (i) above, the premium, if any, payable on redemptionshall be provided for out of the profits of the company or out of the company's securities premiumaccount, before such shares are redeemed.

(3) Where a company is not in a position to redeem any preference shares or to pay dividend, if any,on such shares in accordance with the terms of issue (such shares hereinafter referred to as unredeemedpreference shares), it may, with the consent of the holders of three-fourths in value of such preferenceshares and with the approval of the Tribunal on a petition made by it in this behalf, issue furtherredeemable preference shares equal to the amount due, including the dividend thereon, in respect of theunredeemed preference shares, and on the issue of such further redeemable preference shares, theunredeemed preference shares shall be deemed to have been redeemed:

Provided that the Tribunal shall, while giving approval under this sub-section, order the redemptionforthwith of preference shares held by such persons who have not consented to the issue of furtherredeemable preference shares.

Explanation.-- For the removal of doubts, it is hereby declared that the issue of further redeemablepreference shares or the redemption of preference shares under this section shall not be deemed to be anincrease or, as the case may be, a reduction, in the share capital of the company.

(4) The capital redemption reserve account may, notwithstanding anything in this section, be appliedby the company, in paying up unissued shares of the company to be issued to members of the company asfully paid bonus shares.

Explanation.-- For the purposes of sub-section (2), the term infrastructure projects means theinfrastructure projects specified in Schedule VI.

(1) A company shall not register a transfer ofsecurities of the company, or the interest of a member in the company in the case of a company having noshare capital, other than the transfer between persons both of whose names are entered as holders ofbeneficial interest in the records of a depository, unless a proper instrument of transfer, in such form asmay be prescribed, duly stamped, dated and executed by or on behalf of the transferor and the transfereeand specifying the name, address and occupation, if any, of the transferee has been delivered to thecompany by the transferor or the transferee within a period of sixty days from the date of execution, alongwith the certificate relating to the securities, or if no such certificate is in existence, along with the letterof allotment of securities:

Provided that where the instrument of transfer has been lost or the instrument of transfer has not beendelivered within the prescribed period, the company may register the transfer on such terms as toindemnity as the Board may think fit.

(2) Nothing in sub-section (1) shall prejudice the power of the company to register, on receipt of anintimation of transmission of any right to securities by operation of law from any person to whom suchright has been transmitted.

(3) Where an application is made by the transferor alone and relates to partly paid shares, the transfershall not be registered, unless the company gives the notice of the application, in such manner as may beprescribed, to the transferee and the transferee gives no objection to the transfer within two weeks fromthe receipt of notice.

(4) Every company shall, unless prohibited by any provision of law or any order of Court, Tribunal orother authority, deliver the certificates of all securities allotted, transferred or transmitted--

(a) within a period of two months from the date of incorporation, in the case of subscribers to thememorandum;

(b) within a period of two months from the date of allotment, in the case of any allotment of anyof its shares;

(c) within a period of one month from the date of receipt by the company of the instrument oftransfer under sub-section (1) or, as the case may be, of the intimation of transmission under subsection

(2), in the case of a transfer or transmission of securities;

(d) within a period of six months from the date of allotment in the case of any allotment ofdebenture:

Provided that where the securities are dealt with in a depository, the company shall intimate thedetails of allotment of securities to depository immediately on allotment of such securities.

(5) The transfer of any security or other interest of a deceased person in a company made by his legalrepresentative shall, even if the legal representative is not a holder thereof, be valid as if he had been theholder at the time of the execution of the instrument of transfer.

(6) Where any default is made in complying with the provisions of sub-sections (1) to (5), thecompany shall be punishable with fine which shall not be less than twenty-five thousand rupees but whichmay extend to five lakh rupees and every officer of the company who is in default shall be punishablewith fine which shall not be less than ten thousand rupees but which may extend to one lakh rupees.

(7) Without prejudice to any liability under the Depositories Act, 1996 (22 of 1996), where anydepository or depository participant, with an intention to defraud a person, has transferred shares, it shallbe liable under section 447.

If any person deceitfully personates as an ownerof any security or interest in a company, or of any share warrant or coupon issued in pursuance of thisAct, and thereby obtains or attempts to obtain any such security or interest or any such share warrant orcoupon, or receives or attempts to receive any money due to any such owner, he shall be punishable withimprisonment for a term which shall not be less than one year but which may extend to three years andwith fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

(1) If a private company limited by sharesrefuses, whether in pursuance of any power of the company under its articles or otherwise, to register thetransfer of, or the transmission by operation of law of the right to, any securities or interest of a memberin the company, it shall within a period of thirty days from the date on which the instrument of transfer, or the intimation of such transmission, as the case may be, was delivered to the company, send notice of therefusal to the transferor and the transferee or to the person giving intimation of such transmission, as thecase may be, giving reasons for such refusal.

(2) Without prejudice to sub-section (1), the securities or other interest of any member in a publiccompany shall be freely transferable:

Provided that any contract or arrangement between two or more persons in respect of transfer ofsecurities shall be enforceable as a contract.

(3) The transferee may appeal to the Tribunal against the refusal within a period of thirty days fromthe date of receipt of the notice or in case no notice has been sent by the company, within a period of sixtydays from the date on which the instrument of transfer or the intimation of transmission, as the case maybe, was delivered to the company.

(4) If a public company without sufficient cause refuses to register the transfer of securities within aperiod of thirty days from the date on which the instrument of transfer or the intimation of transmission,as the case may be, is delivered to the company, the transferee may, within a period of sixty days of suchrefusal or where no intimation has been received from the company, within ninety days of the delivery ofthe instrument of transfer or intimation of transmission, appeal to the Tribunal.

(5) The Tribunal, while dealing with an appeal made under sub-section (3) or sub-section (4), may,after hearing the parties, either dismiss the appeal, or by order--

(a) direct that the transfer or transmission shall be registered by the company and the companyshall comply with such order within a period of ten days of the receipt of the order; or

(b) direct rectification of the register and also direct the company to pay damages, if any,sustained by any party aggrieved.

(6) If a person contravenes the order of the Tribunal under this section, he shall be punishable withimprisonment for a term which shall not be less than one year but which may extend to three years andwith fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

(1) If the name of any person is, without sufficientcause, entered in the register of members of a company, or after having been entered in the register, is,without sufficient cause, omitted therefrom, or if a default is made, or unnecessary delay takes place inentering in the register, the fact of any person having become or ceased to be a member, the personaggrieved, or any member of the company, or the company may appeal in such form as may beprescribed, to the Tribunal, or to a competent court outside India, specified by the Central Government bynotification, in respect of foreign members or debenture holders residing outside India, for rectification ofthe register.

(2) The Tribunal may, after hearing the parties to the appeal under sub-section (1) by order, eitherdismiss the appeal or direct that the transfer or transmission shall be registered by the company within aperiod of ten days of the receipt of the order or direct rectification of the records of the depository or theregister and in the latter case, direct the company to pay damages, if any, sustained by the partyaggrieved.

(3) The provisions of this section shall not restrict the right of a holder of securities, to transfer suchsecurities and any person acquiring such securities shall be entitled to voting rights unless the votingrights have been suspended by an order of the Tribunal.

(4) Where the transfer of securities is in contravention of any of the provisions of the SecuritiesContracts (Regulation) Act, 1956 (42 of 1956), the Securities and Exchange Board of India Act, 1992 (15of 1992) or this Act or any other law for the time being in force, the Tribunal may, on an applicationmade by the depository, company, depository participant, the holder of the securities or the Securities andExchange Board, direct any company or a depository to set right the contravention and rectify its registeror records concerned.

(5) If any default is made in complying with the order of the Tribunal under this section, the companyshall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment fora term which may extend to one year or with fine which shall not be less than one lakh rupees but whichmay extend to three lakh rupees, or with both.

(1) Where any notice,advertisement or other official publication, or any business letter, billhead or letter paper of a companycontains a statement of the amount of the authorised capital of the company, such notice, advertisement orother official publication, or such letter, billhead or letter paper shall also contain a statement, in anequally prominent position and in equally conspicuous characters, of the amount of the capital which hasbeen subscribed and the amount paid-up.

(2) If any default is made in complying with the requirements of sub-section (1), the company shallbe liable to pay a penalty of ten thousand rupees and every officer of the company who is in default shallbe liable to pay a penalty of five thousand rupees, for each default.

(1) A limited company having a sharecapital may, if so authorised by its articles, alter its memorandum in its general meeting to--

(a) increase its authorised share capital by such amount as it thinks expedient;

(b) consolidate and divide all or any of its share capital into shares of a larger amount than itsexisting shares:

Provided that no consolidation and division which results in changes in the voting percentage ofshareholders shall take effect unless it is approved by the Tribunal on an application made in theprescribed manner;

(c) convert all or any of its fully paid-up shares into stock, and reconvert that stock into fullypaid-up shares of any denomination;

(d) sub-divide its shares, or any of them, into shares of smaller amount than is fixed by thememorandum, so, however, that in the sub-division the proportion between the amount paid and theamount, if any, unpaid on each reduced share shall be the same as it was in the case of the share fromwhich the reduced share is derived;

(e) cancel shares which, at the date of the passing of the resolution in that behalf, have not beentaken or agreed to be taken by any person, and diminish the amount of its share capital by the amountof the shares so cancelled.

(2) The cancellation of shares under sub-section (1) shall not be deemed to be a reduction of sharecapital.

(1) Where at any time, a company having a share capitalproposes to increase its subscribed capital by the issue of further shares, such shares shall be offered

(a) to persons who, at the date of the offer, are holders of equity shares of the company inproportion, as nearly as circumstances admit, to the paid-up share capital on those shares by sending aletter of offer subject to the following conditions, namely:

(i) the offer shall be made by notice specifying the number of shares offered and limiting atime not being less than fifteen days and not exceeding thirty days from the date of the offerwithin which the offer, if not accepted, shall be deemed to have been declined;

(ii) unless the articles of the company otherwise provide, the offer aforesaid shall be deemedto include a right exercisable by the person concerned to renounce the shares offered to him orany of them in favour of any other person; and the notice referred to in clause (i) shall contain astatement of this right;

(iii) after the expiry of the time specified in the notice aforesaid, or on receipt of earlierintimation from the person to whom such notice is given that he declines to accept the sharesoffered, the Board of Directors may dispose of them in such manner which is not disadvantageousto the shareholders and the company;

(b) to employees under a scheme of employees stock option, subject to special resolution passedby company and subject to such conditions as may be prescribed; or

(c) to any persons, if it is authorised by a special resolution, whether or not those persons includethe persons referred to in clause (a) or clause (b), either for cash or for a consideration other thancash, if the price of such shares is determined by the valuation report 1[of a registered valuer subject to

such conditions as may be prescribed.[

2[(2) The notice referred to in sub-clause (i) of clause (a) of sub-section (1) shall be despatched throughregistered post or speed post or through electronic mode to all the existing shareholders at least three daysbefore the opening of the issue.]

(3) Nothing in this section shall apply to the increase of the subscribed capital of a company causedby the exercise of an option as a term attached to the debentures issued or loan raised by the company toconvert such debentures or loans into shares in the company:

Provided that the terms of issue of such debentures or loan containing such an option have beenapproved before the issue of such debentures or the raising of loan by a special resolution passed by thecompany in general meeting.

(4) Notwithstanding anything contained in sub-section (3), where any debentures have been issued, orloan has been obtained from any Government by a company, and if that Government considers itnecessary in the public interest so to do, it may, by order, direct that such debentures or loans or any partthereof shall be converted into shares in the company on such terms and conditions as appear to theGovernment to be reasonable in the circumstances of the case even if terms of the issue of suchdebentures or the raising of such loans do not include a term for providing for an option for suchconversion:

Provided that where the terms and conditions of such conversion are not acceptable to the company, itmay, within sixty days from the date of communication of such order, appeal to the Tribunal which shallafter hearing the company and the Government pass such order as it deems fit.

(5) In determining the terms and conditions of conversion under sub-section (4), the Governmentshall have due regard to the financial position of the company, the terms of issue of debentures or loans,as the case may be, the rate of interest payable on such debentures or loans and such other matters as itmay consider necessary.

(6) Where the Government has, by an order made under sub-section (4), directed that any debentureor loan or any part thereof shall be converted into shares in a company and where no appeal has beenpreferred to the Tribunal under sub-section (4) or where such appeal has been dismissed, thememorandum of such company shall, where such order has the effect of increasing the authorised sharecapital of the company, stand altered and the authorised share capital of such company shall standincreased by an amount equal to the amount of the value of shares which such debentures or loans or partthereof has been converted into.

1. Subs. by Act 1 of 2018, s. 14, for "of a registered valuer subject to such conditions as may be prescribed" (w.e.f. 9-2-2018).

2. Subs. by s. 14, ibid., for sub-section (2) (w.e.f. 9-2-2018)

(1) A company may issue fully paid-up bonus shares to its members, inany manner whatsoever, out of--

(i) its free reserves;

(ii) the securities premium account; or

(iii) the capital redemption reserve account:

Provided that no issue of bonus shares shall be made by capitalising reserves created by therevaluation of assets.

(2) No company shall capitalise its profits or reserves for the purpose of issuing fully paid-up bonusshares under sub-section (1), unless--

(a) it is authorised by its articles;

(b) it has, on the recommendation of the Board, been authorised in the general meeting of thecompany;

(c) it has not defaulted in payment of interest or principal in respect of fixed deposits or debtsecurities issued by it;

(d) it has not defaulted in respect of the payment of statutory dues of the employees, such as,contribution to provident fund, gratuity and bonus;

(e) the partly paid-up shares, if any outstanding on the date of allotment, are made fully paid-up;

(f) it complies with such conditions as may be prescribed.

(3) The bonus shares shall not be issued in lieu of dividend.

(1) Where--

(a) a company alters its share capital in any manner specified in sub-section (1) of section 61;

(b) an order made by the Government under sub-section (4) read with sub-section (6) ofsection 62 has the effect of increasing authorised capital of a company; or

(c) a company redeems any redeemable preference shares,

the company shall file a notice in the prescribed form with the Registrar within a period of thirty days ofsuch alteration or increase or redemption, as the case may be, along with an altered memorandum.

1[(2) where any company fails to comply with the provisions of sub-section (1), such company rupeesand every officer who is in default shall be liable to a penalty of one thousand rupees for each day duringwhich such default continues, or five lakh rupees whichever is less.]

1. Subs. by Act 22 of 2019, s. 10, for sub-section (2) (w.e.f. 2-11-2018).

An unlimited company having a share capital may, by a resolution for registration as alimited company under this Act, do either or both of the following things, namely--

(a) increase the nominal amount of its share capital by increasing the nominal amount of each ofits shares, subject to the condition that no part of the increased capital shall be capable of being calledup except in the event and for the purposes of the company being wound up;

(b) provide that a specified portion of its uncalled share capital shall not be capable of beingcalled up except in the event and for the purposes of the company being wound up.

(1) Subject to confirmation by the Tribunal on an application bythe company, a company limited by shares or limited by guarantee and having a share capital may, by aspecial resolution, reduce the share capital in any manner and in particular, may--

(a) extinguish or reduce the liability on any of its shares in respect of the share capital not paidup;or

(b) either with or without extinguishing or reducing liability on any of its shares,--

(i) cancel any paid-up share capital which is lost or is unrepresented by available assets; or

(ii) pay off any paid-up share capital which is in excess of the wants of the company,alter its memorandum by reducing the amount of its share capital and of its shares accordingly:

Provided that no such reduction shall be made if the company is in arrears in the repayment of anydeposits accepted by it, either before or after the commencement of this Act, or the interest payablethereon.

(2) The Tribunal shall give notice of every application made to it under sub-section (1) to the CentralGovernment, Registrar and to the Securities and Exchange Board, in the case of listed companies, and thecreditors of the company and shall take into consideration the representations, if any, made to it by thatGovernment, Registrar, the Securities and Exchange Board and the creditors within a period of threemonths from the date of receipt of the notice:

Provided that where no representation has been received from the Central Government, Registrar, theSecurities and Exchange Board or the creditors within the said period, it shall be presumed that they haveno objection to the reduction.

(3) The Tribunal may, if it is satisfied that the debt or claim of every creditor of the company has beendischarged or determined or has been secured or his consent is obtained, make an order confirming thereduction of share capital on such terms and conditions as it deems fit:

Provided that no application for reduction of share capital shall be sanctioned by the Tribunal unlessthe accounting treatment, proposed by the company for such reduction is in conformity with theaccounting standards specified in section 133 or any other provision of this Act and a certificate to thateffect by the company's auditor has been filed with the Tribunal.

(4) The order of confirmation of the reduction of share capital by the Tribunal under sub-section (3)shall be published by the company in such manner as the Tribunal may direct.

(5) The company shall deliver a certified copy of the order of the Tribunal under sub-section (3) andof a minute approved by the Tribunal showing--

(a) the amount of share capital;

(b) the number of shares into which it is to be divided;

(c) the amount of each share; and

(d) the amount, if any, at the date of registration deemed to be paid-up on each share,

to the Registrar within thirty days of the receipt of the copy of the order, who shall register the same andissue a certificate to that effect.

(6) Nothing in this section shall apply to buy-back of its own securities by a company under section68.

(7) A member of the company, past or present, shall not be liable to any call or contribution in respectof any share held by him exceeding the amount of difference, if any, between the amount paid on theshare, or reduced amount, if any, which is to be deemed to have been paid thereon, as the case may be,and the amount of the share as fixed by the order of reduction.

(8) Where the name of any creditor entitled to object to the reduction of share capital under thissection is, by reason of his ignorance of the proceedings for reduction or of their nature and effect withrespect to his debt or claim, not entered on the list of creditors, and after such reduction, the company 1[commits a default, within the meaning of section 6 of the Insolvency and Bankruptcy Code, 2016(31 of 2016), in respect of the amount of his debt or claim],--

(a) every person, who was a member of the company on the date of the registration of the orderfor reduction by the Registrar, shall be liable to contribute to the payment of that debt or claim, anamount not exceeding the amount which he would have been liable to contribute if the company hadcommenced winding up on the day immediately before the said date; and

(b) if the company is wound up, the Tribunal may, on the application of any such creditor andproof of his ignorance as aforesaid, if it thinks fit, settle a list of persons so liable to contribute, andmake and enforce calls and orders on the contributories settled on the list, as if they were ordinarycontributories in a winding up.

(9) Nothing in sub-section (8) shall affect the rights of the contributories among themselves.

(10) If any officer of the company--

(a) knowingly conceals the name of any creditor entitled to object to the reduction;

(b) knowingly misrepresents the nature or amount of the debt or claim of any creditor; or

(c) abets or is privy to any such concealment or misrepresentation as aforesaid,

he shall be liable under section 447.

(11) If a company fails to comply with the provisions of sub-section (4), it shall be punishable withfine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees.

1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for "is unable, within the meaning of sub-section (2) of section271, to pay the amount of his debt or claim",u2016 (w.e.f. 15-11-2016).

(1) No company limited by shares or by guarantee and having a share capital shall have power to buy its ownshares unless the consequent reduction of share capital is effected under the provisions of this Act.

(2) No public company shall give, whether directly or indirectly and whether by means of a loan,guarantee, the provision of security or otherwise, any financial assistance for the purpose of, or inconnection with, a purchase or subscription made or to be made, by any person of or for any shares in thecompany or in its holding company.

(3) Nothing in sub-section (2) shall apply to--

(a) the lending of money by a banking company in the ordinary course of its business;

(b) the provision by a company of money in accordance with any scheme approved by companythrough special resolution and in accordance with such requirements as may be prescribed, for thepurchase of, or subscription for, fully paid-up shares in the company or its holding company, if thepurchase of, or the subscription for, the shares held by trustees for the benefit of the employees orsuch shares held by the employee of the company;

(c) the giving of loans by a company to persons in the employment of the company other than itsdirectors or key managerial personnel, for an amount not exceeding their salary or wages for a periodof six months with a view to enabling them to purchase or subscribe for fully paid-up shares in thecompany or its holding company to be held by them by way of beneficial ownership:

Provided that disclosures in respect of voting rights not exercised directly by the employees in respectof shares to which the scheme relates shall be made in the Board's report in such manner as may beprescribed.

(4) Nothing in this section shall affect the right of a company to redeem any preference shares issuedby it under this Act or under any previous company law.

(5) If a company contravenes the provisions of this section, it shall be punishable with fine whichshall not be less than one lakh rupees but which may extend to twenty-five lakh rupees and every officerof the company who is in default shall be punishable with imprisonment for a term which may extend tothree years and with fine which shall not be less than one lakh rupees but which may extend to twentyfivelakh rupees.

(1) Notwithstanding anything contained inthis Act, but subject to the provisions of sub-section (2), a company may purchase its own shares or otherspecified securities (hereinafter referred to as buy-back) out of

(a) its free reserves;

(b) the securities premium account; or

(c) the proceeds of the issue of any shares or other specified securities:

Provided that no buy-back of any kind of shares or other specified securities shall be made out of theproceeds of an earlier issue of the same kind of shares or same kind of other specified securities.

(2) No company shall purchase its own shares or other specified securities under sub-section (1),unless--

(a) the buy-back is authorised by its articles;

(b) a special resolution has been passed at a general meeting of the company authorising the buyback:

Provided that nothing contained in this clause shall apply to a case where

(i) the buy-back is, ten per cent. or less of the total paid-up equity capital and free reserves of thecompany; and

(ii) such buy-back has been authorised by the Board by means of a resolution passed at itsmeeting;

(c) the buy-back is twenty-five per cent. or less of the aggregate of paid-up capital and freereserves of the company:

Provided that in respect of the buy-back of equity shares in any financial year, the reference totwenty-five per cent. in this clause shall be construed with respect to its total paid-up equity capital in thatfinancial year;

(d) the ratio of the aggregate of secured and unsecured debts owed by the company after buy-backis not more than twice the paid-up capital and its free reserves:

Provided that the Central Government may, by order, notify a higher ratio of the debt to capitaland free reserves for a class or classes of companies;

(e) all the shares or other specified securities for buy-back are fully paid-up;

(f) the buy-back of the shares or other specified securities listed on any recognised stockexchange is in accordance with the regulations made by the Securities and Exchange Board in thisbehalf; and

(g) the buy-back in respect of shares or other specified securities other than those specified inclause

(f) is in accordance with such rules as may be prescribed:

Provided that no offer of buy-back under this sub-section shall be made within a period of one yearreckoned from the date of the closure of the preceding offer of buy-back, if any.

(3) The notice of the meeting at which the special resolution is proposed to be passed under clause (b)of sub-section (2) shall be accompanied by an explanatory statement stating--

(a) a full and complete disclosure of all material facts;

(b) the necessity for the buy-back;

(c) the class of shares or securities intended to be purchased under the buy-back;

(d) the amount to be invested under the buy-back; and

(e) the time-limit for completion of buy-back.

(4) Every buy-back shall be completed within a period of one year from the date of passing of thespecial resolution, or as the case may be, the resolution passed by the Board under clause (b) of subsection (2).

(5) The buy-back under sub-section (1) may be--

(a) from the existing shareholders or security holders on a proportionate basis;

(b) from the open market;

(c) by purchasing the securities issued to employees of the company pursuant to a scheme ofstock option or sweat equity.

(6) Where a company proposes to buy-back its own shares or other specified securities under thissection in pursuance of a special resolution under clause (b) of sub-section (2) or a resolution under item (ii) of the proviso thereto, it shall, before making such buy-back, file with the Registrar and the Securitiesand Exchange Board, a declaration of solvency signed by at least two directors of the company, one ofwhom shall be the managing director, if any, in such form as may be prescribed and verified by anaffidavit to the effect that the Board of Directors of the company has made a full inquiry into the affairs ofthe company as a result of which they have formed an opinion that it is capable of meeting its liabilitiesand will not be rendered insolvent within a period of one year from the date of declaration adopted by theBoard:

Provided that no declaration of solvency shall be filed with the Securities and Exchange Board by acompany whose shares are not listed on any recognised stock exchange.

(7) Where a company buys back its own shares or other specified securities, it shall extinguish andphysically destroy the shares or securities so bought back within seven days of the last date of completionof buy-back.

(8) Where a company completes a buy-back of its shares or other specified securities under thissection, it shall not make a further issue of the same kind of shares or other securities including allotmentof new shares under clause (a) of sub-section (1) of section 62 or other specified securities within a periodof six months except by way of a bonus issue or in the discharge of subsisting obligations such asconversion of warrants, stock option schemes, sweat equity or conversion of preference shares ordebentures into equity shares.

(9) Where a company buys back its shares or other specified securities under this section, it shallmaintain a register of the shares or securities so bought, the consideration paid for the shares or securitiesbought back, the date of cancellation of shares or securities, the date of extinguishing and physicallydestroying the shares or securities and such other particulars as may be prescribed.

(10) A company shall, after the completion of the buy-back under this section, file with the Registrarand the Securities and Exchange Board a return containing such particulars relating to the buy-backwithin thirty days of such completion, as may be prescribed:

Provided that no return shall be filed with the Securities and Exchange Board by a company whoseshares are not listed on any recognised stock exchange.

(11) If a company makes any default in complying with the provisions of this section or anyregulation made by the Securities and Exchange Board, for the purposes of clause (f) of sub-section (2),the company shall be punishable with fine which shall not be less than one lakh rupees but which mayextend to three lakh rupees and every officer of the company who is in default shall be punishable withimprisonment for a term which may extend to three years or with fine which shall not be less than onelakh rupees but which may extend to three lakh rupees, or with both.

Explanation I.-- For the purposes of this section and section 70, specified securities includesemployees stock option or other securities as may be notified by the Central Government from time totime.

Explanation II.-- For the purposes of this section, free reserves includes securities premiumaccount.

(1) Where a companypurchases its own shares out of free reserves or securities premium account, a sum equal to the nominalvalue of the shares so purchased shall be transferred to the capital redemption reserve account and detailsof such transfer shall be disclosed in the balance sheet.

(2) The capital redemption reserve account may be applied by the company, in paying up unissuedshares of the company to be issued to members of the company as fully paid bonus shares.

(1) No company shall directly orindirectly purchase its own shares or other specified securities--

(a) through any subsidiary company including its own subsidiary companies;

(b) through any investment company or group of investment companies; or

(c) if a default, is made by the company, in the repayment of deposits accepted either before orafter the commencement of this Act, interest payment thereon, redemption of debentures orpreference shares or payment of dividend to any shareholder, or repayment of any term loan orinterest payable thereon to any financial institution or banking company:

Provided that the buy-back is not prohibited, if the default is remedied and a period of three yearshas lapsed after such default ceased to subsist.

(2) No company shall, directly or indirectly, purchase its own shares or other specified securities incase such company has not complied with the provisions of sections 92, 123, 127 and section 129.

(1) A company may issue debentures with an option to convert such debenturesinto shares, either wholly or partly at the time of redemption:

Provided that the issue of debentures with an option to convert such debentures into shares, wholly orpartly, shall be approved by a special resolution passed at a general meeting.

(2) No company shall issue any debentures carrying any voting rights.

(3) Secured debentures may be issued by a company subject to such terms and conditions as may beprescribed.

(4) Where debentures are issued by a company under this section, the company shall create adebenture redemption reserve account out of the profits of the company available for payment of dividendand the amount credited to such account shall not be utilised by the company except for the redemption ofdebentures.

(5) No company shall issue a prospectus or make an offer or invitation to the public or to its membersexceeding five hundred for the subscription of its debentures, unless the company has, before such issueor offer, appointed one or more debenture trustees and the conditions governing the appointment of suchtrustees shall be such as may be prescribed.

(6) A debenture trustee shall take steps to protect the interests of the debenture-holders and redresstheir grievances in accordance with such rules as may be prescribed.

(7) Any provision contained in a trust deed for securing the issue of debentures, or in any contractwith the debenture-holders secured by a trust deed, shall be void in so far as it would have the effect ofexempting a trustee thereof from, or indemnifying him against, any liability for breach of trust, where hefails to show the degree of care and due diligence required of him as a trustee, having regard to theprovisions of the trust deed conferring on him any power, authority or discretion:

Provided that the liability of the debenture trustee shall be subject to such exemptions as may beagreed upon by a majority of debenture-holders holding not less than three-fourths in value of the totaldebentures at a meeting held for the purpose.

(8) A company shall pay interest and redeem the debentures in accordance with the terms andconditions of their issue.

(9) Where at any time the debenture trustee comes to a conclusion that the assets of the company areinsufficient or are likely to become insufficient to discharge the principal amount as and when it becomesdue, the debenture trustee may file a petition before the Tribunal and the Tribunal may, after hearing thecompany and any other person interested in the matter, by order, impose such restrictions on the incurringof any further liabilities by the company as the Tribunal may consider necessary in the interests of thedebenture-holders.

(10) Where a company fails to redeem the debentures on the date of their maturity or fails to payinterest on the debentures when it is due, the Tribunal may, on the application of any or all of thedebenture-holders, or debenture trustee and, after hearing the parties concerned, direct, by order, thecompany to redeem the debentures forthwith on payment of principal and interest due thereon.

(11) If any default is made in complying with the order of the Tribunal under this section, everyofficer of the company who is in default shall be punishable with imprisonment for a term which mayextend to three years or with fine which shall not be less than two lakh rupees but which may extend tofive lakh rupees, or with both.

(12) A contract with the company to take up and pay for any debentures of the company may beenforced by a decree for specific performance.

(13) The Central Government may prescribe the procedure, for securing the issue of debentures, theform of debenture trust deed, the procedure for the debenture-holders to inspect the trust deed and toobtain copies thereof, quantum of debenture redemption reserve required to be created and such othermatters.

(1) Every holder of securities of a company may, at any time, nominate, inthe prescribed manner, any person to whom his securities shall vest in the event of his death.

(2) Where the securities of a company are held by more than one person jointly, the joint holders maytogether nominate, in the prescribed manner, any person to whom all the rights in the securities shall vestin the event of death of all the joint holders.

(3) Notwithstanding anything contained in any other law for the time being in force or in anydisposition, whether testamentary or otherwise, in respect of the securities of a company, where anomination made in the prescribed manner purports to confer on any person the right to vest the securitiesof the company, the nominee shall, on the death of the holder of securities or, as the case may be, on thedeath of the joint holders, become entitled to all the rights in the securities, of the holder or, as the casemay be, of all the joint holders, in relation to such securities, to the exclusion of all other persons, unlessthe nomination is varied or cancelled in the prescribed manner.

(4) Where the nominee is a minor, it shall be lawful for the holder of the securities, making thenomination to appoint, in the prescribed manner, any person to become entitled to the securities of thecompany, in the event of the death of the nominee during his minority.

(1) On and after the commencement ofthis Act, no company shall invite, accept or renew deposits under this Act from the public except in amanner provided under this Chapter:

Provided that nothing in this sub-section shall apply to a banking company and non-banking financialcompany as defined in the Reserve Bank of India Act, 1934 (2 of 1934) and to such other company as theCentral Government may, after consultation with the Reserve Bank of India, specify in this behalf.

(2) A company may, subject to the passing of a resolution in general meeting and subject to such rulesas may be prescribed in consultation with the Reserve Bank of India, accept deposits from its members onsuch terms and conditions, including the provision of security, if any, or for the repayment of suchdeposits with interest, as may be agreed upon between the company and its members, subject to thefulfilment of the following conditions, namely:--

(a) issuance of a circular to its members including therein a statement showing the financialposition of the company, the credit rating obtained, the total number of depositors and the amount duetowards deposits in respect of any previous deposits accepted by the company and such otherparticulars in such form and in such manner as may be prescribed;

(b) filing a copy of the circular along with such statement with the Registrar within thirty daysbefore the date of issue of the circular;

1[(c) depositing, on or before the thirtieth day of April each year, such sum which shall not be lessthan twenty per cent. of the amount of its deposits maturing during the following financial year andkept in a scheduled bank in a separate bank account to be called deposit repayment reserve account;]

2

(e) certifying that the company has not committed any default in the repayment of depositsaccepted either before or after the commencement of this Act or payment of interest on,3[such deposits and where a default had occurred, the company made good the default and a period of fiveyears had lapsed since the date of making good the default;] and

(f) providing security, if any for the due repayment of the amount of deposit or the interestthereon including the creation of such charge on the property or assets of the company:

Provided that in case where a company does not secure the deposits or secures such depositspartially, then, the deposits shall be termed as unsecured deposits and shall be so quoted in everycircular, form, advertisement or in any document related to invitation or acceptance of deposits.

(3) Every deposit accepted by a company under sub-section (2) shall be repaid with interest inaccordance with the terms and conditions of the agreement referred to in that sub-section.

(4) Where a company fails to repay the deposit or part thereof or any interest thereon undersub-section (3), the depositor concerned may apply to the Tribunal for an order directing the company topay the sum due or for any loss or damage incurred by him as a result of such non-payment and for suchother orders as the Tribunal may deem fit.

(5) The deposit repayment reserve account referred to in clause (c) of sub-section (2) shall not be usedby the company for any purpose other than repayment of deposits.

1. Subs. by Act 1 of 2018, s. 15, for clause (c) (w.e.f. 15-8-2018).

2. Clause (d) omitted by s. 15, ibid. (w.e.f. 15-8-2018).

3. Subs. by s. 15,ibid., for "such deposits;" (w.e.f. 15-8-2018)

(1) Where inrespect of any deposit accepted by a company before the commencement of this Act, the amount of suchdeposit or part thereof or any interest due thereon remains unpaid on such commencement or becomesdue at any time thereafter, the company shall

(a) file, within a period of three months from such commencement or from the date on whichsuch payments, are due, with the Registrar a statement of all the deposits accepted by the companyand sums remaining unpaid on such amount with the interest payable thereon along with thearrangements made for such repayment, notwithstanding anything contained in any other law for thetime being in force or under the terms and conditions subject to which the deposit was accepted orany scheme framed under any law; and

1[(b) repay within one year from such commencement or from the date on which such payments aredue, whichever is earlier.

Provided that renewal of any such deposits shall be done in accordance with the provisions ofChapter V and the rules made thereunder.]

(2) The Tribunal may on an application made by the company, after considering the financialcondition of the company, the amount of deposit or part thereof and the interest payable thereon and suchother matters, allow further time as considered reasonable to the company to repay the deposit.

(3) If a company fails to repay the deposit or part thereof or any interest thereon within the timespecified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2),the company shall, in addition to the payment of the amount of deposit or part thereof and the interestdue, be punishable with fine which shall not be less than one crore rupees but which may extend to tencrore rupees and every officer of the company who is in default shall be punishable with imprisonmentwhich may extend to seven years or with fine which shall not be less than twenty-five lakh rupees butwhich may extend to two crore rupees, or with both.

1. Subs. by Act 1 of 2018, s. 16, for clause (b) (w.e.f. 15-8-2018).

(1) Where a company fails to repay the deposit or part thereof or anyinterest thereon referred to in section 74 within the time specified in sub-section (1) of that section or suchfurther time as may be allowed by the Tribunal under sub-section (2) of that section, and it is proved thatthe deposits had been accepted with intent to defraud the depositors or for any fraudulent purpose, everyofficer of the company who was responsible for the acceptance of such deposit shall, without prejudice tothe provisions contained in subsection (3) of that section and liability under section 447, be personallyresponsible, without any limitation of liability, for all or any of the losses or damages that may have beenincurred by the depositors.

(2) Any suit, proceedings or other action may be taken by any person, group of persons or anyassociation of persons who had incurred any loss as a result of the failure of the company to repay thedeposits or part thereof or any interest thereon.

(1) Notwithstanding anythingcontained in section 73, a public company, having such net worth or turnover as may be prescribed, mayaccept deposits from persons other than its members subject to compliance with the requirementsprovided in sub-section (2) of section 73 and subject to such rules as the Central Government may, inconsultation with the Reserve Bank of India, prescribe:

Provided that such a company shall be required to obtain the rating (including its networth, liquidityand ability to pay its deposits on due date) from a recognised credit rating agency for informing the publicthe rating given to the company at the time of invitation of deposits from the public which ensuresadequate safety and the rating shall be obtained for every year during the tenure of deposits:

Provided further that every company accepting secured deposits from the public shall within thirtydays of such acceptance, create a charge on its assets of an amount not less than the amount of deposits

accepted in favour of the deposit holders in accordance with such rules as may be prescribed.

(2) The provisions of this Chapter shall, mutatis mutandis, apply to the acceptance of deposits frompublic under this section.

1[76A. Punishment for contravention of section 73 or section 76. Where a company accepts orinvites or allows or causes any other person to accept or invite on its behalf any deposit in contraventionof the manner or the conditions prescribed under section 73 or section 76 or rules made thereunder or if acompany fails to repay the deposit or part thereof or any interest due thereon within the time specifiedunder section 73 or section 76 or rules made thereunder or such further time as may be allowed by theTribunal under section 73,--

(a) the company shall, in addition to the payment of the amount of deposit or part thereof and theinterest due, be punishable with fine which shall not be less than 2[one crore rupees or twice theamount of deposit accepted by the company, whichever is lower] but which may extend to ten crorerupees; and

(b) every officer of the company who is in default shall be punishable with imprisonment whichmay extend to 3[seven years and with fine] which shall not be less than twenty-five lakh rupees butwhich may extend to two crore rupees, 4:

Provided that if it is proved that the officer of the company who is in default, has contravened suchprovisions knowingly or wilfully with the intention to deceive the company or its shareholders ordepositors or creditors or tax authorities, he shall be liable for action under section 447.]

1. Ins. by Act 21 of 2015, s. 8 (w.e.f. 29-5-2015).

2. Subs. by Act 1 of 2018, s. 17, for "one crore rupees" (w.e.f. 9-2-2018).

3. Subs. by s. 17, ibid., for "seven years or with fine" (w.e.f. 9-2-2018).

4. The words "or with both" omitted by s. 17, ibid. (w.e.f. 9-2-2018).

(1) It shall be the duty of every company creating a chargewithin or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise,and situated in or outside India, to register the particulars of the charge signed by the company and thecharge-holder together with the instruments, if any, creating such charge in such form, on payment ofsuch fees and in such manner as may be prescribed, with the Registrar within thirty days of its creation:

1[Provided that the Registrar may, on an application by the company, allow such registration to bemade--

(a) in case of charges created before the commencement of the Companies (Amendment) Act,2019, within a period of three hundred days of such creation; or

(b) in case of charges created on or after the commencement of the Companies (Amendment) Act,2019, within a period of sixty days of such creation,

on payment of such additional fees as may be prescribed:

Provided further that if the registration is not made within the period specified--

(a) in clause (a) to the first proviso, the registration of the charges shall be made within sixmonths from the date of commencement of the Companies (Amendment) Act, 2019, on payment ofsuch additional fees as may be prescribed and different fees may be prescribed for different classes ofcompanies;

(b) in clause (b) to the first proviso, the Registrar may, on an application, allow such registrationto be made within a further period of sixty days after payment of such ad valorem fees as may beprescribed.]

Provided also that any subsequent registration of a charge shall not prejudice any right acquired inrespect of any property before the charge is actually registered:

2[Provided also that this section shall not apply to such charges as may be prescribed in consultationwith the Reserve Bank of India.]

(2) Where a charge is registered with the Registrar under sub-section (1), he shall issue a certificate ofregistration of such charge in such form and in such manner as may be prescribed to the company and, asthe case may be, to the person in whose favour the charge is created.

(3) Notwithstanding anything contained in any other law for the time being in force, no chargecreated by a company shall be taken into account by the liquidator 3[appointed under this Act or theInsolvency and Bankruptcy Code, 2016 (31 of 2016), as the case may be,] or any other creditor unless it isduly registered under sub-section (1) and a certificate of registration of such charge is given by theRegistrar under sub-section (2).

(4) Nothing in sub-section (3) shall prejudice any contract or obligation for the repayment of themoney secured by a charge.

1. Subs. by Act 22 of 2019, s. 11, for first and second provisos (w.e.f. 2-11-2018).

2. The proviso ins. by Act 1 of 2018, s. 18 (w.e.f. 7-5-2018).

3. Ins. by Act 31 of 2016, s. 255 and the Eleventh Schedule (w.e.f. 15-11-2016).

Where a company fails to 1[register the charge withinthe period specified in section 77], without prejudice to its liability in respect of any offence under thisChapter, the person in whose favour the charge is created may apply to the Registrar for registration ofthe charge along with the instrument created for the charge, within such time and in such form andmanner as may be prescribed and the Registrar may, on such application, within a period of fourteen daysafter giving notice to the company, unless the company itself registers the charge or shows sufficientcause why such charge should not be registered, allow such registration on payment of such fees, as maybe prescribed:

Provided that where registration is effected on application of the person in whose favour the charge iscreated, that person shall be entitled to recover from the company the amount of any fees or additionalfees paid by him to the Registrar for the purpose of registration of charge

1. Subs. by Act 1 of 2018, s. 19, for "register the charge within the period specified in section 77" (w.e.f. 7-5-2018).

The provisions of section 77 relating to registration ofcharges shall, so far as may be, apply to--

(a) a company acquiring any property subject to a charge within the meaning of that section; or

(b) any modification in the terms or conditions or the extent or operation of any charge registeredunder that section

Where any charge on any property or assets of a company or any ofits undertakings is registered under section 77, any person acquiring such property, assets, undertakings orpart thereof or any share or interest therein shall be deemed to have notice of the charge from the date ofsuch registration.

(1) The Registrar shall, in respect of everycompany, keep a register containing particulars of the charges registered under this Chapter in such formand in such manner as may be prescribed.

(2) A register kept in pursuance of this section shall be open to inspection by any person on paymentof such fees as may be prescribed for each inspection.

(1) A company shall give intimation to theRegistrar in the prescribed form, of the payment or satisfaction in full of any charge registered under thisChapter within a period of thirty days from the date of such payment or satisfaction 1.

2[Provided that the Registrar may, on an application by the company or the charge holder, allow suchintimation of payment or satisfaction to be made within a period of three hundred days of such paymentor satisfaction on payment of such additional fees as may be prescribed.]

(2) The Registrar shall, on receipt of intimation under sub-section (1), cause a notice to be sent to theholder of the charge calling upon him to show cause within such time not exceeding fourteen days, asmay be specified in such notice, as to why payment or satisfaction in full should not be recorded asintimated to the Registrar, and if no cause is shown, by such holder of the charge, the Registrar shall orderthat a memorandum of satisfaction shall be entered in the register of charges kept by him under section 81and shall inform the company that he has done so:

Provided that the notice referred to in this sub-section shall not be required to be sent, in case theintimation to the Registrar in this regard is in the specified form and signed by the holder of charge.

(3) If any cause is shown, the Registrar shall record a note to that effect in the register of charges andshall inform the company.

(4) Nothing in this section shall be deemed to affect the powers of the Registrar to make an entry inthe register of charges under section 83 or otherwise than on receipt of an intimation from the company.

1. Omitted by Act 1 of 2018, s. 20, for certain words (w.e.f. 5-7-2018).

2. The Proviso ins. by s. 20, ibid. (w.e.f. 5-7-2018).

(1) The Registrar may, on evidence being given to his satisfaction with respect to anyregistered charge,--

(a) that the debt for which the charge was given has been paid or satisfied in whole or in part; or

(b) that part of the property or undertaking charged has been released from the charge or hasceased to form part of the company's property or undertaking,enter in the register of charges a memorandum of satisfaction in whole or in part, or of the fact that part ofthe property or undertaking has been released from the charge or has ceased to form part of thecompany's property or undertaking, as the case may be, notwithstanding the fact that no intimation hasbeen received by him from the company.

(2) The Registrar shall inform the affected parties within thirty days of making the entry in theregister of charges kept under sub-section (1) of section 81.

(1) If any person obtains an order for theappointment of a receiver of, or of a person to manage, the property, subject to a charge, of a company orif any person appoints such receiver or person under any power contained in any instrument, he shall,within a period of thirty days from the date of the passing of the order or of the making of theappointment, give notice of such appointment to the company and the Registrar along with a copy of theorder or instrument and the Registrar shall, on payment of the prescribed fees, register particulars of thereceiver, person or instrument in the register of charges.

(2) Any person appointed under sub-section (1) shall, on ceasing to hold such appointment, give tothe company and the Registrar a notice to that effect and the Registrar shall register such notice.

(1) Every company shall keep at its registered office a registerof charges in such form and in such manner as may be prescribed, which shall include therein all chargesand floating charges affecting any property or assets of the company or any of its undertakings, indicatingin each case such particulars as may be prescribed:

Provided that a copy of the instrument creating the charge shall also be kept at the registered office ofthe company along with the register of charges.

(2) The register of charges and instrument of charges, kept under sub-section (1) shall be open forinspection during business hours--

(a) by any member or creditor without any payment of fees; or

(b) by any other person on payment of such fees as may be prescribed,

subject to such reasonable restrictions as the company may, by its articles, impose.

1[(1)] If any company contravenes any provision of thisChapter, the company shall be punishable with fine which shall not be less than one lakh rupees butwhich may extend to ten lakh rupees and every officer of the company who is in default shall bepunishable with imprisonment for a term which may extend to six months or with fine which shall not beless than twenty-five thousand rupees but which may extend to one lakh rupees, or with both.

2[(2) If any person willfully furnishes any false or incorrect information or knowingly suppresses anymaterial information, required to be registered in accordance with the provisions of section 77, he shall beliable for action under section 447.]

1. Section 86 numbered as sub-section (1) thereof by Act 22 of 2019, s.12 (w.e.f. 2-11-2018).

2. Ins. by s. 12, ibid. (w.e.f. 2-11-2018).

1[87. Rectification by Central Government in Register of charges. The Central Government onbeing satisfied that--

(a) the omission to give intimate to the Registrar of the payment or satisfaction of a charge,within the time required under this Chapter; or

(b) the omission or misstatement of any particulars, in any filing previously made to the Registrarwith respect to any charge or modification thereof or with respect to any memorandum of satisfactionor other entry made in pursuance of section 82 or section 83,

was accidental or due to inadvertence or some other sufficient cause or it is not of a nature to prejudicethe position of creditors or shareholders of the company, it may, on the application of the company or anyperson interested and on such terms and conditions as it deems just and expedient, direct that the time forthe giving of intimation of payment or satisfaction shall be extended or, as the case may require, that theomission or misstatement shall be rectified.]

1. Subs. by s. 13, ibid., for section 86 (w.e.f. 2-11-2018).

(1) Every company shall keep and maintain the following registersin such form and in such manner as may be prescribed, namely:--

(a) register of members indicating separately for each class of equity and preference shares heldby each member residing in or outside India;

(b) register of debenture-holders; and

(c) register of any other security holders.

(2) Every register maintained under sub-section (1) shall include an index of the names includedtherein.

(3) The register and index of beneficial owners maintained by a depository under section 11 of theDepositories Act, 1996 (22 of 1996), shall be deemed to be the corresponding register and index for thepurposes of this Act.

(4) A company may, if so authorised by its articles, keep in any country outside India, in such manneras may be prescribed, a part of the register referred to in sub-section (1), called "foreign register"containing the names and particulars of the members, debenture-holders, other security holders orbeneficial owners residing outside India.

(5) If a company does not maintain a register of members or debenture-holders or other securityholders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-section (2),the company and every officer of the company who is in default shall be punishable with fine which shallnot be less than fifty thousand rupees but which may extend to three lakh rupees and where the failure is acontinuing one, with a further fine which may extend to one thousand rupees for every day, after the firstduring which the failure continues.

(1) Where the name of a person isentered in the register of members of a company as the holder of shares in that company but who does nothold the beneficial interest in such shares, such person shall make a declaration within such time and insuch form as may be prescribed to the company specifying the name and other particulars of the personwho holds the beneficial interest in such shares.

(2) Every person who holds or acquires a beneficial interest in share of a company shall make adeclaration to the company specifying the nature of his interest, particulars of the person in whose namethe shares stand registered in the books of the company and such other particulars as may be prescribed.

(3) Where any change occurs in the beneficial interest in such shares, the person referred to insub-section (1) and the beneficial owner specified in sub-section (2) shall, within a period of thirty daysfrom the date of such change, make a declaration to the company in such form and containing suchparticulars as may be prescribed.

(4) The Central Government may make rules to provide for the manner of holding and disclosingbeneficial interest and beneficial ownership under this section.(5) If any person fails, to make a declaration as required under sub-section (1) or sub-section (2) orsub-section (3), without any reasonable cause, he shall be punishable with fine which may extend to fiftythousand rupees and where the failure is a continuing one, with a further fine which may extend to onethousand rupees for every day after the first during which the failure continues.

(6) Where any declaration under this section is made to a company, the company shall make a note ofsuch declaration in the register concerned and shall file, within thirty days from the date of receipt ofdeclaration by it, a return in the prescribed form with the Registrar in respect of such declaration withsuch fees or additional fees as may be prescribed, 1.

(7) If a company, required to file a return under sub-section (6), fails to do so before the expiry of thetime specified 2[therein], the company and every officer of the company who is in default shall be punishable with fine which shall not be less than five hundred rupees but which may extend to onethousand rupees and where the failure is a continuing one, with a further fine which may extend to onethousand rupees for every day after the first during which the failure continues.

(8) No right in relation to any share in respect of which a declaration is required to be made under thissection but not made by the beneficial owner, shall be enforceable by him or by any person claimingthrough him.

(9) Nothing in this section shall be deemed to prejudice the obligation of a company to pay dividendto its members under this Act and the said obligation shall, on such payment, stand discharged.

3[(10) For the purposes of this section and section 90, beneficial interest in a share includes, directlyor indirectly, through any contract, arrangement or otherwise, the right or entitlement of a person alone ortogether with any other person to--

(i) exercise or cause to be exercised any or all of the rights attached to such share; or

(ii) receive or participate in any dividend or other distribution in respect of such share.]

1. The words and figures "within the time specified under section 403" omitted by Act 1 of 2018, s. 21 (w.e.f. 7-5-2018).

2. Subs. by Act 1 of 2018, s. 21, for "under the first proviso to sub-section (1) of section 403" (w.e.f. 7-5-2018).

3. Ins. by Act 1 of 2018, s. 21 (w.e.f. 13-6-2018).

1[90. Register of significant beneficial owners in a company. (1) Every individual, who actingalone or together, or through one or more persons or trust, including a trust and persons resident outsideIndia, holds beneficial interests, of not less than twenty-five per cent. or such other percentage as may beprescribed, in shares of a company or the right to exercise, or the actual exercising of significant influenceor control as defined in clause (27) of section 2, over the company (herein referred to as "significantbeneficial owner"), shall make a declaration to the company, specifying the nature of his interest andother particulars, in such manner and within such period of acquisition of the beneficial interest or rightsand any change thereof, as may be prescribed:

Provided that the Central Government may prescribe a class or classes of persons who shall not berequired to make declaration under this sub-section.

(2) Every company shall maintain a register of the interest declared by individuals undersub-section (1) and changes therein which shall include the name of individual, his date of birth, address,details of ownership in the company and such other details as may be prescribed.

(3) The register maintained under sub-section (2) shall be open to inspection by any member of thecompany on payment of such fees as may be prescribed.

(4) Every company shall file a return of significant beneficial owners of the company and changestherein with the Registrar containing names, addresses and other details as may be prescribed within suchtime, in such form and manner as may be prescribed.

2[(4A) Every company shall take necessary steps to identify an individual who is a significantbeneficial owner in relation to the company and require him to comply with the provisions of thissection.]

(5) A company shall give notice, in the prescribed manner, to any person (whether or not a member ofthe company) whom the company knows or has reasonable cause to believe--

(a) to be a significant beneficial owner of the company;

(b) to be having knowledge of the identity of a significant beneficial owner or another person likelyto have such knowledge; or

(c) to have been a significant beneficial owner of the company at any time during the three yearsimmediately preceding the date on which the notice is issued,

and who is not registered as a significant beneficial owner with the company as required under thissection.

(6) The information required by the notice under sub-section (5) shall be given by the concernedperson within a period not exceeding thirty days of the date of the notice.

(7) The company shall,--

(a) where that person fails to give the company the information required by the notice within thetime specified therein; or

(b) where the information given is not satisfactory,

apply to the Tribunal within a period of fifteen days of the expiry of the period specified in the notice, foran order directing that the shares in question be subject to restrictions with regard to transfer of interest,suspension of all rights attached to the shares and such other matters as may be prescribed.

(8) On any application made under sub-section (7), the Tribunal may, after giving an opportunity ofbeing heard to the parties concerned, make such order restricting the rights attached with the shares withina period of sixty days of receipt of application or such other period as may be prescribed.

3[(9) The company or the person aggrieved by the order of the Tribunal may make an application tothe Tribunal for relaxation or lifting of the restrictions placed under sub-section (8), within a period of oneyear from the date of such order:

Provided that if no such application has been filed within a period of one year from the date of theorder under sub-section (8), such shares shall be transferred, without any restrictions, to the authorityconstituted under sub-section (5) of section 125, in such manner as may be prescribed;]

4[(9A) The Central Government may make rules for the purposes of this section.]

(10) If any person fails to make a declaration as required under sub-section (1), he shall be punishablewith fine which shall not be less than one lakh rupees but which may extend to ten lakh rupees and wherethe failure is a continuing one, with a further fine which may extend to one thousand rupees for every dayafter the first during which the failure continues.

(11) If a company, required to maintain register under sub-section (2) and file the information undersub-section (4) 4[or required to take necessary steps under sub-section (4A)] fails to do so or deniesinspection as provided therein, the company and every officer of the company who is in default shall bepunishable with fine which shall not be less than ten lakh rupees but which may extend to fifty lakhrupees and where the failure is a continuing one, with a further fine which may extend to one thousandrupees for every day after the first during which the failure continues.

(12) If any person wilfully furnishes any false or incorrect information or suppresses any materialinformation of which he is aware in the declaration made under this section, he shall be liable to actionunder section 447.]

1. Subs. by Act 1 of 2018, s. 22, for section 90 (w.e.f. 13-6-2018).

2. Ins. by Act 22 of 2019, s. 14 (w.e.f. 15-8-2019).

3. Subs. by s. 14, ibid., for sub-section (9) (w.e.f. 2-11-2018).

4. Ins. by Act 22 of 2019, s. 14 (w.e.f. 15-8-2019).

(1) A company may close the register of members or the register of debenture-holders or the register of othersecurity holders for any period or periods not exceeding in the aggregate forty-five days in each year, butnot exceeding thirty days at any one time, subject to giving of previous notice of at least seven days orsuch lesser period as may be specified by Securities and Exchange Board for listed companies or thecompanies which intend to get their securities listed, in such manner as may be prescribed.

(2) If the register of members or of debenture-holders or of other security holders is closed withoutgiving the notice as provided in sub-section (1), or after giving shorter notice than that so provided, or fora continuous or an aggregate period in excess of the limits specified in that sub-section, the company andevery officer of the company who is in default shall be liable to a penalty of five thousand rupees forevery day subject to a maximum of one lakh rupees during which the register is kept closed.

(1) Every company shall prepare a return (hereinafter referred to as the annualreturn) in the prescribed form containing the particulars as they stood on the close of the financial yearregarding--

(a) its registered office, principal business activities, particulars of its holding, subsidiary andassociate companies;

(b) its shares, debentures and other securities and shareholding pattern;

(c) its indebtedness;

(d) its members and debenture-holders along with changes therein since the close of the previousfinancial year;

(e) its promoters, directors, key managerial personnel along with changes there in since the closeof the previous financial year;

(f) meetings of members or a class thereof, Board and its various committees along withattendance details;

(g) remuneration of directors and key managerial personnel;

(h) penalty or punishment imposed on the company, its directors or officers and details ofcompounding of offences and appeals made against such penalty or punishment;

(i) matters relating to certification of compliances, disclosures as may be prescribed;

(j) details, as may be prescribed, in respect of shares held by or on behalf of the ForeignInstitutional Investors indicating their names, addresses, countries of incorporation, registration andpercentage of shareholding held by them; and

(k) such other matters as may be prescribed,

and signed by a director and the company secretary, or where there is no company secretary, by acompany secretary in practice:

Provided that in relation to One Person Company and small company, the annual return shall besigned by the company secretary, or where there is no company secretary, by the director of the company.

(2) 1[The annual return, filed by a listed company or, by a company having such paid-up capital orturnover as may be prescribed] shall be certified by a company secretary in practice in the prescribedform, stating that the annual return discloses the facts correctly and adequately and that the company hascomplied with all the provisions of this Act.

(3) An extract of the annual return in such form as may be prescribed shall form part of the Board'sreport.

(4) Every company shall file with the Registrar a copy of the annual return, within sixty days from thedate on which the annual general meeting is held or where no annual general meeting is held in any yearwithin sixty days from the date on which the annual general meeting should have been held together withthe statement specifying the reasons for not holding the annual general meeting, with such fees oradditional fees as may be prescribed, 2.

3[(5) If any company fails to file its annual return under sub-section (4), before the expiry of theperiod specified therein, such company and its every officer who is in default shall be liable to a penaltyof fifty thousand rupees and in case of continuing failure, with a further penalty of one hundred rupees foreach day after the first during which such failure continues, subject to a maximum of five lakh rupees.]

(6) If a company secretary in practice certifies the annual return otherwise than in conformity with therequirements of this section or the rules made thereunder, he shall be punishable with fine which shall notbe less than fifty thousand rupees but which may extend to five lakh rupees.

1. Subs. by S.O. 1177 (E), dated 29th April, 2014 for certain words (w.e.f. 29-4-2014).

2. The words "within the time as specified, under section 403" omitted by Act 1 of 2018, s. 23 (w.e.f. 7-5-2018).

3. Subs. by Act 22 of 2019, s. 15, for sub-section (5) (w.e.f. 2-11-2018).

[Return to be filed with Registrar in case promoter's stake changes.] Omitted by the CompaniesAct, 2017 (1 of 2018), s. 24 (w.e.f. 13-6-2018).

(1) The registers required to be keptand maintained by a company under section 88 and copies of the annual return filed under section 92 shallbe kept at the registered office of the company:

Provided that such registers or copies of return may also be kept at any other place in India in whichmore than one-tenth of the total number of members entered in the register of members reside, ifapproved by a special resolution passed at a general meeting of the company 1:

Provided further that the period for which the registers, returns and records are required to be keptshall be such as may be prescribed.

(2) The registers and their indices, except when they are closed under the provisions of this Act, andthe copies of all the returns shall be open for inspection by any member, debenture-holder, other securityholder or beneficial owner, during business hours without payment of any fees and by any other person onpayment of such fees as may be prescribed.

(3) Any such member, debenture-holder, other security holder or beneficial owner or any other personmay

(a) take extracts from any register, or index or return without payment of any fee; or

(b) require a copy of any such register or entries therein or return on payment of such fees as maybe prescribed.

2[Provided that such particulars of the register or index or return as may be prescribed shall not beavailable for inspection under sub-section (2) or for taking extracts or copies under this sub-section.].

(4) If any inspection or the making of any extract or copy required under this section is refused, thecompany and every officer of the company who is in default shall be liable, for each such default, to a penalty of one thousand rupees for every day subject to a maximum of one lakh rupees during which therefusal or default continues.

(5) The Central Government may also, by order, direct an immediate inspection of the document, ordirect that the extract required shall forthwith be allowed to be taken by the person requiring it.

1. The words "and the Registrar has been given a copy of the proposed special resolution in advance" omitted by s. 25, ibid.

(w.e.f. 13-6-2018).

2. The proviso ins. by s. 25, ibid. (w.e.f. 13-6-2018).

The registers, their indices and copies of annual returnsmaintained under sections 88 and 94 shall be prima facie evidence of any matter directed or authorised tobe inserted therein by or under this Act.

(1) Every company other than a One Person Company shall in eachyear hold in addition to any other meetings, a general meeting as its annual general meeting and shallspecify the meeting as such in the notices calling it, and not more than fifteen months shall elapsebetween the date of one annual general meeting of a company and that of the next:

Provided that in case of the first annual general meeting, it shall be held within a period of ninemonths from the date of closing of the first financial year of the company and in any other case, within aperiod of six months, from the date of closing of the financial year:

Provided further that if a company holds its first annual general meeting as aforesaid, it shall not benecessary for the company to hold any annual general meeting in the year of its incorporation:

Provided also that the Registrar may, for any special reason, extend the time within which any annualgeneral meeting, other than the first annual general meeting, shall be held, by a period not exceeding threemonths.

(2) Every annual general meeting shall be called during business hours, that is, between 9 a.m. and 6p.m. on any day that is not a National Holiday and shall be held either at the registered office of thecompany or at some other place within the city, town or village in which the registered office of thecompany is situate:

1[Provided that annual general meeting of an unlisted company may be held at any place in India ifconsent is given in writing or by electronic mode by all the members in advance:

Provided further that the Central Government may exempt any company from the provisions of thissub-section subject to such conditions as it may impose.

Explanation.-- For the purposes of this sub-section, National Holiday means and includes a daydeclared as National Holiday by the Central Government.

1. Subs. by Act 1 of 2018, s. 26, for "Provided that" (w.e.f. 13-6-2018).

(1) If any default is made in holding theannual general meeting of a company under section 96, the Tribunal may, notwithstanding anythingcontained in this Act or the articles of the company, on the application of any member of the company,call, or direct the calling of, an annual general meeting of the company and give such ancillary orconsequential directions as the Tribunal thinks expedient:

Provided that such directions may include a direction that one member of the company present inperson or by proxy shall be deemed to constitute a meeting.

(2) A general meeting held in pursuance of sub-section (1) shall, subject to any directions of theTribunal, be deemed to be an annual general meeting of the company under this Act.

(1) If for any reason it is impracticableto call a meeting of a company, other than an annual general meeting, in any manner in which meetings ofthe company may be called, or to hold or conduct the meeting of the company in the manner prescribedby this Act or the articles of the company, the Tribunal may, either suo motu or on the application of anydirector or member of the company who would be entitled to vote at the meeting,--

(a) order a meeting of the company to be called, held and conducted in such manner as theTribunal thinks fit; and

(b) give such ancillary or consequential directions as the Tribunal thinks expedient, includingdirections modifying or supplementing in relation to the calling, holding and conducting of themeeting, the operation of the provisions of this Act or articles of the company:

Provided that such directions may include a direction that one member of the company present inperson or by proxy shall be deemed to constitute a meeting.

(2) Any meeting called, held and conducted in accordance with any order made under sub-section (1)shall, for all purposes, be deemed to be a meeting of the company duly called, held and conducted.

If any default ismade in holding a meeting of the company in accordance with section 96 or section 97 or section 98 or incomplying with any directions of the Tribunal, the company and every officer of the company who is indefault shall be punishable with fine which may extend to one lakh rupees and in the case of a continuingdefault, with a further fine which may extend to five thousand rupees for every day during which suchdefault continues.

(1) The Board may, whenever it deems fit, call anextraordinary general meeting of the company.

1[Provided that an extraordinary general meeting of the company, other than of the wholly ownedsubsidiary of a company incorporated outside India, shall be held at a place within India.]

(2) The Board shall, at the requisition made by,--

(a) in the case of a company having a share capital, such number of members who hold, on thedate of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of thecompany as on that date carries the right of voting;

(b) in the case of a company not having a share capital, such number of members who have, onthe date of receipt of the requisition, not less than one-tenth of the total voting power of all themembers having on the said date a right to vote,call an extraordinary general meeting of the company within the period specified in sub-section (4).

(3) The requisition made under sub-section (2) shall set out the matters for the consideration of whichthe meeting is to be called and shall be signed by the requisitionists and sent to the registered office of thecompany.

(4) If the Board does not, within twenty-one days from the date of receipt of a valid requisition inregard to any matter, proceed to call a meeting for the consideration of that matter on a day not later thanforty-five days from the date of receipt of such requisition, the meeting may be called and held by therequisitionists themselves within a period of three months from the date of the requisition.

(5) A meeting under sub-section (4) by the requisitionists shall be called and held in the same mannerin which the meeting is called and held by the Board.

(6) Any reasonable expenses incurred by the requisitionists in calling a meeting under sub-section (4)shall be reimbursed to the requisitionists by the company and the sums so paid shall be deducted from anyfee or other remuneration under section 197 payable to such of the directors who were in default in callingthe meeting.

1. The proviso ins. by Act 1 of 2018, s. 27 (w.e.f. 9-2-2018).

(1) A general meeting of a company may be called by giving not less thanclear twenty-one days' notice either in writing or through electronic mode in such manner as maybeprescribed:

²[Provided that a general meeting may be called after giving shorter notice than that specified in thissub-section if consent, in writing or by electronic mode, is accorded thereto--

(i) in the case of an annual general meeting, by not less than ninty-five per cent. of the membersentitled to vote thereat; and

(ii) in the case of any other general meeting, by members of the company--

(a) holding, if the company has a share capital, majority in number of members entitled to voteand who represent not less than ninety-five per cent. of such part of the paid-up share capital of thecompany as gives a right to vote at the meeting; or

(b) having, if the company has no share capital, not less than ninty-five per cent. of the totalvoting power exercisable at that meeting:

Provided further that where any member of a company is entitled to vote only on some resolution orresolutions to be moved at a meeting and not on the others, those members shall be taken into account for thepurposes of this sub-section in respect of the former resolution or resolutions and not in respect of the latter.]

(2) Every notice of a meeting shall specify the place, date, day and the hour of the meeting and shallcontain a statement of the business to be transacted at such meeting.

(3) The notice of every meeting of the company shall be given to--

(a) every member of the company, legal representative of any deceased member or the assigneeof an insolvent member;

(b) the auditor or auditors of the company; and

(c) every director of the company.

(4) Any accidental omission to give notice to, or the non-receipt of such notice by, any member orother person who is entitled to such notice for any meeting shall not invalidate the proceedings of themeeting.

1. The proviso subs. by s. 28, ibid. (w.e.f. 9-2-2018).

(1) A statement setting out the following material factsconcerning each item of special business to be transacted at a general meeting, shall be annexed to thenotice calling such meeting, namely:--

(a) the nature of concern or interest, financial or otherwise, if any, in respect of each items of--

(i) every director and the manager, if any;

(ii) every other key managerial personnel; and

(iii) relatives of the persons mentioned in sub-clauses (i) and (ii);

(b) any other information and facts that may enable members to understand the meaning, scopeand implications of the items of business and to take decision thereon.

(2) For the purposes of sub-section (1),--

(a) in the case of an annual general meeting, all business to be transacted thereat shall be deemedspecial, other than--

(i) the consideration of financial statements and the reports of the Board of Directors andauditors;

(ii) the declaration of any dividend;

(iii) the appointment of directors in place of those retiring;

(iv) the appointment of, and the fixing of the remuneration of, the auditors; and

(b) in the case of any other meeting, all business shall be deemed to be special:

Provided that where any item of special business to be transacted at a meeting of the company relatesto or affects any other company, the extent of shareholding interest in that other company of everypromoter, director, manager, if any, and of every other key managerial personnel of the first mentionedcompany shall, if the extent of such shareholding is not less than two per cent. of the paid-up share capitalof that company, also be set out in the statement.

(3) Where any item of business refers to any document, which is to be considered at the meeting, thetime and place where such document can be inspected shall be specified in the statement undersub-section (1).

(4) Where as a result of the non-disclosure or insufficient disclosure in any statement referred to insub-section (1), being made by a promoter, director, manager, if any, or other key managerial personnel,any benefit which accrues to such promoter, director, manager or other key managerial personnel or theirrelatives, either directly or indirectly, the promoter, director, manager or other key managerial personnel,as the case may be, shall hold such benefit in trust for the company, and shall, without prejudice to anyother action being taken against him under this Act or under any other law for the time being in force, beliable to compensate the company to the extent of the benefit received by him.

1[(5) Without prejudice to the provisions of sub-section (4), if any default is made in complying withthe provisions of this section, every promoter, director, manager or other key managerial personnel of thecompany who is in default shall be liable to a penalty of fifty thousand rupees or five times the amount ofbenefit accruing to the promoter, director, manager or other key managerial personnel or any of hisrelatives, whichever is higher.]

1. Subs. by Act 22 of 2019, s. 16, for sub-section (5) (w.e.f. 2-11-2018).

(1) Unless the articles of the company provide for a larger number,--

(a) in case of a public company,--

(i) five members personally present if the number of members as on the date of meeting is notmore than one thousand;

(ii) fifteen members personally present if the number of members as on the date of meeting is more than one thousand but up to five thousand;

(iii) thirty members personally present if the number of members as on the date of themeeting exceeds five thousand;

(b) in the case of a private company, two members personally present, shall be the quorum for ameeting of the company.

(2) If the quorum is not present within half-an-hour from the time appointed for holding a meeting ofthe company--

(a) the meeting shall stand adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine; or

(b) the meeting, if called by requisitionists under section 100, shall stand cancelled:

Provided that in case of an adjourned meeting or of a change of day, time or place of meeting underclause (a), the company shall give not less than three days notice to the members either individually or bypublishing an advertisement in the newspapers (one in English and one in vernacular language) which isin circulation at the place where the registered office of the company is situated.

(3) If at the adjourned meeting also, a quorum is not present within half-an-hour from the timeappointed for holding meeting, the members present shall be the quorum.

(1) Unless the articles of the company otherwise provide, themembers personally present at the meeting shall elect one of themselves to be the Chairman thereof on ashow of hands.

(2) If a poll is demanded on the election of the Chairman, it shall be taken forthwith in accordancewith the provisions of this Act and the Chairman elected on a show of hands under sub-section (1) shallcontinue to be the Chairman of the meeting until some other person is elected as Chairman as a result ofthe poll, and such other person shall be the Chairman for the rest of the meeting.

(1) Any member of a company entitled to attend and vote at a meeting of thecompany shall be entitled to appoint another person as a proxy to attend and vote at the meeting on hisbehalf:

Provided that a proxy shall not have the right to speak at such meeting and shall not been titled tovote except on a poll:

Provided further that, unless the articles of a company otherwise provide, this sub-section shall notapply in the case of a company not having a share capital:

Provided also that the Central Government may prescribe a class or classes of companies whosemembers shall not be entitled to appoint another person as a proxy:

Provided also that a person appointed as proxy shall act on behalf of such member or number ofmembers not exceeding fifty and such number of shares as may be prescribed.

(2) In every notice calling a meeting of a company which has a share capital, or the articles of whichprovide for voting by proxy at the meeting, there shall appear with reasonable prominence a statementthat a member entitled to attend and vote is entitled to appoint a proxy, or, where that is allowed, one ormore proxies, to attend and vote instead of himself, and that a proxy need not be a member.

(3) If default is made in complying with sub-section (2), every officer of the company who is indefault shall be 1[liable to a penalty of five thousands rupees].

(4) Any provision contained in the articles of a company which specifies or requires a longer periodthan forty-eight hours before a meeting of the company, for depositing with the company or any otherperson any instrument appointing a proxy or any other document necessary to show the validity orotherwise relating to the appointment of a proxy in order that the appointment may be effective at suchmeeting, shall have effect as if a period of forty-eight hours had been specified in or required by suchprovision for such deposit.

(5) If for the purpose of any meeting of a company, invitations to appoint as proxy a person or one ofa number of persons specified in the invitations are issued at the companys expense to any memberentitled to have a notice of the meeting sent to him and to vote thereat by proxy, every officer of thecompany who knowingly issues the invitations as aforesaid or willfully authorises or permits their issueshall be punishable with fine which may extend to one lakh rupees:

Provided that an officer shall not be punishable under this sub-section by reason only of the issue to amember at his request in writing of a form of appointment naming the proxy, or of a list of personswilling to act as proxies, if the form or list is available on request in writing to every member entitled tovote at the meeting by proxy.

(6) The instrument appointing a proxy shall--

(a) be in writing; and

(b) be signed by the appointer or his attorney duly authorised in writing or, if the appointer is abody corporate, be under its seal or be signed by an officer or an attorney duly authorised by it.

(7) An instrument appointing a proxy, if in the form as may be prescribed, shall not be questioned onthe ground that it fails to comply with any special requirements specified for such instrument by thearticles of a company.

(8) Every member entitled to vote at a meeting of the company, or on any resolution to be movedthereat, shall be entitled during the period beginning twenty-four hours before the time fixed for thecommencement of the meeting and ending with the conclusion of the meeting, to inspect the proxieslodged, at any time during the business hours of the company, provided not less than three days' notice inwriting of the intention so to inspect is given to the company.

1. Subs. by Act 22 of 2019, s. 17, for "punishable with fine which may extend to five thousand rupees" (w.e.f. 2-11-2018).

(1) Notwithstanding anything contained in this Act, the articlesof a company may provide that no member shall exercise any voting right in respect of any sharesregistered in his name on which any calls or other sums presently payable by him have not been paid, orin regard to which the company has exercised any right of lien.

(2) A company shall not, except on the grounds specified in sub-section (1), prohibit any memberfrom exercising his voting right on any other ground.

(3) On a poll taken at a meeting of a company, a member entitled to more than one vote, or his proxy,where allowed, or other person entitled to vote for him, as the case may be, need not, if he votes, use allhis votes or cast in the same way all the votes he uses.

(1) At any general meeting, a resolution put to the vote of themeeting shall, unless a poll is demanded under section 109 or the voting is carried out electronically, bedecided on a show of hands.

(2) A declaration by the Chairman of the meeting of the passing of a resolution or otherwise by showof hands under sub-section (1) and an entry to that effect in the books containing the minutes of themeeting of the company shall be conclusive evidence of the fact of passing of such resolution orotherwise.

The Central Government may prescribe the class or classesof companies and manner in which a member may exercise his right to vote by the electronic means.

(1) Before or on the declaration of the result of the voting on any resolutionon show of hands, a poll may be ordered to be taken by the Chairman of the meeting on his own motion,and shall be ordered to be taken by him on a demand made in that behalf,--

(a) in the case a company having a share capital, by the members present in person or by proxy,where allowed, and having not less than one-tenth of the total voting power or holding shares onwhich an aggregate sum of not less than five lakh rupees or such higher amount as may be prescribedhas been paid-up; and

(b) in the case of any other company, by any member or members present in person or by proxy,where allowed, and having not less than one-tenth of the total voting power.

(2) The demand for a poll may be withdrawn at any time by the persons who made the demand.

(3) A poll demanded for adjournment of the meeting or appointment of Chairman of the meeting shallbe taken forthwith.

(4) A poll demanded on any question other than adjournment of the meeting or appointment ofChairman shall be taken at such time, not being later than forty-eight hours from the time when thedemand was made, as the Chairman of the meeting may direct.

(5) Where a poll is to be taken, the Chairman of the meeting shall appoint such number of persons, ashe deems necessary, to scrutinise the poll process and votes given on the poll and to report thereon to himin the manner as may be prescribed.

(6) Subject to the provisions of this section, the Chairman of the meeting shall have power to regulatethe manner in which the poll shall be taken.

(7) The result of the poll shall be deemed to be the decision of the meeting on the resolution on whichthe poll was taken.

(1) Notwithstanding anything contained in this Act, a company

(a) shall, in respect of such items of business as the Central Government may, by notification,declare to be transacted only by means of postal ballot; and

(b) may, in respect of any item of business, other than ordinary business and any business inrespect of which directors or auditors have a right to be heard at any meeting, transact by means ofpostal ballot,in such manner as may be prescribed, instead of transacting such business at a general meeting:

1[Provided that any item of business required to be transacted by means of postal ballot underclause (a), may be transacted at a general meeting by a company which is required to provide the facilityto members to vote by electronic means under section 108, in the manner provided in that section.]

(2) If a resolution is assented to by the requisite majority of the shareholders by means of postalballot, it shall be deemed to have been duly passed at a general meeting convened in that behalf.

1. The Proviso ins. by Act 1 of 2018, s. 29 (w.e.f. 9-2-2018).

(1) A company shall, on requisition in writing of suchnumber of members, as required in section 100--,

(a) give notice to members of any resolution which may properly be moved and is intended to bemoved at a meeting; and

(b) circulate to members any statement with respect to the matters referred to in proposedresolution or business to be dealt with at that meeting.

(2) A company shall not be bound under this section to give notice of any resolution or to circulateany statement unless--

(a) a copy of the requisition signed by the requisitionists (or two or more copies which, betweenthem, contain the signatures of all the requisitionists) is deposited at the registered office of thecompany,

(i) in the case of a requisition requiring notice of a resolution, not less than six weeks beforethe meeting;

(ii) in the case of any other requisition, not less than two weeks before the meeting; and

(b) there is deposited or tendered with the requisition, a sum reasonably sufficient to meet thecompanys expenses in giving effect thereto:

Provided that if, after a copy of a requisition requiring notice of a resolution has been deposited at theregistered office of the company, an annual general meeting is called on a date within six weeks after thecopy has been deposited, the copy, although not deposited within the time required by this sub-section,shall be deemed to have been properly deposited for the purposes thereof.

(3) The company shall not be bound to circulate any statement as required by clause (b) of subsection (1), if on the application either of the company or of any other person who claims to be aggrieved,the Central Government, by order, declares that the rights conferred by this section are being abused tosecure needless publicity for defamatory matter.

(4) An order made under sub-section (3) may also direct that the cost incurred by the company byvirtue of this section shall be paid to the company by the requisitionists, notwithstanding that they are notparties to the application.

(5) If any default is made in complying with the provisions of this section, the company and everyofficer of the company who is in default shall be liable to a penalty of twenty-five thousand rupees.

(1) The President of India or theGovernor of a State, if he is a member of a company, may appoint such person as he thinks fit to act as hisrepresentative at any meeting of the company or at any meeting of any class of members of the company.

(2) A person appointed to act under sub-section (1) shall, for the purposes of this Act, be deemed tobe a member of such a company and shall be entitled to exercise the same rights and powers, includingthe right to vote by proxy and postal ballot, as the President or, as the case may be, the Governor couldexercise as a member of the company.

(1) A bodycorporate, whether a company within the meaning of this Act or not, may,--

(a) if it is a member of a company within the meaning of this Act, by resolution of its Board ofDirectors or other governing body, authorise such person as it thinks fit to act as its representative atany meeting of the company, or at any meeting of any class of members of the company;

(b) if it is a creditor, including a holder of debentures, of a company within the meaning of thisAct, by resolution of its directors or other governing body, authorise such person as it thinks fit to actas its representative at any meeting of any creditors of the company held in pursuance of this Act orof any rules made thereunder, or in pursuance of the provisions contained in any debenture or trustdeed, as the case may be.

(2) A person authorised by resolution under sub-section (1) shall be entitled to exercise the samerights and powers, including the right to vote by proxy and by postal ballot, on behalf of the bodycorporate which he represents as that body could exercise if it were an individual member, creditor orholder of debentures of the company.

(1) A resolution shall be an ordinary resolution if thenotice required under this Act has been duly given and it is required to be passed by the votes cast,whether on a show of hands, or electronically or on a poll, as the case may be, in favour of the resolution,including the casting vote, if any, of the Chairman, by members who, being entitled so to do, vote inperson, or where proxies are allowed, by proxy or by postal ballot, exceed the votes, if any, cast againstthe resolution by members, so entitled and voting.

(2) A resolution shall be a special resolution when--

(a) the intention to propose the resolution as a special resolution has been duly specified in thenotice calling the general meeting or other intimation given to the members of the resolution;

(b) the notice required under this Act has been duly given; and

(c) the votes cast in favour of the resolution, whether on a show of hands, or electronically or on apoll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or bypostal ballot, are required to be not less than three times the number of the votes, if any, cast againstthe resolution by members so entitled and voting.

Where, by any provision contained in this Act or in thearticles of a company, special notice is required of any resolution, notice of the intention to move suchresolution shall be given to the company by such number of members holding not less than one per cent.of total voting power or holding shares on which such aggregate sum not exceeding five lakh rupees, asmay be prescribed, has been paid-up and the company shall give its members notice of the resolution insuch manner as may be prescribed.

Where a resolution is passed at an adjournedmeeting of--

(a) a company; or

(b) the holders of any class of shares in a company; or

(c) the Board of Directors of a company,

the resolution shall, for all purposes, be treated as having been passed on the date on which it was in factpassed, and shall not be deemed to have been passed on any earlier date.

(1) A copy of every resolution or any agreement, inrespect of matters specified in sub-section (3) together with the explanatory statement under section 102,if any, annexed to the notice calling the meeting in which the resolution is proposed, shall be filed withthe Registrar within thirty days of the passing or making thereof in such manner and with such fees asmay be prescribed 1:

Provided that the copy of every resolution which has the effect of altering the articles and the copy ofevery agreement referred to in sub-section (3) shall be embodied in or annexed to every copy of thearticles issued after passing of the resolution or making of the agreement.

2[(2) If any company fails to file the resolution or the agreement under sub-section (1) before theexpiry of the period specified therein, such company shall be liable to a penalty of one lakh rupees and incase of continuing failure, with a further penalty of five hundred rupees for each day after the first duringwhich such failure continues, subject to a maximum of twenty-five lakh rupees and every officer of thecompany who is in default including liquidator of the company, if any, shall be liable to a penalty of fiftythousand rupees and in case of continuing failure, with further penalty of five hundred rupees for each dayafter the first during which such failure continues, subject to a maximum of five lakh rupees.]

(3) The provisions of this section shall apply to--

(a) special resolutions;

(b) resolutions which have been agreed to by all the members of a company, but which, if not soagreed to, would not have been effective for their purpose unless they had been passed as specialresolutions;

(c) any resolution of the Board of Directors of a company or agreement executed by a company,relating to the appointment, re-appointment or renewal of the appointment, or variation of the termsof appointment, of a managing director;

(d) resolutions or agreements which have been agreed to by any class of members but which, ifnot so agreed to, would not have been effective for their purpose unless they had been passed by aspecified majority or otherwise in some particular manner; and all resolutions or agreements whicheffectively bind such class of members though not agreed to by all those members;

3

(f) resolutions requiring a company to be wound up voluntarily passed in pursuance of 4[section59 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016)];

(g) resolutions passed in pursuance of sub-section (3) of section 179: 5

6[Provided that no person shall be entitled under section 399 to inspect or obtain copies ofsuch resolutions; 7]

8[Provided further that nothing contained in this clause shall apply to a banking company in respect ofa resolution passed to grant loans, or give guarantee or provide security in respect of loans under clause (f)of sub-section (3) of section 179 in the ordinary course of its business; and]

(h) any other resolution or agreement as may be prescribed and placed in the public domain.

1. The words and figures "within the time specified under section 403" omitted by Act 1 of 2018, s. 30 (w.e.f. 7-5-2018).

2. Subs. by Act 22 of 2019, s. 18, for sub-section (2) (w.e.f. 2-11-2018).

3.Clause (e) omitted by Act 1 of 2018, s. 30 (w.e.f. 7-5-2018).

4. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for "section 304" (w.e.f. 15-11-2016).

5. The word "and" omitted by Act 21 of 2015, s. 9 (w.e.f. 29-5-2015).

6. Ins. by s. 9, ibid. (w.e.f. 29-5-2015).

7. The "and" omitted by Act 1 of 2018, s. 30 (w.e.f. 7-5-2018).

8.The proviso ins. by s. 30, ibid. (w.e.f. 7-5-2018).

(1) Every company shall cause minutes of theproceedings of every general meeting of any class of shareholders or creditors, and every resolutionpassed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, tobe prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusionof every such meeting concerned, or passing of resolution by postal ballot in books kept for that purposewith their pages consecutively numbered.

(2) The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat.

(3) All appointments made at any of the meetings aforesaid shall be included in the minutes of themeeting.

(4) In the case of a meeting of the Board of Directors or of a committee of the Board, the minutesshall also contain--

(a) the names of the directors present at the meeting; and

(b) in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from, or not concurring with the resolution.

(5) There shall not be included in the minutes, any matter which, in the opinion of the Chairman ofthe meeting,--

(a) is or could reasonably be regarded as defamatory of any person; or

(b) is irrelevant or immaterial to the proceedings; or

(c) is detrimental to the interests of the company.

(6) The Chairman shall exercise absolute discretion in regard to the inclusion or non-inclusion of anymatter in the minutes on the grounds specified in sub-section (5).

(7) The minutes kept in accordance with the provisions of this section shall be evidence of theproceedings recorded therein.

(8) Where the minutes have been kept in accordance with sub-section (1) then, until the contrary isproved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat tohave duly taken place, and the resolutions passed by postal ballot to have been duly passed and inparticular, all appointments of directors, key managerial personnel, auditors or company secretary inpractice, shall be deemed to be valid.

(9) No document purporting to be a report of the proceedings of any general meeting of a companyshall be circulated or advertised at the expense of the company, unless it includes the matters required bythis section to be contained in the minutes of the proceedings of such meeting.

(10) Every company shall observe secretarial standards with respect to general and Board meetingsspecified by the Institute of Company Secretaries of India constituted under section 3 of the CompanySecretaries Act, 1980 (56 of 1980), and approved as such by the Central Government.

(11) If any default is made in complying with the provisions of this section in respect of any meeting,the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the companywho is in default shall be liable to a penalty of five thousand rupees.

(12) If a person is found guilty of tampering with the minutes of the proceedings of meeting, he shallbe punishable with imprisonment for a term which may extend to two years and with fine which shall notbe less than twenty-five thousand rupees but which may extend to one lakh rupees.

(1) The books containing the minutes of theproceedings of any general meeting of a company or of a resolution passed by postal ballot, shall--

(a) be kept at the registered office of the company; and

(b) be open, during business hours, to the inspection by any member without charge, subject tosuch reasonable restrictions as the company may, by its articles or in general meeting, impose, so,however, that not less than two hours in each business day are allowed for inspection.

(2) Any member shall be entitled to be furnished, within seven working days after he has made arequest in that behalf to the company, and on payment of such fees as may be prescribed, with a copy ofany minutes referred to in sub-section (1).

(3) If any inspection under sub-section (1) is refused, or if any copy required under sub-section (2) isnot furnished within the time specified therein, the company shall be liable to a penalty of twenty-fivethousand rupees and every officer of the company who is in default shall be liable to a penalty of fivethousand rupees for each such refusal or default, as the case may be.

(4) In the case of any such refusal or default, the Tribunal may, without prejudice to any action beingtaken under sub-section (3), by order, direct an immediate inspection of the minute-books or direct thatthe copy required shall forthwith be sent to the person requiring it.

Without prejudice to anyother provisions of this Act, any document, record, register, minutes, etc.,--

(a) required to be kept by a company; or

(b) allowed to be inspected or copies to be given to any person by a company under this Act, maybe kept or inspected or copies given, as the case may be, in electronic form in such form and manneras may be prescribed.

(1) Every listed public company shall prepare in theprescribed manner a report on each annual general meeting including the confirmation to the effect thatthe meeting was convened, held and conducted as per the provisions of this Act and the rules madethereunder.

(2) The company shall file with the Registrar a copy of the report referred to in sub-section (1) withinthirty days of the conclusion of the annual general meeting with such fees as may be prescribed, or withsuch additional fees as may be prescribed, 1.

2[(3) If the company fails to file the report under sub-section (2) before the expiry of the periodspecified therein, such company shall be liable to a penalty of one lakh rupees and in case of continuingfailure, with a further penalty of five hundred rupees for each day after the first during which such failurecontinues, subject to a maximum of five lakh rupees and every officer of the company who is in defaultshall be liable to a penalty which shall not be less than twenty-five thousand rupees and in case ofcontinuing failure, with a further penalty of five hundred rupees for each day after the first during whichsuch failure continues, subject to a maximum of one lakh rupees.]

1. The words and figures "within the time as specified, under section 403" omitted by Act 1 of 2018, s. 31 (w.e.f. 7-5-2018).

2. Subs. by Act 22 of 2019, s. 19, for sub-section (3) (w.e.f. 2-11-2018).

(1) The provisions of section 98 andsections 100 to 111 (both inclusive) shall not apply to a One Person Company.

(2) The ordinary businesses as mentioned under clause (a) of sub-section (2) of section 102 which acompany, other than a One Person Company, is required to transact at its annual general meeting, shall betransacted, in case of One Person Company, as provided in sub-section (3).

(3) For the purposes of section 114, any business which is required to be transacted at an annualgeneral meeting or other general meeting of a company by means of an ordinary or special resolution, itshall be sufficient if, in case of One Person Company, the resolution is communicated by the member tothe company and entered in the minutes-book required to be maintained under section 118 and signed anddated by the member and such date shall be deemed to be the date of the meeting for all the purposesunder this Act.

(4) Notwithstanding anything in this Act, where there is only one director on the Board of Director ofa One Person Company, any business which is required to be transacted at the meeting of the Board ofDirectors of a company, it shall be sufficient if, in case of such One Person Company, the resolution by such director is entered in the minutes-book required to be maintained under section 118 and signed anddated by such director and such date shall be deemed to be the date of the meeting of the Board ofDirectors for all the purposes under this Act.

(1) No dividend shall be declared or paid by a company for anyfinancial year except--

(a) out of the profits of the company for that year arrived at after providing for depreciation inaccordance with the provisions of sub-section (2), or out of the profits of the company for anyprevious financial year or years arrived at after providing for depreciation in accordance with theprovisions of that sub-section and remaining undistributed, or out of 1[both:]

2[Provided that in computing profits any amount representing unrealised gains, notional gains orrevaluation of assets and any change in carrying amount of an asset or of a liability on measurement of theasset or the liability at fair value shall be excluded; or]

(b) out of money provided by the Central Government or a State Government for the payment ofdividend by the company in pursuance of a guarantee given by that Government:

Provided that a company may, before the declaration of any dividend in any financial year, transfersuch percentage of its profits for that financial year as it may consider appropriate to the reserves of thecompany:

Provided further that where, owing to inadequacy or absence of profits in any financial year, anycompany proposes to declare dividend out of the accumulated profits earned by it in previous years and 3[transferred by the company to the free reserves], such declaration of dividend shall not be made exceptin accordance with such rules as may be prescribed in this behalf:

Provided also that no dividend shall be declared or paid by a company from its reserves other thanfree reserves:

4[Provided also that no company shall declare dividend unless carried over previous losses anddepreciation not provided in previous year or years are set off against profit of the company for thecurrent year.]

(2) For the purposes of clause (a) of sub-section (1), depreciation shall be provided in accordancewith the provisions of Schedule II.

5[(3) The Board of Directors of a company may declare interim dividend during any financial year orat any time during the period from closure of financial year till holding of the annual general meeting outof the surplus in the profit and loss account or out of profits of the financial year for which such interimdividend is sought to be declared or out of profits generated in the financial year till the quarter precedingthe date of declaration of the interim dividend:]

Provided that in case the company has incurred loss during the current financial year up to the end ofthe quarter immediately preceding the date of declaration of interim dividend, such interim dividend shallnot be declared at a rate higher than the average dividends declared by the company during immediatelypreceding three financial years.]

(4) The amount of the dividend, including interim dividend, shall be deposited in a scheduled bank ina separate account within five days from the date of declaration of such dividend.

(5) No dividend shall be paid by a company in respect of any share therein except to the registeredshareholder of such share or to his order or to his banker and shall not be payable except in cash:

Provided that nothing in this sub-section shall be deemed to prohibit the capitalisation of profits orreserves of a company for the purpose of issuing fully paid-up bonus shares or paying up any amount forthe time being unpaid on any shares held by the members of the company:

Provided further that any dividend payable in cash may be paid by cheque or warrant or in anyelectronic mode to the shareholder entitled to the payment of the dividend.

(6) A company which fails to comply with the provisions of sections 73 and 74 shall not, so long assuch failure continues, declare any dividend on its equity shares.

1. Subs. by s. 32, ibid., for "both; or" (w.e.f. 9-2-2018).

2. The proviso ins. by s. 32, ibid. (w.e.f. 9-2-2018).

3. Subs. by s. 32, ibid., for "transferred by the company to the reserves" (w.e.f. 9-2-2018).

4. The Proviso ins. by Act 21 of 2015, s. 10 (w.e.f. 29-5-2015).

5. Subs. by Act 1 of 2018, s. 32, for sub-section (3) (w.e.f. 9-2-2018).

(1) Where a dividend has been declared by a company but has notbeen paid or claimed within thirty days from the date of the declaration to any shareholder entitled to thepayment of the dividend, the company shall, within seven days from the date of expiry of the said periodof thirty days, transfer the total amount of dividend which remains unpaid or unclaimed to a specialaccount to be opened by the company in that behalf in any scheduled bank to be called the UnpaidDividend Account.

(2) The company shall, within a period of ninety days of making any transfer of an amount undersub-section (1) to the Unpaid Dividend Account, prepare a statement containing the names, their lastknown addresses and the unpaid dividend to be paid to each person and place it on the website of thecompany, if any, and also on any other website approved by the Central Government for this purpose, insuch form, manner and other particulars as may be prescribed.

(3) If any default is made in transferring the total amount referred to in sub-section (1) or any partthereof to the Unpaid Dividend Account of the company, it shall pay, from the date of such default,interest on so much of the amount as has not been transferred to the said account, at the rate of twelveper cent. per annum and the interest accruing on such amount shall ensure to the benefit of the membersof the company in proportion to the amount remaining unpaid to them.

(4) Any person claiming to be entitled to any money transferred under sub-section (1) to the UnpaidDividend Account of the company may apply to the company for payment of the money claimed.

(5) Any money transferred to the Unpaid Dividend Account of a company in pursuance of this sectionwhich remains unpaid or unclaimed for a period of seven years from the date of such transfer shall betransferred by the company along with interest accrued, if any, thereon to the Fund established under sub-section (1) of section 125 and the company shall send a statement in the prescribed form of the detailsof such transfer to the authority which administers the said Fund and that authority shall issue a receipt tothe company as evidence of such transfer.

(6) All shares in respect of which1[dividend has not been paid or claimed for seven consecutive yearsor more shall be] transferred by the company in the name of Investor Education and Protection Fundalong with a statement containing such details as may be prescribed:

Provided that any claimant of shares transferred above shall be entitled to claim the transfer of sharesfrom Investor Education and Protection Fund in accordance with such procedure and on submission ofsuch documents as may be prescribed.

2[Explanation.-- For the removal of doubts, it is hereby clarified that in case any dividend is paid orclaimed for any year during the said period of seven consecutive years, the share shall not be transferredto Investor Education and Protection Fund.]

(7) If a company fails to comply with any of the requirements of this section, the company shall bepunishable with fine which shall not be less than five lakh rupees but which may extend to twenty-fivelakh rupees and every officer of the company who is in default shall be punishable with fine which shallnot be less than one lakh rupees but which may extend to five lakh rupees.

1. Subs. by Act 21 of 2015, s. 11, for "unpaid or unclaimed dividend has been transferred under sub-section (5) shall also be"(w.e.f. 29-5-2015).

2. The Explanation ins. by s. 11, ibid. (w.e.f. 29-5-2015).

(1) The Central Government shall establish aFund to be called the Investor Education and Protection Fund (herein referred to as the Fund).

(2) There shall be credited to the Fund--

(a) the amount given by the Central Government by way of grants after due appropriation madeby Parliament by law in this behalf for being utilised for the purposes of the Fund;

(b) donations given to the Fund by the Central Government, State Governments, companies orany other institution for the purposes of the Fund;

(c) the amount in the Unpaid Dividend Account of companies transferred to the Fund under subsection(5) of section 124;

(d) the amount in the general revenue account of the Central Government which had beentransferred to that account under sub-section (5) of section 205A of the Companies Act, 1956 (1 of1956), as it stood immediately before the commencement of the Companies (Amendment) Act, 1999(21 of 1999), and remaining unpaid or unclaimed on the commencement of this Act;

(e) the amount lying in the Investor Education and Protection Fund under section 205C of theCompanies Act, 1956 (1 of 1956);

(f) the interest or other income received out of investments made from the Fund;

(g) the amount received under sub-section (4) of section 38;

(h) the application money received by companies for allotment of any securities and due forrefund;

(i) matured deposits with companies other than banking companies;

(j) matured debentures with companies;

(k) interest accrued on the amounts referred to in clauses (h) to (j);

(l) sale proceeds of fractional shares arising out of issuance of bonus shares, merger andamalgamation for seven or more years;

(m) redemption amount of preference shares remaining unpaid or unclaimed for seven or moreyears; and

(n) such other amount as may be prescribed:

Provided that no such amount referred to in clauses (h) to (j) shall form part of the Fund unless suchamount has remained unclaimed and unpaid for a period of seven years from the date it became due forpayment.

(3) The Fund shall be utilised for--

(a) the refund in respect of unclaimed dividends, matured deposits, matured debentures, theapplication money due for refund and interest thereon;

(b) promotion of investors education, awareness and protection;

(c) distribution of any disgorged amount among eligible and identifiable applicants for shares ordebentures, shareholders, debenture-holders or depositors who have suffered losses due to wrongactions by any person, in accordance with the orders made by the Court which had ordereddisgorgement;

(d) reimbursement of legal expenses incurred in pursuing class action suits under sections 37 and245 by members, debenture-holders or depositors as may be sanctioned by the Tribunal; and

(e) any other purpose incidental thereto,

in accordance with such rules as may be prescribed:

Provided that the person whose amounts referred to in clauses (a) to (d) of sub-section (2) of section205C transferred to Investor Education and Protection Fund, after the expiry of the period of seven yearsas per provisions of the Companies Act, 1956 (1 of 1956), shall be entitled to get refund out of the Fundin respect of such claims in accordance with rules made under this section.

Explanation.--The disgorged amount refers to the amount received through disgorgement or disposalof securities.

(4) Any person claiming to be entitled to the amount referred in sub-section (2) may apply to theauthority constituted under sub-section (5) for the payment of the money claimed.

(5) The Central Government shall constitute, by notification, an authority for administration of theFund consisting of a chairperson and such other members, not exceeding seven and a chief executiveofficer, as the Central Government may appoint.

(6) The manner of administration of the Fund, appointment of chairperson, members and chiefexecutive officer, holding of meetings of the authority shall be in accordance with such rules as may beprescribed.

(7) The Central Government may provide to the authority such offices, officers, employees and otherresources in accordance with such rules as may be prescribed.

(8) The authority shall administer the Fund and maintain separate accounts and other relevant recordsin relation to the Fund in such form as may be prescribed after consultation with the Comptroller andAuditor-General of India.

(9) It shall be competent for the authority constituted under sub-section (5) to spend money out of theFund for carrying out the objects specified in sub-section (3).

(10) The accounts of the Fund shall be audited by the Comptroller and Auditor-General of India atsuch intervals as may be specified by him and such audited accounts together with the audit reportthereon shall be forwarded annually by the authority to the Central Government.

(11) The authority shall prepare in such form and at such time for each financial year as may beprescribed its annual report giving a full account of its activities during the financial year and forward acopy thereof to the Central Government and the Central Government shall cause the annual report and theaudit report given by the Comptroller and Auditor-General of India to be laid before each House ofParliament.

Where any instrument of transfer of shares has been delivered toany company for registration and the transfer of such shares has not been registered by the company, itshall, notwithstanding anything contained in any other provision of this Act,--

(a) transfer the dividend in relation to such shares to the Unpaid Dividend Account referred to insection 124 unless the company is authorised by the registered holder of such shares in writing to paysuch dividend to the transferee specified in such instrument of transfer; and

(b) keep in abeyance in relation to such shares, any offer of rights shares under clause (a) of subsection(1) of section 62 and any issue of fully paid-up bonus shares in pursuance of first proviso tosub-section (5) of section 123.

Where a dividend has been declared by acompany but has not been paid or the warrant in respect thereof has not been posted within thirty daysfrom the date of declaration to any shareholder entitled to the payment of the dividend, every director ofthe company shall, if he is knowingly a party to the default, be punishable with imprisonment which mayextend to two years and with fine which shall not be less than one thousand rupees for every day duringwhich such default continues and the company shall be liable to pay simple interest at the rate of eighteenper cent. per annum during the period for which such default continues:

Provided that no offence under this section shall be deemed to have been committed:--

(a) where the dividend could not be paid by reason of the operation of any law;

(b) where a shareholder has given directions to the company regarding the payment of thedividend and those directions cannot be complied with and the same has been communicated to him;

(c) where there is a dispute regarding the right to receive the dividend;

(d) where the dividend has been lawfully adjusted by the company against any sum due to it fromthe shareholder; or

(e) where, for any other reason, the failure to pay the dividend or to post the warrant within theperiod under this section was not due to any default on the part of the company.

(1) Every company shall prepare and keep atits registered office books of account and other relevant books and papers and financial statement forevery financial year which give a true and fair view of the state of the affairs of the company, includingthat of its branch office or offices, if any, and explain the transactions effected both at the registered officeand its branches and such books shall be kept on accrual basis and according to the double entry systemof accounting:

Provided that all or any of the books of account aforesaid and other relevant papers may be kept atsuch other place in India as the Board of Directors may decide and where such a decision is taken, thecompany shall, within seven days thereof, file with the Registrar a notice in writing giving the full addressof that other place:

Provided further that the company may keep such books of account or other relevant papers inelectronic mode in such manner as may be prescribed.

(2) Where a company has a branch office in India or outside India, it shall be deemed to havecomplied with the provisions of sub-section (1), if proper books of account relating to the transactionseffected at the branch office are kept at that office and proper summarized returns periodically are sent bythe branch office to the company at its registered office or the other place referred to in sub-section (1).

(3) The books of account and other books and papers maintained by the company within India shallbe open for inspection at the registered office of the company or at such other place in India by anydirector during business hours, and in the case of financial information, if any, maintained outside thecountry, copies of such financial information shall be maintained and produced for inspection by anydirector subject to such conditions as may be prescribed:

Provided that the inspection in respect of any subsidiary of the company shall be done only by theperson authorised in this behalf by a resolution of the Board of Directors.

(4) Where an inspection is made under sub-section (3), the officers and other employees of thecompany shall give to the person making such inspection all assistance in connection with the inspectionwhich the company may reasonably be expected to give.

(5) The books of account of every company relating to a period of not less than eight financial yearsimmediately preceding a financial year, or where the company had been in existence for a period less thaneight years, in respect of all the preceding years together with the vouchers relevant to any entry in suchbooks of account shall be kept in good order:

Provided that where an investigation has been ordered in respect of the company under Chapter XIV,the Central Government may direct that the books of account may be kept for such longer period as itmay deem fit.

(6) If the managing director, the whole-time director in charge of finance, the Chief Financial Officeror any other person of a company charged by the Board with the duty of complying with the provisions ofthis section, contravenes such provisions, such managing director, whole-time director in charge offinance, Chief Financial officer or such other person of the company shall be punishable withimprisonment for a term which may extend to one year or with fine which shall not be less than fiftythousand rupees but which may extend to five lakh rupees or with both.

(1) The financial statements shall give a true and fair view of the stateof affairs of the company or companies, comply with the accounting standards notified under section 133and shall be in the form or forms as may be provided for different class or classes of companies inSchedule III:

Provided that the items contained in such financial statements shall be in accordance with theaccounting standards:

Provided further that nothing contained in this sub-section shall apply to any insurance or bankingcompany or any company engaged in the generation or supply of electricity, or to any other class ofcompany for which a form of financial statement has been specified in or under the Act governing suchclass of company:

Provided also that the financial statements shall not be treated as not disclosing a true and fair viewof the state of affairs of the company, merely by reason of the fact that they do not disclose--

(a) in the case of an insurance company, any matters which are not required to be disclosed by theInsurance Act, 1938 (4 of 1938), or the Insurance Regulatory and Development Authority Act, 1999(41 of 1999);

(b) in the case of a banking company, any matters which are not required to be disclosed by theBanking Regulation Act, 1949 (10 of 1949);

(c) in the case of a company engaged in the generation or supply of electricity, any matters whichare not required to be disclosed by the Electricity Act, 2003 (36 of 2003);

(d) in the case of a company governed by any other law for the time being in force, any matterswhich are not required to be disclosed by that law.

(2) At every annual general meeting of a company, the Board of Directors of the company shall laybefore such meeting financial statements for the financial year.

1[(3) Where a company has one or more subsidiaries, it shall, in addition to financial statementsprovided under sub-section (2), prepare a consolidated financial statement of the company and of all thesubsidiaries in the same form and manner as that of its own which shall also be laid before the annualgeneral meeting of the company along with the laying of its financial statement under sub-section (2):

Provided that the company shall also attach along with its financial statement, a separate statementcontaining the salient features of the financial statement of its subsidiary or subsidiaries in such form asmay be prescribed:

Provided further that the Central Government may provide for the consolidation of accounts ofcompanies in such manner as may be prescribed.]

(4) The provisions of this Act applicable to the preparation, adoption and audit of the financialstatements of a holding company shall, mutatis mutandis, apply to the consolidated financial statementsreferred to in sub-section (3).

(5) Without prejudice to sub-section (1), where the financial statements of a company do not complywith the accounting standards referred to in sub-section (1), the company shall disclose in its financialstatements, the deviation from the accounting standards, the reasons for such deviation and the financialeffects, if any, arising out of such deviation

(6) The Central Government may, on its own or on an application by a class or classes of companies,by notification, exempt any class or classes of companies from complying with any of the requirements ofthis section or the rules made thereunder, if it is considered necessary to grant such exemption in thepublic interest and any such exemption may be granted either unconditionally or subject to suchconditions as may be specified in the notification.

(7) If a company contravenes the provisions of this section, the managing director, the whole-timedirector in charge of finance, the Chief Financial Officer or any other person charged by the Board withthe duty of complying with the requirements of this section and in the absence of any of the officersmentioned above, all the directors shall be punishable with imprisonment for a term which may extend toone year or with fine which shall not be less than fifty thousand rupees but which may extend to five lakhrupees, or with both.

Explanation.-- For the purposes of this section, except where the context otherwise requires, anyreference to the financial statement shall include any notes annexed to or forming part of such financial statement, giving information required to be given and allowed to be given in the form of such notesunder this Act.

1. Subs. by Act 1 of 2018, s. 33, for sub-section (3) (w.e.f. 7-5-2018).

(1) A company shall not re-openits books of account and not recast its financial statements, unless an application in this regard is made bythe Central Government, the Income-tax authorities, the Securities and Exchange Board, any otherstatutory regulatory body or authority or any person concerned and an order is made by a court ofcompetent jurisdiction or the Tribunal to the effect that--

(i) the relevant earlier accounts were prepared in a fraudulent manner; or

(ii) the affairs of the company were mismanaged during the relevant period, casting a doubt onthe reliability of financial statements:

Provided that the court or the Tribunal, as the case may be, shall give notice to the CentralGovernment, the Income-tax authorities, the Securities and Exchange Board or any other statutoryregulatory body or authority concerned 1[or any other person concerned] and shall take intoconsideration the representations, if any, made by that Government or the authorities, Securities andExchange Board or the body or authority concerned 1[or the other person concerned] before passing anyorder under this section.

(2) Without prejudice to the provisions contained in this Act the accounts so revised or re-cast undersub-section (1) shall be final.

2[(3) No order shall be made under sub-section (1) in respect of re-opening of books of accountrelating to a period earlier than eight financial years immediately preceding the current financial year:

Provided that where a direction has been issued by the Central Government under the proviso tosub-section (5) of section 128 for keeping of books of account for a period longer than eight years, thebooks of account may be ordered to be re-opened within such longer period.]

1. Ins. by Act 1 of 2018, s. 34 (w.e.f. 9-2-2018).

2. Ins. by Act 1 of 2018, s. 34 (w.e.f. 9-2-2018)

(1) If it appears to thedirectors of a company that--

(a) the financial statement of the company; or

(b) the report of the Board,

do not comply with the provisions of section 129 or section 134 they may prepare revised financialstatement or a revised report in respect of any of the three preceding financial years after obtainingapproval of the Tribunal on an application made by the company in such form and manner as may beprescribed and a copy of the order passed by the Tribunal shall be filed with the Registrar:

Provided that the Tribunal shall give notice to the Central Government and the Income-tax authoritiesand shall take into consideration the representations, if any, made by that Government or the authoritiesbefore passing any order under this section:

Provided further that such revised financial statement or report shall not be prepared or filed morethan once in a financial year:

Provided also that the detailed reasons for revision of such financial statement or report shall also bedisclosed in the Board's report in the relevant financial year in which such revision is being made.

(2) Where copies of the previous financial statement or report have been sent out to members ordelivered to the Registrar or laid before the company in general meeting, the revisions must be confinedto--

(a) the correction in respect of which the previous financial statement or report do not complywith the provisions of section 129 or section 134; and

(b) the making of any necessary consequential alternation.

(3) The Central Government may make rules as to the application of the provisions of this Act inrelation to revised financial statement or a revised director's report and such rules may, in particular--

(a) make different provisions according to which the previous financial statement or report arereplaced or are supplemented by a document indicating the corrections to be made;

(b) make provisions with respect to the functions of the company's auditor in relation to therevised financial statement or report;

(c) require the directors to take such steps as may be prescribed.

(1) The Central Government may,by notification, constitute a National Financial Reporting Authority to provide for matters relating toaccounting and auditing standards under this Act.

1[(1A) The National Financial Reporting Authority shall perform its functions through such divisionsas may be prescribed.]

(2) Notwithstanding anything contained in any other law for the time being in force, the NationalFinancial Reporting Authority shall--

(a) make recommendations to the Central Government on the formulation and laying down ofaccounting and auditing policies and standards for adoption by companies or class of companies ortheir auditors, as the case may be;

(b) monitor and enforce the compliance with accounting standards and auditing standards in suchmanner as may be prescribed;

(c) over see the quality of service of the professions associated with ensuring compliance withsuch standards, and suggest measures required for improvement in quality of service and such otherrelated matters as may be prescribed; and

(d) perform such other functions relating to clauses (a), (b) and (c) as may be prescribed.

(3) The National Financial Reporting Authority shall consist of a chairperson, who shall be a personof eminence and having expertise in accountancy, auditing, finance or law to be appointed by the CentralGovernment and such other members not exceeding fifteen consisting of part-time and full-time membersas may be prescribed:

Provided that the terms and conditions and the manner of appointment of the chairperson andmembers shall be such as may be prescribed:

Provided further that the chairperson and members shall make a declaration to the CentralGovernment in the prescribed form regarding no conflict of interest or lack of independence in respect ofhis or their appointment:

Provided also that the chairperson and members, who are in full-time employment with NationalFinancial Reporting Authority shall not be associated with any audit firm (including related consultancyfirms) during the course of their appointment and two years after ceasing to hold such appointment.

2[(3A) Each division of the National Financial Reporting Authority shall be presided over by theChairperson or a full-time Member authorized by the Chairperson.

(3B) There shall be an executive body of the National Financial Reporting Authority consisting of theChairperson and full-time Members of such Authority for efficient discharge of its functions undersub-section (2) [other than clause (a) and sub-section (4).]

(4) Notwithstanding anything contained in any other law for the time being in force, the NationalFinancial Reporting Authority shall--

(a) have the power to investigate, either suo motu or on a reference made to it by the CentralGovernment, for such class of bodies corporate or persons, in such manners may be prescribed intothe matters of professional or other misconduct committed by any member or firm of charteredaccountants, registered under the Chartered Accountants Act, 1949 (38 of 1949):

Provided that no other institute or body shall initiate or continue any proceedings in such mattersof misconduct where the National Financial Reporting Authority has initiated an investigation underthis section;

(b) have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908(5 of 1908), while trying a suit, in respect of the following matters, namely:--

(i) discovery and production of books of account and other documents, at such place and atsuch time as may be specified by the National Financial Reporting Authority;

(ii) summoning and enforcing the attendance of persons and examining them on oath;

(iii) inspection of any books, registers and other documents of any person referred to inclause (b) at any place;

(iv) issuing commissions for examination of witnesses or documents;

(c) where professional or other misconduct is proved, have the power to make order for--

(A) imposing penalty of--

(I) not less than one lakh rupees, but which may extend to five times of the fees received,in case of individuals; and(II) not less than 2[five lakh rupees], but which may extend to ten times of the feesreceived, in case of firms;

3[(B) debarring the member or the firm from--

I. being appointed as an auditor or internal auditor or undertaking any audit in respect t offinancial statements or internal audit of the functions and activities of any company or bodycorporate; or

II. performing any valuation as provided under section 247,

for a minimum period of six months or such higher period not exceeding ten years as may bedetermined by the National Financial Reporting Authority.]

Explanation.--For the purposes of this sub-section, the expression "professional or other misconduct"shall have the same meaning assigned to it under section 22 of the Chartered Accountants Act, 1949(38 of 1949).

(5) Any person aggrieved by any order of the National Financial Reporting Authority issued underclause (c) of sub-section (4), may prefer an appeal before 4[the Appellate Tribunal in such manner and onpayment of such fee as may be prescribed].

5

(10) The National Financial Reporting Authority shall meet at such times and places and shallobserve such rules of procedure in regard to the transaction of business at its meetings in such manner asmay be prescribed.

(11) The Central Government may appoint a secretary and such other employees as it may considernecessary for the efficient performance of functions by the National Financial Reporting Authority underthis Act and the terms and conditions of service of the secretary and employees shall be such as may beprescribed.

(12) The head office of the National Financial Reporting Authority shall be at New Delhi and theNational Financial Reporting Authority may, meet at such other places in India as it deems fit.

(13) The National Financial Reporting Authority shall cause to be maintained such books of accountand other books in relation to its accounts in such form and in such manner as the Central Governmentmay, in consultation with the Comptroller and Auditor-General of India prescribe.

(14) The accounts of the National Financial Reporting Authority shall be audited by the Comptrollerand Auditor-General of India at such intervals as may be specified by him and such accounts as certifiedby the Comptroller and Auditor-General of India together with the audit report thereon shall be forwardedannually to the Central Government by the National Financial Reporting Authority.

(15) The National Financial Reporting Authority shall prepare in such form and at such time for eachfinancial year as may be prescribed its annual report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government and the Central Government shallcause the annual report and the audit report given by the Comptroller and Auditor-General of India to belaid before each House of Parliament.

1. Ins. by Act 22 of 2019, s. 20 (w.e.f. 15-8-2019).

2. Subs. by Act 1 of 2018, s. 35, for "ten lakh rupees" (w.e.f. 9-2-2018).

3. Subs. by Act 22 of 2019, s. 20, for sub-clause (b) (w.e.f. 15-8-2019).

4. Subs. by s. 35, ibid., for "the Appellate Authority constituted under sub-section (6) in such manner as may be prescribed"(w.e.f. 9-2-2018).

5. Sub-sections (6), (7), (8) and (9) omitted by s. 35, ibid. (w.e.f. 9-2-2018).

The Central Government mayprescribe the standards of accounting or any addendum thereto, as recommended by the Institute ofChartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949(38 of 1949), in consultation with and after examination of the recommendations made by the NationalFinancial Reporting Authority:

1[Provided that until the National Financial Reporting Authority is constituted under section 132 ofthe Companies Act, 2013 (18 of 2013), the Central Government may prescribe the standards ofaccounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India,constituted under section 3 of the Chartered Accountants Act, 1949 (38 of 1949), in consultation with andafter examination of the recommendations made by National Advisory Committee on AccountingStandards constituted under section 210A of the Companies Act, 1956 (1 of 1956).]

1. Ins. by notification No. S.O. 1227(E), dated 29th March, 2016 (w.e.f 1-4-2015).

1[(1) The financial statement, includingconsolidated financial statement, if any, shall be approved by the Board of Directors before they aresigned on behalf of the Board by the chairperson of the company where he is authorised by the Board orby two directors out of which one shall be managing director, if any, and the Chief Executive Officer, the Chief Financial Officer and the company secretary of the company, wherever they are appointed, or in thecase of One Person Company, only by one director, for submission to the auditor for his report thereon.]

(2) The auditors report shall be attached to every financial statement.

(3) There shall be attached to statements laid before a company in general meeting, a report by its Board ofDirectors, which shall include--

2[(a) the web address, if any, where annual return referred to in sub-section (3) of section 92 has beenplaced;]

(b) number of meetings of the Board;

(c) Directors Responsibility Statement;

3[(ca) details in respect of frauds reported by auditors under sub-section (12) of section 143 other thanthose which are reportable to the Central Government;]

(d) a statement on declaration given by independent directors under sub-section (6) of section 149;

(e) in case of a company covered under sub-section (1) of section 178, companys policy on directorsappointment and remuneration including criteria for determining qualifications, positive attributes,independence of a director and other matters provided under sub-section (3) of section 178;

(f) explanations or comments by the Board on every qualification, reservation or adverse remark ordisclaimer made--

(i) by the auditor in his report; and

(ii) by the company secretary in practice in his secretarial audit report;

(g) particulars of loans, guarantees or investments under section 186;

(h) particulars of contracts or arrangements with related parties referred to in sub-section (1) of section188 in the prescribed form;

(i) the state of the companys affairs;

(j) the amounts, if any, which it proposes to carry to any reserves;

(k) the amount, if any, which it recommends should be paid by way of dividend;

(l) material changes and commitments, if any, affecting the financial position of the company whichhave occurred between the end of the financial year of the company to which the financial statementsrelate and the date of the report;

(m) the conservation of energy, technology absorption, foreign exchange earnings and outgo, in suchmanner as may be prescribed;

(n) a statement indicating development and implementation of a risk management policy for thecompany including identification therein of elements of risk, if any, which in the opinion of the Board maythreaten the existence of the company;

(o) the details about the policy developed and implemented by the company incorporate socialresponsibility initiatives taken during the year;

(p) in case of a listed company and every other public company having such paid-up share capital asmay be prescribed, a statement indicating the manner in which formal 4annual evaluation of theperformance of the Board, its Committees and of individual directors has been made;

(q) such other matters as may be prescribed:

5[Provided that where disclosures referred to in this sub-section have been included in the financialstatements, such disclosures shall be referred to instead of being repeated in the Board's report:

Provided further that where the policy referred to in clause (e) or clause (o) is made available oncompany's website, if any, it shall be sufficient compliance of the requirements under such clauses if thesalient features of the policy and any change therein are specified in brief in the Board's report and theweb-address is indicated therein at which the complete policy is available.]

6[(3A) The Central Government may prescribe an abridged Board's report, for the purpose of compliancewith this section by One Person Company or small company.]

(4) The report of the Board of Directors to be attached to the financial statement under this section shall, incase of a One Person Company, mean a report containing explanations or comments by the Board on everyqualification, reservation or adverse remark or disclaimer made by the auditor in his report.

(5) The Directors Responsibility Statement referred to in clause (c) of sub-section (3) shall statethat--

(a) in the preparation of the annual accounts, the applicable accounting standards had beenfollowed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the company at the end of the financial year and of the profit and loss of the company forthat period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of this Act for safeguarding the assets of the company andfor preventing and detecting fraud another irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors, in the case of a listed company, had laid down internal financial controls to befollowed by the company and that such internal financial controls are adequate and were operatingeffectively.

Explanation.-- For the purposes of this clause, the term internal financial controls means thepolicies and procedures adopted by the company for ensuring the orderly and efficient conduct of itsbusiness, including adherence to companys policies, the safeguarding of its assets, the preventionand detection of frauds and errors, the accuracy and completeness of the accounting records, and thetimely preparation of reliable financial information;

(f) the directors had devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

(6) The Boards report and any annexures thereto under sub-section (3) shall be signed by itschairperson of the company if he is authorised by the Board and where he is not so authorised, shall besigned by at least two directors, one of whom shall be a managing director, or by the director where thereis one director.

(7) A signed copy of every financial statement, including consolidated financial statement, if any,shall be issued, circulated or published along with a copy each of--

(a) any notes annexed to or forming part of such financial statement;

(b) the auditors report; and

(c) the Boards report referred to in sub-section (3).

(8) If a company contravenes the provisions of this section, the company shall be punishable with finewhich shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees andevery officer of the company who is in default shall be punishable with imprisonment for a term whichmay extend to three years or with fine which shall not be less than fifty thousand rupees but which mayextend to five lakh rupees, or with both.

1. Subs. by Act 1 of 2018, s. 36 (w.e.f. 31-7-2018).

2. Subs by Act 1 of 2018, s. 36, for clause (a) (w.e.f. 31-7-2018).

3. Ins. by Act 21 of 2015, s. 12 (w.e.f. 29-5-2015).

4. Subs. by Act 1 of 2018, s. 36 for "annual evaluation has been made by the Board of its own performance and that of itscommittees and individual directors" (w.e.f. 31-7-2018).

5. The provisos ins. by s. 36, ibid., (w.e.f. 31-7-2018).

6. Sub-section (3A) ins. by s. 36, ibid., (w.e.f. 31-7-2018).

(1) Every company having net worth of rupees five hundredcrore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore ormore during 1[the immediately preceding financial year] shall constitute a Corporate Social ResponsibilityCommittee of the Board consisting of three or more directors, out of which at least one director shall bean independent director:

2[Provided that where a company is not required to appoint an independent director under sub-section(4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.]

(2) The Board's report under sub-section (3) of section 134 shall disclose the composition of theCorporate Social Responsibility Committee.

(3) The Corporate Social Responsibility Committee shall,--.

(a) formulate and recommend to the Board, a Corporate Social Responsibility Policy which shallindicate the activities to be undertaken by the company 3[in areas or subject, specified in ScheduleVII];

(b) recommend the amount of expenditure to be incurred on the activities referred to in clause (a);and

(c) monitor the Corporate Social Responsibility Policy of the company from time to time..

(4) The Board of every company referred to in sub-section (1) shall,.--

(a) after taking into account the recommendations made by the Corporate Social ResponsibilityCommittee, approve the Corporate Social Responsibility Policy for the company and disclosecontents of such Policy in its report and also place it on the company's website, if any, in such manneras may be prescribed; and.

(b) ensure that the activities as are included in Corporate Social Responsibility Policy of thecompany are undertaken by the company.

(5) The Board of every company referred to in sub-section (1), shall ensure that the company spends,in every financial year, at least two per cent. of the average net profits of the company made during thethree immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy:

Provided that the company shall give preference to the local area and areas around it where itoperates, for spending the amount earmarked for Corporate Social Responsibility activities:

Provided further that if the company fails to spend such amount, the Board shall, in its report madeunder clause (o) of sub-section (3) of section 134, specify the reasons for not spending the amount..

4[Explanation.--For the purposes of this section average "net profit" shall be calculated in accordancewith the provisions of section 198.]

1. Subs. by Act 1 of 2018, s. 37 for "any financial year" (w.e.f. 19-9-2018).

2. The proviso ins. by s. 37, ibid., (w.e.f. 19-9-2018).

3. Subs. by s. 37, ibid., for "as specified in Schedule VII" (w.e.f. 19-9-2018).

4. Subs. by Act 1 of 2018, s. 37, for the Explanation (w.e.f 19-9-2018).

(1) 1 a copy of the financialstatements, including consolidated financial statements, if any, auditors report and every other documentrequired by law to be annexed or attached to the financial statements, which are to be laid before acompany in its general meeting, shall be sent to every member of the company, to every trustee for thedebenture-holder of any debentures issued by the company, and to all persons other than such member ortrustee, being the person so entitled, not less than twenty-one days before the date of the meeting:

2[Provided that if the copies of the documents are sent less than twenty-one days before the date of themeeting, they shall, notwithstanding that fact, be deemed to have been duly sent if it is so agreed bymembers--

(a) holding, if the company has a share capital, majority in number entitled to vote and whorepresent not less than ninety-five per cent. of such part of the paid-up share capital of the company asgives a right to vote at the meeting; or

(b) having, if the company has no share capital, not less than ninety-five per cent. of the total votingpower exercisable at the meeting:

Provided further that] in the case of a listed company, the provisions of this sub-section shall bedeemed to be complied with, if the copies of the documents are made available for inspection at itsregistered office during working hours for a period of twenty-one days before the date of the meeting anda statement containing the salient features of such documents in the prescribed form or copies of thedocuments, as the company may deem fit, is sent to every member of the company and to every trusteefor the holders of any debentures issued by the company not less than twenty-one days before the date ofthe meeting unless the shareholders ask for full financial statements:

3[Provided also] that the Central Government may prescribe the manner of circulation of financialstatements of companies having such net worth and turnover as may be prescribed:

Provided also that a listed company shall also place its financial statements including consolidatedfinancial statements, if any, and all other documents required to be attachedthereto, on its website, which is maintained by or on behalf of the company:

4[Provided also that every listed company having a subsidiary or subsidiaries shall place separateaudited accounts in respect of each of subsidiary on its website, if any:

Provided also that a listed company which has a subsidiary incorporated outside India (herein referredto as foreign subsidiary)--

(a) where such foreign subsidiary is statutorily required to prepare consolidated financial statementunder any law of the country of its incorporation, the requirement of this proviso shall be met ifconsolidated financial statement of such foreign subsidiary is placed on the website of the listedcompany;

(b) where such foreign subsidiary is not required to get its financial statement audited under any lawof the country of its incorporation and which does not get such financial statement audited, the holdingIndian listed company may place such unaudited financial statement on its website and where suchfinancial statement is in a language other than English, a translated copy of the financial statement inEnglish shall also be placed on the website.]

(2) A company shall allow every member or trustee of the holder of any debentures issued by thecompany to inspect the documents stated under sub-section (1) at its registered office during businesshours.

5[Provided that every company having a subsidiary or subsidiaries shall provide a copy of separateaudited or unaudited financial statements, as the case may be, as prepared in respect of each of itssubsidiary to any member of the company who asks for it.]

(3) If any default is made in complying with the provisions of this section, the company shall be liableto a penalty of twenty-five thousand rupees and every officer of the company who is in default shall beliable to a penalty of five thousand rupees.

1. The words and figures "Without prejudice to the provisions of section 101" omitted by s. 38, ibid., (w.e.f. 9-2-2018).

2. Subs. by s. 38, ibid., for "Provided that" (w.e.f. 9-2-2018).

3. Subs. by s. 38, ibid., for "Provided further" (w.e.f. 9-2-2018).

4. Subs. by Act 1 of 2018, s. 38, for the Fourth proviso (w.e.f. 9-2-2018).

5. The proviso ins. by s. 38, ibid. (w.e.f. 9-2-2018).

(1) A copy of the financialstatements, including consolidated financial statement, if any, along with all the documents which arerequired to be or attached to such financial statements under this Act, duly adopted at the annual generalmeeting of the company, shall be filed with the Registrar within thirty days of the date of annual generalmeeting in such manner, with such fees or additional fees as may be prescribed 1:

Provided that where the financial statements under sub-section (1) are not adopted at annual generalmeeting or adjourned annual general meeting, such unadopted financial statements along with therequired documents under sub-section (1) shall be filed with the Registrar within thirty days of the date ofannual general meeting and the Registrar shall take them in his records as provisional till the financialstatements are filed with him after their adoption in the adjourned annual general meeting for thatpurpose:

Provided further that financial statements adopted in the adjourned annual general meeting shall befiled with the Registrar within thirty days of the date of such adjourned annual general meeting with suchfees or such additional fees as may be prescribed 1:

Provided also that a One Person Company shall file a copy of the financial statements duly adoptedby its member, along with all the documents which are required to be attached to such financialstatements, within one hundred eighty days from the closure of the financial year:

Provided also that a company shall, along with its financial statements to be filed with the Registrar,attach the accounts of its subsidiary or subsidiaries which have been incorporated outside India and whichhave not established their place of business in India.

2[Provided also that in the case of a subsidiary which has been incorporated outside India (hereinreferred to as "foreign subsidiary"), which is not required to get its financial statement audited under anylaw of the country of its incorporation and which does not get such financial statement audited, therequirements of the fourth proviso shall be met if the holding Indian company files such unauditedfinancial statement along with a declaration to this effect and where such financial statement is in alanguage other than English, along with a translated copy of the financial statement in English.]

(2) Where the annual general meeting of a company for any year has not been held, the financialstatements along with the documents required to be attached under sub-section (1), duly signed along withthe statement of facts and reasons for not holding the annual general meeting shall be filed with theRegistrar within thirty days of the last date before which the annual general meeting should have beenheld and in such manner, with such fees or additional fees as may be prescribed 3.

(3) If a company fails to file the copy of the financial statements under sub-section (1) orsub-section (2), as the case may be, before the expiry of the period specified 4[therein] the company shallbe 5[liable to a penalty] of one thousand rupees for every day during which the failure continues butwhich shall not be more than ten lakh rupees, and the managing director and the Chief Financial Officerof the company, if any, and, in the absence of the managing director and the Chief Financial Officer, anyother director who is charged by the Board with the responsibility of complying with the provisions ofthis section, and, in the absence of any such director, all the directors of the company, shall be 6[shall beliable to a penalty of one lakh rupees and in case of continuing failure, with a further penalty of onehundred rupees for each day after the first during which such failure continues, subject to a maximum offive lakh rupees.]

1. The words and figures "within the time specified under section 403" omitted by s. 39, ibid. (w.e.f. 7-5-2018).

2. The proviso ins. by s. 39, ibid. (w.e.f. 7-5-2018).

3. The words and figures "within the time specified, under section 403" omitted by Act 1 of 2018, s. 39 (w.e.f. 7-5-2018).

4. Subs. by s. 39, ibid., for "in section 403" (w.e.f. 7-5-2018

5. Subs. by Act 22 of 2019, s. 22, for "punishable with fine" (w.e.f. 2-11-2018).

6. Subs. by s. 22, ibid., for "punishable with imprisonment for a term which may extend to six months or with fine which shallnot be less than one lakh rupees but which may extend to five lakh rupees, or with both" (w.e.f. 2-11-2018).

(1) Such class or classes of companies as may be prescribed shall be requiredto appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or suchother professional as may be decided by the Board to conduct internal audit of the functions and activitiesof the company.

(2) The Central Government may, by rules, prescribe the manner and the intervals in which theinternal audit shall be conducted and reported to the Board.

(1) Subject to the provisions of this Chapter, every company shall,at the first annual general meeting, appoint an individual or a firm as an auditor who shall hold officefrom the conclusion of that meeting till the conclusion of its sixth annual general meeting and thereaftertill the conclusion of every sixth meeting and the manner and procedure of selection of auditors by themembers of the company at such meeting shall be such as may be prescribed:

1

Provided further that before such appointment is made, the written consent of the auditor to suchappointment, and a certificate from him or it that the appointment, if made, shall be in accordance withthe conditions as may be prescribed, shall be obtained from the auditor:

Provided also that the certificate shall also indicate whether the auditor satisfies the criteria providedin section 141:

Provided also that the company shall inform the auditor concerned of his or its appointment, and alsofile a notice of such appointment with the Registrar within fifteen days of the meeting in which theauditor is appointed.

Explanation.-- For the purposes of this Chapter, "appointment" includes re-appointment.

(2) No listed company or a company belonging to such class or classes of companies as may beprescribed, shall appoint or re-appoint--

(a) an individual as auditor for more than one term of five consecutive years; and

(b) an audit firm as auditor for more than two terms of five consecutive years:

Provided that--

(i) an individual auditor who has completed his term under clause (a) shall not be eligible forre-appointment as auditor in the same company for five years from the completion of his term;

(ii) an audit firm which has completed its term under clause (b), shall not be eligible for reappointmentas auditor in the same company for five years from the completion of such term:

Provided further that as on the date of appointment no audit firm having a common partner or partnersto the other audit firm, whose tenure has expired in a company immediately preceding the financial year,shall be appointed as auditor of the same company for a period of five years:

2[Provided also that every company, existing on or before the commencement of this Act which isrequired to comply with provisions of this sub-section, shall comply with the requirements of this subsectionwithin three years from the date of commencement of this Act:]

Provided also that, nothing contained in this sub-section shall prejudice the right of the company toremove an auditor or the right of the auditor to resign from such office of the company.

(3) Subject to the provisions of this Act, members of a company may resolve to provide that--

(a) in the audit firm appointed by it, the auditing partner and his team shall be rotated at suchintervals as may be resolved by members; or

(b) the audit shall be conducted by more than one auditor.

(4) The Central Government may, by rules, prescribe the manner in which the companies shall rotatetheir auditors in pursuance of sub-section (2).

Explanation.-- For the purposes of this Chapter, the word "firm" shall include a limited liabilitypartnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009).

(5) Notwithstanding anything contained in sub-section (1), in the case of a Government company orany other company owned or controlled, directly or indirectly, by the Central Government, or by anyState Government or Governments, or partly by the Central Government and partly by one or more StateGovernments, the Comptroller and Auditor-General of India shall, in respect of a financial year, appointan auditor duly qualified to be appointed as an auditor of companies under this Act, within a period of onehundred and eighty days from the commencement of the financial year, who shall hold office till theconclusion of the annual general meeting.

(6) Notwithstanding anything contained in sub-section (1), the first auditor of a company, other than aGovernment company, shall be appointed by the Board of Directors within thirty days from the date ofregistration of the company and in the case of failure of the Board to appoint such auditor, it shall informthe members of the company, who shall within ninety days at an extraordinary general meeting appointsuch auditor and such auditor shall hold office till the conclusion of the first annual general meeting.

(7) Notwithstanding anything contained in sub-section (1) or sub-section (5), in the case of aGovernment company or any other company owned or controlled, directly or indirectly, by the CentralGovernment, or by any State Government, or Governments, or partly by the Central Government andpartly by one or more State Governments, the first auditor shall be appointed by the Comptroller andAuditor-General of India within sixty days from the date of registration of the company and in case theComptroller and Auditor-General of India does not appoint such auditor within the said period, the Boardof Directors of the company shall appoint such auditor within the next thirty days; and in the case offailure of the Board to appoint such auditor within the next thirty days, it shall inform the members of thecompany who shall appoint such auditor within the sixty days at an extraordinary general meeting, whoshall hold office till the conclusion of the first annual general meeting.

(8) Any casual vacancy in the office of an auditor shall--

(i) in the case of a company other than a company whose accounts are subject to audit by anauditor appointed by the Comptroller and Auditor-General of India, be filled by the Board ofDirectors within thirty days, but if such casual vacancy is as a result of the resignation of an auditor,such appointment shall also be approved by the company at a general meeting convened within threemonths of the recommendation of the Board and he shall hold the office till the conclusion of the nextannual general meeting;

(ii) in the case of a company whose accounts are subject to audit by an auditor appointed by theComptroller and Auditor-General of India, be filled by the Comptroller and Auditor-General of Indiawithin thirty days:

Provided that in case the Comptroller and Auditor-General of India does not fill the vacancywithin the said period, the Board of Directors shall fill the vacancy within next thirty days.

(9) Subject to the provisions of sub-section (1) and the rules made thereunder, a retiring auditor maybe re-appointed at an annual general meeting, if--

(a) he is not disqualified for re-appointment;

(b) he has not given the company a notice in writing of his unwillingness to be re-appointed; and

(c) a special resolution has not been passed at that meeting appointing some other auditor orproviding expressly that he shall not be re-appointed.

(10) Where at any annual general meeting, no auditor is appointed or re-appointed, the existingauditor shall continue to be the auditor of the company.

(11) Where a company is required to constitute an Audit Committee under section 177, allappointments, including the filling of a casual vacancy of an auditor under this section shall be made aftertaking into account the recommendations of such committee.

1. The first proviso omitted by s. 40, ibid. (w.e.f. 7-5-2018).

2. Subs. by notification No. S.O. 2264(E), dated 30th June, 2016, for the proviso (w.e.f.1-4-2014

(1) The auditor appointedunder section 139 may be removed from his office before the expiry of his term only by a specialresolution of the company, after obtaining the previous approval of the Central Government in that behalfin the prescribed manner:

Provided that before taking any action under this sub-section, the auditor concerned shall be given areasonable opportunity of being heard.

(2) The auditor who has resigned from the company shall file within a period of thirty days from thedate of resignation, a statement in the prescribed form with the company and the Registrar, and in case ofcompanies referred to in sub-section (5) of section 139, the auditor shall also file such statement with theComptroller and Auditor-General of India, indicating the reasons and other facts as may be relevant withregard to his resignation.

1[(3) If the auditor does not comply with the provisions of sub-section (2), he or it shall be liable to apenalty of fifty thousand rupees or an amount equal to the remuneration of the auditor, whichever is less,and in case of continuing failure, with a further penalty of five hundred rupees for each day after the firstduring which such failure continues, subject to a maximum of five lakh rupees.]

(4) (i) Special notice shall be required for a resolution at an annual general meeting appointing asauditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be reappointed,except where the retiring auditor has completed a consecutive tenure of five years or, as thecase may be, ten years, as provided under sub-section (2) of section 139.

(ii) On receipt of notice of such a resolution, the company shall forthwith send a copy thereof to theretiring auditor.

(iii) Where notice is given of such a resolution and the retiring auditor makes with respect theretorepresentation in writing to the company (not exceeding a reasonable length) and requests its notificationto members of the company, the company shall, unless the representation is received by it too late for it todo so,--

(a) in any notice of the resolution given to members of the company, state the fact of therepresentation having been made; and

(b) send a copy of the representation to every member of the company to whom notice of themeeting is sent, whether before or after the receipt of the representation by the company, and if a copy of the representation is not sent as aforesaid because it was received too late or because ofthe companys default, the auditor may (without prejudice to his right to be heard orally) require that therepresentation shall be read out at the meeting:

Provided that if a copy of representation is not sent as aforesaid, a copy thereof shall be filed with theRegistrar:

Provided further that if the Tribunal is satisfied on an application either of the company or of anyother aggrieved person that the rights conferred by this sub-section are being abused by the auditor, then,the copy of the representation may not be sent and the representation need not be read out at the meeting.

(5) Without prejudice to any action under the provisions of this Act or any other law for the timebeing in force, the Tribunal either suo motu or on an application made to it by the Central Government orby any person concerned, if it is satisfied that the auditor of a company has, whether directly or indirectly,acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, the company or itsdirectors or officers, it may, by order, direct the company to change its auditors:

Provided that if the application is made by the Central Government and the Tribunal is satisfied thatany change of the auditor is required, it shall within fifteen days of receipt of such application, make anorder that he shall not function as an auditor and the Central Government may appoint another auditor inhis place:

Provided further that an auditor, whether individual or firm, against whom final order has been passedby the Tribunal under this section shall not be eligible to be appointed as an auditor of any company for aperiod of five years from the date of passing of the order and the auditor shall also be liable for actionunder section 447.

Explanation I.-- It is hereby clarified that the case of a firm, the liability shall be of the firm and thatof every partner or partners who acted in a fraudulent manner or abetted or colluded in any fraud by, or inrelation to, the company or its director or officers.

Explanation II.-- For the purposes of this Chapter the word "auditor" includes a firm of auditors.

1. Subs. by Act 22 of 2019, s. 23, for sub-section (3) (w.e.f. 2-11-2018).

(1) A person shall be eligiblefor appointment as an auditor of a company only if he is a chartered accountant:

Provided that a firm whereof majority of partners practising in India are qualified for appointment asaforesaid may be appointed by its firm name to be auditor of a company.

(2) Where a firm including a limited liability partnership is appointed as an auditor of a company,only the partners who are chartered accountants shall be authorised to act and sign on behalf of the firm.

(3) The following persons shall not be eligible for appointment as an auditor of a company,namely:--

(a) a body corporate other than a limited liability partnership registered under the LimitedLiability Partnership Act, 2008 (6 of 2009);

(b) an officer or employee of the company;

(c) a person who is a partner, or who is in the employment, of an officer or employee of thecompany;

(d) a person who, or his relative or partner--

(i) is holding any security of or interest in the company or its subsidiary, or of its holding orassociate company or a subsidiary of such holding company:

Provided that the relative may hold security or interest in the company of face value notexceeding one thousand rupees or such sum as may be prescribed;

(ii) is indebted to the company, or its subsidiary, or its holding or associate company or asubsidiary of such holding company, in excess of such amount as may be prescribed; or

(iii) has given a guarantee or provided any security in connection with the indebtedness ofany third person to the company, or its subsidiary, or its holding or associate company or asubsidiary of such holding company, for such amount as may be prescribed;

(e) a person or a firm who, whether directly or indirectly, has business relationship with thecompany, or its subsidiary, or its holding or associate company or subsidiary of such holdingcompany or associate company of such nature as may be prescribed;

(f) a person whose relative is a director or is in the employment of the company as a director orkey managerial personnel;

(g) a person who is in full time employment elsewhere or a person or a partner of a firm holdingappointment as its auditor, if such persons or partner is at the date of such appointment orreappointment holding appointment as auditor of more than twenty companies;

(h) a person who has been convicted by a court of an offence involving fraud and a period of tenyears has not elapsed from the date of such conviction;

1[(i) a person who, directly or indirectly, renders any service referred to in section 144 to thecompany or its holding company or its subsidiary company.

Explanation.-- For the purposes of this clause, the term "directly or indirectly" shall have themeaning assigned to it in the Explanation to section 144.]

(4) Where a person appointed as an auditor of a company incurs any of the disqualificationsmentioned in sub-section (3) after his appointment, he shall vacate his office as such auditor and suchvacation shall be deemed to be a casual vacancy in the office of the auditor.

1. Subs. by Act 1 of 2018, s. 42, for clause (i) (w.e.f. 9-2-2018).

(1) The remuneration of the auditor of a company shall be fixedin its general meeting or in such manner as may be determined therein:

Provided that the Board may fix remuneration of the first auditor appointed by it.

(2) The remuneration under sub-section (1) shall, in addition to the fee payable to an auditor, includethe expenses, if any, incurred by the auditor in connection with the audit of the company and any facilityextended to him but does not include any remuneration paid to him for any other service rendered by himat the request of the company.

(1) Every auditor of a companyshall have a right of access at all times to the books of account and vouchers of the company, whetherkept at the registered office of the company or at any other place and shall be entitled to require from theofficers of the company such information and explanation as he may consider necessary for theperformance of his duties as auditor and amongst other matters inquire into the following matters,namely:--

(a) whether loans and advances made by the company on the basis of security have been properlysecured and whether the terms on which they have been made are prejudicial to the interests of thecompany or its members;

(b) whether transactions of the company which are represented merely by book entries areprejudicial to the interests of the company;

(c) where the company not being an investment company or a banking company, whether somuch of the assets of the company as consist of shares, debentures and other securities have been soldat a price less than that at which they were purchased by the company;

(d) whether loans and advances made by the company have been shown as deposits;

(e) whether personal expenses have been charged to revenue account;

(f) where it is stated in the books and documents of the company that any shares have beenallotted for cash, whether cash has actually been received in respect of such allotment, and if no cashhas actually been so received, whether the position as stated in the account books and the balancesheet is correct, regular and not misleading:

Provided that the auditor of a company which is a holding company shall also have the right of accessto the records of all 1[its subsidiaries and associate companies] in so far as it relates to the consolidation ofits financial statements with that of 1[its subsidiaries and associate companies.]

(2) The auditor shall make a report to the members of the company on the accounts examined by himand on every financial statements which are required by or under this Act to be laid before the companyin general meeting and the report shall after taking into account the provisions of this Act, the accountingand auditing standards and matters which are required to be included in the audit report under theprovisions of this Act or any rules made thereunder or under any order made under sub-section (11) andto the best of his information and knowledge, the said accounts, financial statements give a true and fairview of the state of the company's affairs as at the end of its financial year and profit or loss and cashflow for the year and such other matters as may be prescribed.

(3) The auditor's report shall also state--

(a) whether he has sought and obtained all the information and explanations which to the best ofhis knowledge and belief were necessary for the purpose of his audit and if not, the details thereof andthe effect of such information on the financial statements;

(b) whether, in his opinion, proper books of account as required by law have been kept by thecompany so far as appears from his examination of those books and proper returns adequate for thepurposes of his audit have been received from branches not visited by him;

(c) whether the report on the accounts of any branch office of the company audited under subsection

(8) by a person other than the company's auditor has been sent to him under the proviso tothat sub-section and the manner in which he has dealt with it in preparing his report;

(d) whether the company's balance sheet and profit and loss account dealt with in the report are inagreement with the books of account and returns;

(e) whether, in his opinion, the financial statements comply with the accounting standards;

(f) the observations or comments of the auditors on financial transactions or matters which haveany adverse effect on the functioning of the company;

(g) whether any director is disqualified from being appointed as a director under sub-section (2)of section 164;

(h) any qualification, reservation or adverse remark relating to the maintenance of accounts andother matters connected therewith;

(i) whether the company has adequate 2[internal financial controls with reference to financialstatements] in place and the operating effectiveness of such controls;

(j) such other matters as may be prescribed.

(4) Where any of the matters required to be included in the audit report under this section is answeredin the negative or with a qualification, the report shall state the reasons therefor.

(5) 3[In the case of a Government company or any other company owned or controlled, directly orindirectly, by the Central Government, or by any State Government or Governments, or partly by theCentral Government and partly by one or more State Governments, the Comptroller and Auditor Generalof India shall appoint the auditor under sub-section (5) or sub-section (7) of Section 139 and direct suchauditor the manner in which the accounts of the company are required to be audited and] thereupon theauditor so appointed shall submit a copy of the audit report to the Comptroller and Auditor-General ofIndia which, among other things, include the directions, if any, issued by the Comptroller andAuditor-General of India, the action taken thereon and its impact on the accounts and financial statementof the company.

(6) The Comptroller and Auditor-General of India shall within sixty days from the date of receipt ofthe audit report under sub-section (5) have a right to,--

(a) conduct a supplementary audit of the financial statement of the company by such person orpersons as he may authorise in this behalf; and for the purposes of such audit, require information oradditional information to be furnished to any person or persons, so authorised, on such matters, bysuch person or persons, and in such form, as the Comptroller and Auditor-General of India maydirect; and

(b) comment upon or supplement such audit report:

Provided that any comments given by the Comptroller and Auditor-General of India upon, orsupplement to, the audit report shall be sent by the company to every person entitled to copies ofaudited financial statements under sub section (1) of section 136 and also be placed before the annualgeneral meeting of the company at the same time and in the same manner as the audit report.

(7) Without prejudice to the provisions of this Chapter, the Comptroller and Auditor-General of Indiamay, in case of any company covered under sub-section (5) or sub-section (7) of section 139, if heconsiders necessary, by an order, cause test audit to be conducted of the accounts of such company andthe provisions of section 19A of the Comptroller and Auditor-General's (Duties, Powers and Conditionsof Service) Act, 1971 (56 of 1971), shall apply to the report of such test audit.

(8) Where a company has a branch office, the accounts of that office shall be audited either by theauditor appointed for the company (herein referred to as the company's auditor) under this Act or by anyother person qualified for appointment as an auditor of the company under this Act and appointed as suchunder section 139, or where the branch office is situated in a country outside India, the accounts of thebranch office shall be audited either by the company's auditor or by an accountant or by any other personduly qualified to act as an auditor of the accounts of the branch office in accordance with the laws of thatcountry and the duties and powers of the company's auditor with reference to the audit of the branch andthe branch auditor, if any, shall be such as may be prescribed:

Provided that the branch auditor shall prepare a report on the accounts of the branch examined by himand send it to the auditor of the company who shall deal with it in his report in such manner as heconsiders necessary.

(9) Every auditor shall comply with the auditing standards.

(10) The Central Government may prescribe the standards of auditing or any addendum thereto, asrecommended by the Institute of Chartered Accountants of India, constituted under section 3 of theChartered Accountants Act, 1949 (38 of 1949), in consultation with and after examination of therecommendations made by the National Financial Reporting Authority:

Provided that until any auditing standards are notified, any standard or standards of auditing specifiedby the Institute of Chartered Accountants of India shall be deemed to be the auditing standards.

(11) The Central Government may, in consultation with the National Financial Reporting Authority,by general or special order, direct, in respect of such class or description of companies, as may bespecified in the order, that the auditor's report shall also include a statement on such matters as may bespecified therein.

4[Provided that until the National Financial Reporting Authority is constituted under section 132, theCentral Government may hold consultation required under this sub-section with the Committee chairedby an officer of the rank of Joint Secretary or equivalent in the Ministry of Corporate Affairs and theCommittee shall have the representatives from the Institute of Chartered Accountants of India andIndustry Chambers and also special invitees from the National Advisory Committee on AccountingStandards and the office of the Comptroller and Auditor-General.]

5[(12) Notwithstanding anything contained in this section, if an auditor of a company, in the course ofthe performance of his duties as auditor, has reason to believe that an offence involving fraud is being orhas been committed against the company by officers or employees of the company, he shall immediatelyreport the matter to the Central Government within such time and in such manner as may be prescribed.

Provided that in case of a fraud involving lesser than the specified amount, the auditor shall report thematter to the audit committee constituted under section 177 or to the Board in other cases within suchtime and in such manner as may be prescribed:

Provided further that the companies, whose auditors have reported frauds under this sub-section to theaudit committee or the Board but not reported to the Central Government, shall disclose the details aboutsuch frauds in the Board's report in such manner as may be prescribed.]

(13) No duty to which an auditor of a company may be subject to shall be regarded as having beencontravened by reason of his reporting the matter referred to in sub-section (12) if it is done in good faith.

(14) The provisions of this section shall mutatis mutandis apply to--

(a) the 6[cost accountant] conducting cost audit under section 148; or

(b) the company secretary in practice conducting secretarial audit under section 204.

(15) If any auditor, cost accountant or company secretary in practice do not comply with theprovisions of sub-section (12), he shall be punishable with fine which shall not be less than one lakhrupees but which may extend to twenty-five lakh rupees.

1. Subs. by Act 1 of 2018, s. 43, for "its subsidiaries" (w.e.f. 9-2-2018).

2. Subs. by s. 43, ibid., for "internal financial controls system" (w.e.f. 9-2-2018).

3. Subs. by notification No. S.O. 2226(E), dated 4th September, 2014 for certain words (w.e.f. 4-9-2014).

4. Ins. by notification No. S.O. 1226(E), dated 29th March, 2016 (w.e.f. 10-4-2015).

5. Subs. by Act 21 of 2015, s. 13, for sub-section (12) (w.e.f. 14-12-2015).

6. Subs. by Act 1 of 2018, s. 43, for "cost accountant in practice" (w.e.f. 9-2-2018)

An auditor appointed under this Act shall provide tothe company only such other services as are approved by the Board of Directors or the audit committee,as the case may be, but which shall not include any of the following services (whether such services arerendered directly or indirectly to the company), or its holding company or subsidiary company, namely:--

(a) accounting and book keeping services;

(b) internal audit;

(c) design and implementation of any financial information system;

(d) actuarial services;

(e) investment advisory services;

(f) investment banking services;

(g) rendering of outsourced financial services;

(h) management services; and

(i) any other kind of services as may be prescribed:

Provided that an auditor or audit firm who or which has been performing any non-audit services on orbefore the commencement of this Act shall comply with the provisions of this section before the closureof the first financial year after the date of such commencement.

Explanation.-- For the purposes of this sub-section, the term "directly or indirectly" shall includerendering of services by the auditor,--

(i) in case of auditor being an individual, either himself or through his relative or any other personconnected or associated with such individual or through any other entity, whatsoever, in which suchindividual has significant influence or control, or whose name or trade mark or brand is used by suchindividual;

(ii) in case of auditor being a firm, either itself or through any of its partners or through its parent,subsidiary or associate entity or through any other entity, whatsoever, in which the firm or any partnerof the firm has significant influence or control, or whose name or trade mark or brand is used by thefirm or any of its partners.

The person appointed as an auditor of the company shallsign the auditor's report or sign or certify any other document of the company in accordance with theprovisions of sub-section (2) of section 141, and the qualifications, observations or comments on financialtransactions or matters, which have any adverse effect on the functioning of the company mentioned inthe auditors report shall be read before the company in general meeting and shall be open to inspectionby any member of the company.

All notices of, and other communications relating to,any general meeting shall be forwarded to the auditor of the company, and the auditor shall, unlessotherwise exempted by the company, attend either by himself or through his authorised representative,who shall also be qualified to be an auditor, any general meeting and shall have right to be heard at suchmeeting on any part of the business which concerns him as the auditor

(1) If any of the provisions of sections 139 to 146 (bothinclusive) is contravened, the company shall be punishable with fine which shall not be less than twentyfivethousand rupees but which may extend to five lakh rupees and every officer of the company who is indefault shall be punishable with imprisonment for a term which may extend to one year or with finewhich shall not be less than ten thousand rupees but which may extend to one lakh rupees, or with both.

(2) If an auditor of a company contravenes any of the provisions of section 139, section 143, section144 or section 145, the auditor shall be punishable with fine which shall not be less than twenty-fivethousand rupees but which may extend to five lakh rupees 1[or four times the remuneration of the auditor,whichever is less]:

Provided that if an auditor has contravened such provisions knowingly or willfully with the intentionto deceive the company or its shareholders or creditors or tax authorities, he shall be punishable withimprisonment for a term which may extend to one year 2[and with fine which shall not be less than fiftythousand rupees but which may extend to twenty-five lakh rupees or eight times the remuneration of theauditor, whichever is less].

(3) Where an auditor has been convicted under sub-section (2), he shall be liable to--

(i) refund the remuneration received by him to the company; and

(ii) pay for damages to the company, statutory bodies or authorities 3[or to members or creditorsof the company] for loss arising out of incorrect or misleading statements of particulars made in hisaudit report.

(4) The Central Government shall, by notification, specify any statutory body or authority or anofficer for ensuring prompt payment of damages to the company or the persons under clause (ii) of subsection(3) and such body, authority or officer shall after payment of damages to such company or personsfile a report with the Central Government in respect of making such damages in such manner as may bespecified in the said notification.

(5) Where, in case of audit of a company being conducted by an audit firm, it is proved that thepartner or partners of the audit firm has or have acted in a fraudulent manner or abetted or colluded in anyfraud by, or in relation to or by, the company or its directors or officers, the liability, whether civil orcriminal as provided in this Act or in any other law for the time being in force, for such act shall be of thepartner or partners concerned of the audit firm and of the firm jointly and severally.

4[Provided that in case of criminal liability of an audit firm, in respect of liability other than fine, theconcerned partner or partners, who acted in a fraudulent manner or abetted or, as the case may be,colluded in any fraud shall only be liable.]

1. Ins. by Act 1 of 2018, s. 44 (w.e.f. 9-2-2018).

2. Subs. by s. 44, ibid., for "and with fine which shall not be less than one lakh rupees but which may extend to twenty-five lakhrupees" (w.e.f. 9-2-2018).

3. Subs. by s. 44, ibid., for "or to any other persons" (w.e.f. 9-2-2018).

4. The proviso ins. by s. 44, ibid. (w.e.f. 9-2-2018).

(1) Notwithstanding anything contained in this Chapter, the Central Government may, by order, in respect ofsuch class of companies engaged in the production of such goods or providing such services as may beprescribed, direct that particulars relating to the utilisation of material or labour or to other items of costas may be prescribed shall also be included in the books of account kept by that class of companies:

Provided that the Central Government shall, before issuing such order in respect of any class ofcompanies regulated under a special Act, consult the regulatory body constituted or established undersuch special Act.

(2) If the Central Government is of the opinion, that it is necessary to do so, it may, by order, directthat the audit of cost records of class of companies, which are covered under sub-section (1) and whichhave a net worth of such amount as may be prescribed or a turnover of such amount as may be prescribed,shall be conducted in the manner specified in the order.

(3) The audit under sub-section (2) shall be conducted by a 1[cost accountant] who shall be appointedby the Board on such remuneration as may be determined by the members in such manner as may beprescribed:

Provided that no person appointed under section 139 as an auditor of the company shall be appointedfor conducting the audit of cost records:

Provided further that the auditor conducting the cost audit shall comply with the cost auditingstandards.

Explanation.-- For the purposes of this sub-section, the expression cost auditing standards meansuch standards as are issued by the 2[Institute of Cost Accountants of India], constituted under the Costand Works Accountants Act, 1959 (23 of 1959), with the approval of the Central Government.

(4) An audit conducted under this section shall be in addition to the audit conducted under section143.

(5) The qualifications, disqualifications, rights, duties and obligations applicable to auditors under thisChapter shall, so far as may be applicable, apply to a cost auditor appointed under this section and it shallbe the duty of the company to give all assistance and facilities to the cost auditor appointed under thissection for auditing the cost records of the company:

Provided that the report on the audit of cost records shall be submitted by the 3[cost accountant] to theBoard of Directors of the company

(6) A company shall within thirty days from the date of receipt of a copy of the cost audit reportprepared in pursuance of a direction under sub-section (2) furnish the Central Government with suchreport along with full information and explanation on every reservation or qualification contained therein.

(7) If, after considering the cost audit report referred to under this section and the information andexplanation furnished by the company under sub-section (6), the Central Government is of the opinionthat any further information or explanation is necessary, it may call for such further information andexplanation and the company shall furnish the same within such time as may be specified by thatGovernment.

(8) If any default is made in complying with the provisions of this section,

(a) the company and every officer of the company who is in default shall be punishable in themanner as provided in sub-section (1) of section 147;

(b) the cost auditor of the company who is in default shall be punishable in the manner asprovided in sub-sections (2) to (4) of section 147.

1. Subs. by Act 1 of 2018, s. 45, for Cost Accountant in practice(w.e.f. 9-2-2018).

2. Subs. by s. 45, ibid., for Institute of Cost and Works Accountants of India (w.e.f. 9-2-2018).

3. Subs. by s. 45, ibid., for cost accountant in practice(w.e.f. 9-2-2018).

(1) Every company shall have a Board of Directorsconsisting of individuals as directors and shall have--

(a) a minimum number of three directors in the case of a public company, two directors in thecase of a private company, and one director in the case of a One Person Company; and

(b) a maximum of fifteen directors:

Provided that a company may appoint more than fifteen directors after passing a special resolution:

Provided further that such class or classes of companies as may be prescribed, shall have at least onewoman director.

(2) Every company existing on or before the date of commencement of this Act shall within one yearfrom such commencement comply with the requirements of the provisions of sub-section (1).

1[(3) Every company shall have at least one director who stays in India for a total period of not lessthan one hundred and eighty-two days during the financial year:

Provided that in case of a newly incorporated company the requirement under this sub-section shallapply proportionately at the end of the financial year in which it is incorporated];

(4) Every listed public company shall have at least one-third of the total number of directors asindependent directors and the Central Government may prescribe the minimum number of independentdirectors in case of any class or classes of public companies.

Explanation.-- For the purposes of this sub-section, any fraction contained in such one-third numbershall be rounded off as one.

(5) Every company existing on or before the date of commencement of this Act shall, within one yearfrom such commencement or from the date of notification of the rules in this regard as may be applicable,comply with the requirements of the provisions of sub-section (4).

(6) An independent director in relation to a company, means a director other than a managing director--

or a whole-time director or a nominee director,

(a) who, in the opinion of the Board, is a person of integrity and possesses relevant expertise andexperience;

(b) (i) who is or was not a promoter of the company or its holding, subsidiary or associatecompany;

(ii) who is not related to promoters or directors in the company, its holding, subsidiary orassociate company;

(c) who has or had no 2[pecuniary relationship, other than remuneration as such director or havingtransaction not exceeding ten per cent. of his total income or such amount as may be prescribed,] withthe company, its holding, subsidiary or associate company, or their promoters, or directors, during thetwo immediately preceding financial years or during the current financial year;

3[(d) none of whose relativesu2014

(i) is holding any security of or interest in the company, its holding, subsidiary or associatecompany during the two immediately preceding financial years or during the current financial year:

Provided that the relative may hold security or interest in the company of face value notexceeding fifty lakh rupees or two per cent. of the paid-up capital of the company, its holding,subsidiary or associate company or such higher sum as may be prescribed;

(ii) is indebted to the company, its holding, subsidiary or associate company or their promoters,or directors, in excess of such amount as may be prescribed during the two immediately precedingfinancial years or during the current financial year;

(iii) has given a guarantee or provided any security in connection with the indebtedness of anythird person to the company, its holding, subsidiary or associate company or their promoters, ordirectors of such holding company, for such amount as may be prescribed during the twoimmediately preceding financial years or during the current financial year; or

(iv) has any other pecuniary transaction or relationship with the company, or its subsidiary, orits holding or associate company amounting to two per cent. or more of its gross turnover or totalincome singly or in combination with the transactions referred to in sub-clause (i), (ii) or (iii);]

(e) who, neither himself nor any of his relatives

(i) holds or has held the position of a key managerial personnel or is or has been employee ofthe company or its holding, subsidiary or associate company in any of the three financial yearsimmediately preceding the financial year in which he is proposed to be appointed;

4[Provided that in case of a relative who is an employee, the restriction under this clause shallnot apply for his employment during preceding three financial years.]

(ii) is or has been an employee or proprietor or a partner, in any of the three financial yearsimmediately preceding the financial year in which he is proposed to be appointed, ofu2014

(A) a firm of auditors or company secretaries in practice or cost auditors of the companyor its holding, subsidiary or associate company; or

(B) any legal or a consulting firm that has or had any transaction with the company, itsholding, subsidiary or associate company amounting to ten per cent. or more of the grossturnover of such firm;

(iii) holds together with his relatives two per cent. or more of the total voting power of thecompany; or

(iv) is a Chief Executive or director, by whatever name called, of any nonprofit organisationthat receives twenty-five per cent. or more of its receipts from the company, any of its promoters,directors or its holding, subsidiary or associate company or that holds two per cent. or more of thetotal voting power of the company; or

(f) who possesses such other qualifications as may be prescribed.

(7) Every independent director shall at the first meeting of the Board in which he participates as adirector and thereafter at the first meeting of the Board in every financial year or whenever there is anychange in the circumstances which may affect his status as an independent director, give a declaration thathe meets the criteria of independence as provided in sub-section (6).

Explanation.-- For the purposes of this section, nominee director means a director nominated byany financial institution in pursuance of the provisions of any law for the time being in force, or of anyagreement, or appointed by any Government, or any other person to represent its interests.

(8) The company and independent directors shall abide by the provisions specified in Schedule IV.

(9) Notwithstanding anything contained in any other provision of this Act, but subject to theprovisions of sections 197 and 198, an independent director shall not be entitled to any stock option andmay receive remuneration by way of fee provided under sub-section (5) of section 197, reimbursement ofexpenses for participation in the Board and other meetings and profit related commission as may beapproved by the members.

(10) Subject to the provisions of section 152, an independent director shall hold office for a term up tofive consecutive years on the Board of a company, but shall be eligible for reappointment on passing of aspecial resolution by the company and disclosure of such appointment in the Board's report.

(11) Notwithstanding anything contained in sub-section (10), no independent director shall holdoffice for more than two consecutive terms, but such independent director shall be eligible forappointment after the expiration of three years of ceasing to become an independent director:

Provided that an independent director shall not, during the said period of three years, be appointed inor be associated with the company in any other capacity, either directly or indirectly.

Explanation.-- For the purposes of sub-sections (10) and (11), any tenure of an independent directoron the date of commencement of this Act shall not be counted as a term under those sub-sections.

(12) Notwithstanding anything contained in this Act,--

(i) an independent director;

(ii) a non-executive director not being promoter or key managerial personnel,

shall be held liable, only in respect of such acts of omission or commission by a company which hadoccurred with his knowledge, attributable through Board processes, and with his consent or connivance orwhere he had not acted diligently.

(13) The provisions of sub-sections (6) and (7) of section 152 in respect of retirement of directors byrotation shall not be applicable to appointment of independent directors.

1. Subs. by Act 1 of 2018, s. 46, for sub-section (3) (w.e.f. 7-5-2018).

2. Subs. by 46, ibid., for u201cpecuniary relationshipu201d (w.e.f. 7-5-2018).

3. Subs. by s. 46, ibid., for Clause (d) (w.e.f. 7-5-2018).

4. The proviso ins. by Act 1 of 2018, s. 46 (w.e.f. 7-5-2018).

(1) Subject to the provisions contained in sub-section (6) of section 149, an independentdirector may be selected from a data bank containing names, addresses and qualifications of persons whoare eligible and willing to act as independent directors, maintained by any body, institute or association, as may by notified by the Central Government, having expertise in creation and maintenance of such databank and put on their website for the use by the company making the appointment of such directors:

Provided that responsibility of exercising due diligence before selecting a person from the data bankreferred to above, as an independent director shall lie with the company making such appointment.

(2) The appointment of independent director shall be approved by the company in general meeting asprovided in sub-section (2) of section 152 and the explanatory statement annexed to the notice of thegeneral meeting called to consider the said appointment shall indicate the justification for choosing theappointee for appointment as independent director.

(3) The data bank referred to in sub-section (1), shall create and maintain data of persons willing toact as independent director in accordance with such rules as may be prescribed.

(4) The Central Government may prescribe the manner and procedure of selection of independentdirectors who fulfil the qualifications and requirements specified under section 149.

A listed company may have onedirector elected by such small shareholders in such manner and with such terms and conditions as may beprescribed.

Explanation.-- For the purposes of this section "small shareholders" means a shareholder holdingshares of nominal value of not more than twenty thousand rupees or such other sum as may be prescribed.

(1) Where no provision is made in the articles of a company forthe appointment of the first director, the subscribers to the memorandum who are individuals shall bedeemed to be the first directors of the company until the directors are duly appointed and in case of a OnePerson Company an individual being member shall be deemed to be its first director until the director ordirectors are duly appointed by the member in accordance with the provisions of this section.

(2) Save as otherwise expressly provided in this Act, every director shall be appointed by thecompany in general meeting.

(3) No person shall be appointed as a director of a company unless he has been allotted the DirectorIdentification Number under section 154 1[or any other number as may be prescribed under section 153].

(4) Every person proposed to be appointed as a director by the company in general meeting orotherwise, shall furnish his Director Identification Number 1[or such other number as may be prescribedunder section 153] and a declaration that he is not disqualified to become a director under this Act.

(5) A person appointed as a director shall not act as a director unless he gives his consent to hold theoffice as director and such consent has been filed with the Registrar within thirty days of his appointmentin such manner as may be prescribed:

Provided that in the case of appointment of an independent director in the general meeting, anexplanatory statement for such appointment, annexed to the notice for the general meeting, shall include astatement that in the opinion of the Board, he fulfils the conditions specified in this Act for such anappointment.

(6) (a) Unless the articles provide for the retirement of all directors at every annual general meeting,not less than two-thirds of the total number of directors of a public company shall--

(i) be persons whose period of office is liable to determination by retirement of directors byrotation; and

(ii) save as otherwise expressly provided in this Act, be appointed by the company in generalmeeting.

(b) The remaining directors in the case of any such company shall, in default of, and subject toany regulations in the articles of the company, also be appointed by the company in general meeting.

(c) At the first annual general meeting of a public company held next after the date of the generalmeeting at which the first directors are appointed in accordance with clauses (a) and (b) and at everysubsequent annual general meeting, one-third of such of the directors for the time being as are liable to retire by rotation, or if their number is neither three nor a multiple of three, then, the numbernearest to one-third, shall retire from office.

(d) The directors to retire by rotation at every annual general meeting shall be those who havebeen longest in office since their last appointment, but as between persons who became directors onthe same day, those who are to retire shall, in default of and subject to any agreement amongthemselves, be determined by lot.

(e) At the annual general meeting at which a director retires as aforesaid, the company may fill upthe vacancy by appointing the retiring director or some other person thereto.

Explanation.-- For the purposes of this sub-section, "total number of directors" shall not includeindependent directors, whether appointed under this Act or any other law for the time being in force,on the Board of a company.

(7) (a) If the vacancy of the retiring director is not so filled-up and the meeting has not expresslyresolved not to fill the vacancy, the meeting shall stand adjourned till the same day in the next week, atthe same time and place, or if that day is a national holiday, till the next succeeding day which is not aholiday, at the same time and place.

(b) If at the adjourned meeting also, the vacancy of the retiring director is not filled up and thatmeeting also has not expressly resolved not to fill the vacancy, the retiring director shall be deemed tohave been re-appointed at the adjourned meeting, unless--

(i) at that meeting or at the previous meeting a resolution for the re-appointment of such directorhas been put to the meeting and lost;

(ii) the retiring director has, by a notice in writing addressed to the company or its Board ofdirectors, expressed his unwillingness to be so re-appointed;

(iii) he is not qualified or is disqualified for appointment;

(iv) a resolution, whether special or ordinary, is required for his appointment or re-appointmentby virtue of any provisions of this Act; or

(v) section 162 is applicable to the case.

Explanation.--For the purposes of this section and section 160, the expression "retiring director"means a director retiring by rotation.

1. Ins. by Act 1 of 2018, s. 47 (w.e.f. 9-2-2018).

Every individual intending tobe appointed as director of a company shall make an application for allotment of Director IdentificationNumber to the Central Government in such form and manner and along with such fees as may beprescribed:

1[Provided that the Central Government may prescribe any identification number which shall be treated as DirectorIdentification Number for the purposes of this Act and in case any individual holds or acquires such identification number,the requirement of this section shall not apply or apply in such manner as may be prescribed.]

1. The proviso ins. by Act 1 of 2018, s. 48 (w.e.f. 9-2-2018).

The Central Government shall, within onemonth from the receipt of the application under section 153, allot a Director Identification Number to anapplicant in such manner as may be prescribed.

No individual, whohas already been allotted a Director Identification Number under section 154, shall apply for, obtain orpossess another Director Identification Number.

Every existing director shall, withinone month of the receipt of Director Identification Number from the Central Government, intimate hisDirector Identification Number to the company or all companies wherein he is a director.

(1) Every company shall,within fifteen days of the receipt of intimation under section 156, furnish the Director IdentificationNumber of all its directors to the Registrar or any other officer or authority as may be specified by theCentral Government with such fees as may be prescribed or with such additional fees as may beprescribed 1 and every such intimation shall be furnished in such form and manner as may beprescribed.

2[(2) If any company fails to furnish the Director Identification Number under sub-section (1), suchcompany shall be liable to a penalty of twenty-five thousand rupees and in case of continuing failure, witha further penalty of one hundred rupees for each day after the first during which such failure continues,subject to a maximum of one lakh rupees, and every officer of the company who is in default shall beliable to a penalty of not less than twenty-five thousand rupees and in case of continuing failure, with afurther penalty of one hundred rupees for each day after the first during which such failure continues,subject to a maximum of one lakh rupees.]

1. The words and figures "within the time specified under section 403" omitted by s. 49, ibid. (w.e.f. 7-5-2018).

2. Subs. by Act 22 of 2019, s. 24, for sub-section (2) (w.e.f. 2-11-2018).

Every person or company, whilefurnishing any return, information or particulars as are required to be furnished under this Act, shallmention the Director Identification Number in such return, information or particulars in case such return,information or particulars relate to the director or contain any reference of any director.

1[159. Penalty for default of certain provisions. If any individual or director of a company makesany default in complying with any of the provisions of section 152, section 155 and section 156, suchindividual or director of the company shall be liable to a penalty which may extend to fifty thousandrupees and where the default is a continuing one, with a further penalty which may extend to five hundredrupees for each day after the first during which such default continues.]

1. Subs. by s. 25, ibid., for section 159 (w.e.f. 2-11-2018).

(1) A person whois not a retiring director in terms of section 152 shall, subject to the provisions of this Act, be eligible forappointment to the office of a director at any general meeting, if he, or some member intending to proposehim as a director, has, not less than fourteen days before the meeting, left at the registered office of thecompany, a notice in writing under his hand signifying his candidature as a director or, as the case maybe, the intention of such member to propose him as a candidate for that office, along with the deposit ofone lakh rupees or such higher amount as may be prescribed which shall be refunded to such person or, asthe case may be, to the member, if the person proposed gets elected as a director or gets more thantwenty-five per cent. of total valid votes cast either on show of hands or on poll on such resolution.

1[Provided that requirements of deposit of amount shall not apply in case of appointment of anindependent director or a director recommended by the Nomination and Remuneration Committee, if any,constituted under sub-section (1) of section 178 or a director recommended by the Board of Directors ofthe Company, in the case of a company not required to constitute Nomination and RemunerationCommittee.]

(2) The company shall inform its members of the candidature of a person for the office of directorunder sub-section (1) in such manner as may be prescribed.

1. The proviso ins. by s. 50, ibid. (w.e.f. 9-2-2018).

(1) Thearticles of a company may confer on its Board of Directors the power to appoint any person, other than aperson who fails to get appointed as a director in a general meeting, as an additional director at any timewho shall hold office up to the date of the next annual general meeting or the last date on which theannual general meeting should have been held, whichever is earlier.

(2) The Board of Directors of a company may, if so authorised by its articles or by a resolution passedby the company in general meeting, appoint a person, not being a person holding any alternatedirectorship for any other director in the company 1[or holding directorship in the same company], to actas an alternate director for a director during his absence for a period of not less than three months fromIndia:

Provided that no person shall be appointed as an alternate director for an independent director unlesshe is qualified to be appointed as an independent director under the provisions of this Act:

Provided further that an alternate director shall not hold office for a period longer than thatpermissible to the director in whose place he has been appointed and shall vacate the office if and whenthe director in whose place he has been appointed returns to India:

Provided also that if the term of office of the original director is determined before he so returns toIndia, any provision for the automatic re-appointment of retiring directors in default of anotherappointment shall apply to the original, and not to the alternate director.

(3) Subject to the articles of a company, the Board may appoint any person as a director nominated byany institution in pursuance of the provisions of any law for the time being in force or of any agreementor by the Central Government or the State Government by virtue of its shareholding in a Governmentcompany.

((4) 2 If the office of any director appointed by the company in general meeting is vacated beforehis term of office expires in the normal course, the resulting casual vacancy may, in default of and subjectto any regulations in the articles of the company, be filled by the Board of Directors at a meeting of theBoard 1[which shall be subsequently approved by members in the immediate next general meeting]:

Provided that any person so appointed shall hold office only up to the date up to which the director inwhose place he is appointed would have held office if it had not been vacated.

1. Ins. by Act 1 of 2018, s. 51 (w.e.f. 9-2-2018).

2. The words "In the case of a public company," omitted by s. 51, ibid. (w.e.f. 9-2-2018).

(1) At a general meeting of a company,a motion for the appointment of two or more persons as directors of the company by a single resolutionshall not be moved unless a proposal to move such a motion has first been agreed to at the meetingwithout any vote being cast against it.

(2) A resolution moved in contravention of sub-section (1) shall be void, whether or not any objectionwas taken when it was moved.

(3) A motion for approving a person for appointment, or for nominating a person for appointment as adirector, shall be treated as a motion for his appointment.

Notwithstanding anything contained in this Act, the articles of a company may provide for theappointment of not less than two-thirds of the total number of the directors of a company in accordancewith the principle of proportional representation, whether by the single transferable vote or by a system ofcumulative voting or otherwise and such appointments may be made once in every three years and casualvacancies of such directors shall be filled as provided in sub-section (4) of section 161.

(1) A person shall not be eligible forappointment as a director of a company, if --

(a) he is of unsound mind and stands so declared by a competent court;

(b) he is an undischarged insolvent;

(c) he has applied to be adjudicated as an insolvent and his application is pending;

(d) he has been convicted by a court of any offence, whether involving moral turpitude orotherwise, and sentenced in respect thereof to imprisonment for not less than six months and a periodof five years has not elapsed from the date of expiry of the sentence:

Provided that if a person has been convicted of any offence and sentenced in respect thereof toimprisonment for a period of seven years or more, he shall not be eligible to be appointed as adirector in any company;

(e) an order disqualifying him for appointment as a director has been passed by a court orTribunal and the order is in force;

(f) he has not paid any calls in respect of any shares of the company held by him, whether aloneor jointly with others, and six months have elapsed from the last day fixed for the payment of the call;

(g) he has been convicted of the offence dealing with related party transactions under section 188at any time during the last preceding five years; or

(h) he has not complied with sub-section (3) of section 152.

1[(i) he has not complied with the provisions of sub-section (1) of section 165.]

(2) No person who is or has been a director of a company which--

(a) has not filed financial statements or annual returns for any continuous period of three financialyears; or

(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem anydebentures on the due date or pay interest due thereon or pay any dividend declared and such failureto pay or redeem continues for one year or more,

shall be eligible to be re-appointed as a director of that company or appointed in other company for aperiod of five years from the date on which the said company fails to do so:

2[Provided that where a person is appointed as a director of a company which is in default of clause (a) orclause (b), he shall not incur the disqualification for a period of six months from the date of his appointment.]

(3) A private company may by its articles provide for any disqualifications for appointment as adirector in addition to those specified in sub-sections (1) and (2).

3[Provided that the disqualifications referred to in clauses (d), (e) and (g) of sub-section (1) shallcontinue to apply even if the appeal or petition has been filed against the order of conviction ordisqualification.]

1. Ins. by Act 22 of 2019, s. 26 (w.e.f. 2-11-2018).

2. The proviso ins. by Act 1 of 2018, s. 52 (w.e.f. 7-5-2018).

3. The proviso subs. by s. 52, ibid. (w.e.f. 7-5-2018).

(1) No person, after the commencement of this Act, shall holdoffice as a director, including any alternate directorship, in more than twenty companies at the same time:

Provided that the maximum number of public companies in which a person can be appointed as adirector shall not exceed ten.

1[Explanation I ].-- For reckoning the limit of public companies in which a person can be appointedas director, directorship in private companies that are either holding or subsidiary company of a publiccompany shall be included.

2[Explanation II.-- For reckoning the limit of directorships of twenty companies, the directorship in adormant company shall not be included.]

(2) Subject to the provisions of sub-section (1), the members of a company may, by specialresolution, specify any lesser number of companies in which a director of the company may act asdirectors.

(3) Any person holding office as director in companies more than the limits as specified insub-section (1), immediately before the commencement of this Act shall, within a period of one year fromsuch commencement,--

(a) choose not more than the specified limit of those companies, as companies in which he wishesto continue to hold the office of director;

(b) resign his office as director in the other remaining companies; and

(c) intimate the choice made by him under clause (a), to each of the companies in which he washolding the office of director before such commencement and to the Registrar having jurisdiction inrespect of each such company.

(4) Any resignation made in pursuance of clause (b) of sub-section (3) shall become effectiveimmediately on the despatch thereof to the company concerned.

(5) No such person shall act as director in more than the specified number of companies,--

(a) after despatching the resignation of his office as director or non-executive director thereof, inpursuance of clause (b) of sub-section (3); or

(b) after the expiry of one year from the commencement of this Act,whichever is earlier.

(6) If a person accepts an appointment as a director in contravention of sub-section (1), he shall be3[liable to a penalty of five thousand rupees for each day after the first during which such contraventioncontinues].

1. The Explanation renumbered as Explanation I thereof by s. 53, ibid. (w.e.f. 9-2-2018).

2. Ins. by s. 53, ibid. (w.e.f. 9-2-2018

3. Subs. by Act 22 of 2019, s. 27, for "punishable with fine which shall not be less than five thousand rupees but which mayextend to twenty-five thousand rupees for every day after the first during which the contravention continues" (w.e.f. 2-11-2018).

(1) Subject to the provisions of this Act, a director of a company shall actin accordance with the articles of the company.

(2) A director of a company shall act in good faith in order to promote the objects of the company forthe benefit of its members as a whole, and in the best interests of the company, its employees, theshareholders, the community and for the protection of environment.

(3) A director of a company shall exercise his duties with due and reasonable care, skill and diligenceand shall exercise independent judgment.

(4) A director of a company shall not involve in a situation in which he may have a direct or indirectinterest that conflicts, or possibly may conflict, with the interest of the company.

(5) A director of a company shall not achieve or attempt to achieve any undue gain or advantageeither to himself or to his relatives, partners, or associates and if such director is found guilty of makingany undue gain, he shall be liable to pay an amount equal to that gain to the company.

(6) A director of a company shall not assign his office and any assignment so made shall be void.

(7) If a director of the company contravenes the provisions of this section such director shall bepunishable with fine which shall not be less than one lakh rupees but which may extend to five lakhrupees.

(1) The office of a director shall become vacant in case--

(a) he incurs any of the disqualifications specified in section 164:

1[Provided that where he incurs disqualification under sub-section (2) of section 164, the office ofthe director shall become vacant in all the companies, other than the company which is in defaultunder that sub-section];

(b) he absents himself from all the meetings of the Board of Directors held during a period oftwelve months with or without seeking leave of absence of the Board;

(c) he acts in contravention of the provisions of section 184 relating to entering into contracts orarrangements in which he is directly or indirectly interested;

(d) he fails to disclose his interest in any contract or arrangement in which he is directly orindirectly interested, in contravention of the provisions of section 184;

(e) he becomes disqualified by an order of a court or the Tribunal;

(f) he is convicted by a court of any offence, whether involving moral turpitude or otherwise andsentenced in respect thereof to imprisonment for not less than six months:

2[Provided that the office shall not be vacated by the director in case of orders referred to inclauses (e) and (f)--

(i) for thirty days from the date of conviction or order of disqualification;

(ii) where an appeal or petition is preferred within thirty days as aforesaid against the convictionresulting in sentence or order, until expiry of seven days from the date on which such appeal orpetition is disposed of; or

(iii) where any further appeal or petition is preferred against order or sentence within sevendays, until such further appeal or petition is disposed of.]

(g) he is removed in pursuance of the provisions of this Act;

(h) he, having been appointed a director by virtue of his holding any office or other employment inthe holding, subsidiary or associate company, ceases to hold such office or other employment in thatcompany.

(2) If a person, functions as a director even when he knows that the office of director held by him hasbecome vacant on account of any of the disqualifications specified in sub-section (1), he shall bepunishable with imprisonment for a term which may extend to one year or with fine which shall not beless than one lakh rupees but which may extend to five lakh rupees, or with both.

(3) Where all the directors of a company vacate their offices under any of the disqualificationsspecified in sub-section (1), the promoter or, in his absence, the Central Government shall appoint therequired number of directors who shall hold office till the directors are appointed by the company in thegeneral meeting.

(4) A private company may, by its articles, provide any other ground for the vacation of the office ofa director in addition to those specified in sub-section (1).

1. The proviso ins. by Act 1 of 2018, s. 54 (w.e.f. 7-5-2018).

2. Subs. by Act 1 of 2018, s. 54, for the proviso (w.e.f. 7-5-2018).

(1) A director may resign from his office by giving a notice inwriting to the company and the Board shall on receipt of such notice take note of the same and thecompany shall intimate the Registrar in such manner, within such time and in such form as may beprescribed and shall also place the fact of such resignation in the report of directors laid in theimmediately following general meeting by the company:

Provided that a 1[director may also forward] a copy of his resignation along with detailed reasons forthe resignation to the Registrar within thirty days of resignation in such manner as may be prescribed.

(2) The resignation of a director shall take effect from the date on which the notice is received by thecompany or the date, if any, specified by the director in the notice, whichever is later:

Provided that the director who has resigned shall be liable even after his resignation for the offenceswhich occurred during his tenure.

(3) Where all the directors of a company resign from their offices, or vacate their offices undersection 167, the promoter or, in his absence, the Central Government shall appoint the required number ofdirectors who shall hold office till the directors are appointed by the company in general meeting.

1. Subs. by s. 55, ibid., for "director shall also forward" (w.e.f. 7-5-2018).

(1) A company may, by ordinary resolution, remove a director, notbeing a director appointed by the Tribunal under section 242, before the expiry of the period of his officeafter giving him a reasonable opportunity of being heard:

1[Provided that an independent director re-appointed for second term under sub-section (10) ofsection 149 shall be removed by the company only by passing a special resolution and after giving him areasonable opportunity of being heard:]

2[Provided further that] nothing contained in this sub-section shall apply where the company hasavailed itself of the option given to it under section 163 to appoint not less than two-thirds of the totalnumber of directors according to the principle of proportional representation.

(2) A special notice shall be required of any resolution, to remove a director under this section, or toappoint somebody in place of a director so removed, at the meeting at which he is removed.

(3) On receipt of notice of a resolution to remove a director under this section, the company shallforthwith send a copy thereof to the director concerned, and the director, whether or not he is a member ofthe company, shall be entitled to be heard on the resolution at the meeting.

(4) Where notice has been given of a resolution to remove a director under this section and thedirector concerned makes with respect thereto representation in writing to the company and requests itsnotification to members of the company, the company shall, if the time permits it to do so,--

(a) in any notice of the resolution given to members of the company, state the fact of therepresentation having been made; and

(b) send a copy of the representation to every member of the company to whom notice of themeeting is sent (whether before or after receipt of the representation by the company),and if a copy of the representation is not sent as aforesaid due to insufficient time or for the company'sdefault, the director may without prejudice to his right to be heard orally require that the representationshall be read out at the meeting:

Provided that copy of the representation need not be sent out and the representation need not be readout at the meeting if, on the application either of the company or of any other person who claims to beaggrieved, the Tribunal is satisfied that the rights conferred by this sub-section are being abused to secureneedless publicity for defamatory matter; and the Tribunal may order the company's costs on theapplication to be paid in whole or in part by the director notwithstanding that he is not a party to it.

(5) A vacancy created by the removal of a director under this section may, if he had been appointedby the company in general meeting or by the Board, be filled by the appointment of another director in hisplace at the meeting at which he is removed, provided special notice of the intended appointment has beengiven under sub-section (2).

(6) A director so appointed shall hold office till the date up to which his predecessor would have heldoffice if he had not been removed.

(7) If the vacancy is not filled under sub-section (5), it may be filled as a casual vacancy inaccordance with the provisions of this Act:

Provided that the director who was removed from office shall not be re-appointed as a director by theBoard of Directors.

(8) Nothing in this section shall be taken--

(a) as depriving a person removed under this section of any compensation or damages payable tohim in respect of the termination of his appointment as director as per the terms of contract or termsof his appointment as director, or of any other appointment terminating with that as director; or

(b) as derogating from any power to remove a director under other provisions of this Act.

1. The proviso ins. by Notification No. S.O. 768(E), dated 21st February, 2018 (w.e.f. 21-2-2018).

2. Subs. by ibid., for "Provided that" (w.e.f. 21-2-2018)

(1) Everycompany shall keep at its registered office a register containing such particulars of its directors and keymanagerial personnel as may be prescribed, which shall include the details of securities held by each ofthem in the company or its holding, subsidiary, subsidiary of company's holding company or associatecompanies.

(2) A return containing such particulars and documents as may be prescribed, of the directors and thekey managerial personnel shall be filed with the Registrar within thirty days from the appointment ofevery director and key managerial personnel, as the case may be, and within thirty days of any changetaking place.

(1) The register kept under sub-section (1) of section 170,--

(a) shall be open for inspection during business hours and the members shall have a right to takeextracts therefrom and copies thereof, on a request by the members, be provided to them free of costwithin thirty days; and

(b) shall also be kept open for inspection at every annual general meeting of the company andshall be made accessible to any person attending the meeting.

(2) If any inspection as provided in clause (a) of sub-section (1) is refused, or if any copy requiredunder that clause is not sent within thirty days from the date of receipt of such request, the Registrar shallon an application made to him order immediate inspection and supply of copies required thereunder.

If a company contravenes any of the provisions of this Chapter and for which nospecific punishment is provided therein, the company and every officer of the company who is in defaultshall be punishable with fine which shall not be less than fifty thousand rupees but which may extend tofive lakh rupees.

(1) Every company shall hold the first meeting of the Board of Directorswithin thirty days of the date of its incorporation and thereafter hold a minimum number of four meetingsof its Board of Directors every year in such a manner that not more than one hundred and twenty daysshall intervene between two consecutive meetings of the Board:

Provided that the Central Government may, by notification, direct that the provisions of this subsectionshall not apply in relation to any class or description of companies or shall apply subject to suchexceptions, modifications or conditions as may be specified in the notification.

(2) The participation of directors in a meeting of the Board may be either in person or through videoconferencing or other audio visual means, as may be prescribed, which are capable of recording andrecognising the participation of the directors and of recording and storing the proceedings of suchmeetings along with date and time:

Provided that the Central Government may, by notification, specify such matters which shall not bedealt with in a meeting through video conferencing or other audio visual means.

1[Provided further that where there is quorum in a meeting through physical presence of directors, anyother director may participate through video conferencing or other audio visual means in such meeting onany matter specified under the first proviso.]

(3) A meeting of the Board shall be called by giving not less than seven days notice in writing toevery director at his address registered with the company and such notice shall be sent by hand delivery orby post or by electronic means:

Provided that a meeting of the Board may be called at shorter notice to transact urgent businesssubject to the condition that at least one independent director, if any, shall be present at the meeting:

Provided further that in case of absence of independent directors from such a meeting of the Board,decisions taken at such a meeting shall be circulated to all the directors and shall be final only onratification thereof by at least one independent director, if any.

(4) Every officer of the company whose duty is to give notice under this section and who fails to doso shall be liable to a penalty of twenty-five thousand rupees.

(5) A One Person Company, small company and dormant company shall be deemed to have compliedwith the provisions of this section if at least one meeting of the Board of Directors has been conducted ineach half of a calendar year and the gap between the two meetings is not less than ninety days:

Provided that nothing contained in this sub-section and in section 174 shall apply to One PersonCompany in which there is only one director on its Board of Directors.

1. The proviso ins. by Act 1 of 2018, s. 56 (w.e.f. 7-5-2018).

(1) The quorum for a meeting of the Board of Directors of acompany hall be one-third of its total strength or two directors, whichever is higher, and the participationof the directors by video conferencing or by other audio visual means shall also be counted for thepurposes of quorum under this sub-section.

(2) The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long astheir number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuingdirectors or director may act for the purpose of increasing the number of directors to that fixed for thequorum, or of summoning a general meeting of the company and for no other purpose.

(3) Where at any time the number of interested directors exceeds or is equal to two-thirds of the totalstrength of the Board of Directors, the number of directors who are not interested directors and present atthe meeting, being not less than two, shall be the quorum during such time.

Explanation.-- For the purposes of this sub-section, "interested director" means a director within themeaning of sub-section (2) of section 184.

(4) Where a meeting of the Board could not be held for want of quorum, then, unless the articles ofthe company otherwise provide, the meeting shall automatically stand adjourned to the same day at thesame time and place in the next week or if that day is a national holiday, till the next succeeding day,which is not a national holiday, at the same time and place.

Explanation.-- For the purposes of this section,--

(i) any fraction of a number shall be rounded off as one;

(ii) "total strength" shall not include directors whose places are vacant.

(1) No resolution shall be deemed to have been dulypassed by the Board or by a committee thereof by circulation, unless the resolution has been circulated indraft, together with the necessary papers, if any, to all the directors, or members of the committee, as thecase may be, at their addresses registered with the company in India by hand delivery or by post or bycourier, or through such electronic means as may be prescribed and has been approved by a majority ofthe directors or members, who are entitled to vote on the resolution:

Provided that, where not less than one-third of the total number of directors of the company for thetime being require that any resolution under circulation must be decided at a meeting, the chairpersonshall put the resolution to be decided at a meeting of the Board.

(2) A resolution under sub-section (1) shall be noted at a subsequent meeting of the Board or thecommittee thereof, as the case may be, and made part of the minutes of such meeting.

No act done by aperson as a director shall be deemed to be invalid, notwithstanding that it was subsequently noticed thathis appointment was invalid by reason of any defect or disqualification or had terminated by virtue of anyprovision contained in this Act or in the articles of the company:

Provided that nothing in this section shall be deemed to give validity to any act done by the directorafter his appointment has been noticed by the company to be invalid or to have terminated.

(1) The Board of Directors of 1[every listed public company] and suchother class or classes of companies, as may be prescribed, shall constitute an Audit Committee.

(2) The Audit Committee shall consist of a minimum of three directors with independent directorsforming a majority:

Provided that majority of members of Audit Committee including its Chairperson shall be personswith ability to read and understand, the financial statement.

(3) Every Audit Committee of a company existing immediately before the commencement of this Actshall, within one year of such commencement, be reconstituted in accordance with sub-section (2).

(4) Every Audit Committee shall act in accordance with the terms of reference specified in writing bythe Board which shall, inter alia, include,--

(i) the recommendation for appointment, remuneration and terms of appointment of auditors ofthe company;

(ii) review and monitor the auditor's independence and performance, and effectiveness of auditprocess;

(iii) examination of the financial statement and the auditors report thereon;

(iv) approval or any subsequent modification of transactions of the company with related parties:

2[Provided that the Audit Committee may make omnibus approval for related party transactionsproposed to be entered into by the company subject to such conditions as may be prescribed;]

3[Provided further that in case of transaction, other than transactions referred to in section 188,and where Audit Committee does not approve the transaction, it shall make its recommendations tothe Board:

Provided also that in case any transaction involving any amount not exceeding one crore rupees isentered into by a director or officer of the company without obtaining the approval of the AuditCommittee and it is not ratified by the Audit Committee within three months from the date of thetransaction, such transaction shall be voidable at the option of the Audit Committee and if thetransaction is with the related party to any director or is authorised by any other director, the directorconcerned shall indemnify the company against any loss incurred by it:

Provided also that the provisions of this clause shall not apply to a transaction, other than atransaction referred to in section 188, between a holding company and its wholly owned subsidiarycompany.]

(v) scrutiny of inter-corporate loans and investments;

(vi) valuation of undertakings or assets of the company, wherever it is necessary;

(vii) evaluation of internal financial controls and risk management systems;

(viii) monitoring the end use of funds raised through public offers and related matters.

(5) The Audit Committee may call for the comments of the auditors about internal control systems,the scope of audit, including the observations of the auditors and review of financial statement beforetheir submission to the Board and may also discuss any related issues with the internal and statutoryauditors and the management of the company.

(6) The Audit Committee shall have authority to investigate into any matter in relation to the itemsspecified in sub-section (4) or referred to it by the Board and for this purpose shall have power to obtainprofessional advice from external sources and have full access to information contained in the records ofthe company.

(7) The auditors of a company and the key managerial personnel shall have a right to be heard in themeetings of the Audit Committee when it considers the auditors report but shall not have the right tovote.

(8) The Board's report under sub-section (3) of section 134 shall disclose the composition of an AuditCommittee and where the Board had not accepted any recommendation of the Audit Committee, the sameshall be disclosed in such report along with the reasons therefor.

(9) Every listed company or such class or classes of companies, as may be prescribed, shall establisha vigil mechanism for directors and employees to report genuine concerns in such manner as may beprescribed.

(10) The vigil mechanism under sub-section (9) shall provide for adequate safeguards againstvictimisation of persons who use such mechanism and make provision for direct access to the chairpersonof the Audit Committee in appropriate or exceptional cases:

Provided that the details of establishment of such mechanism shall be disclosed by the company on itswebsite, if any, and in the Boards report.

1. Subs. by Act 1 of 2018, s. 57, for "every listed company" (w.e.f. 7-5-2018).

2. The proviso ins. by Act 21 of 2015, s. 14 (w.e.f. 14-12-2015).

3. Ins. by Act 1 of 2018, s. 57 (w.e.f. 7-5-2018).

(1) The Board of Directors of 1[every listed public company] and such other class orclasses of companies, as may be prescribed shall constitute the Nomination and Remuneration Committeeconsisting of three or more non-executive directors out of which not less than one-half shall beindependent directors:

Provided that the chairperson of the company (whether executive or non-executive) may be appointedas a member of the Nomination and Remuneration Committee but shall not chair such Committee.

(2) The Nomination and Remuneration Committee shall identify persons who are qualified to becomedirectors and who may be appointed in senior management in accordance with the criteria laid down,recommend to the Board their appointment and removal and 2[shall specify the manner for effectiveevaluation of performance of Board, its committees and individual directors to be carried out either by theBoard, by the Nomination and Remuneration Committee or by an independent external agency andreview its implementation and compliance].

(3) The Nomination and Remuneration Committee shall formulate the criteria for determiningqualifications, positive attributes and independence of a director and recommend to the Board a policy,relating to the remuneration for the directors, key managerial personnel and other employees.

(4) The Nomination and Remuneration Committee shall, while formulating the policy under subsection (3) ensure that--

(a) the level and composition of remuneration is reasonable and sufficient to attract, retain andmotivate directors of the quality required to run the company successfully;

(b) relationship of remuneration to performance is clear and meets appropriate performancebenchmarks; and

(c) remuneration to directors, key managerial personnel and senior management involves abalance between fixed and incentive pay reflecting short and long-term performance objectivesappropriate to the working of the company and its goals:

3[Provided that such policy shall be placed on the website of the company, if any, and the salientfeatures of the policy and changes therein, if any, along with the web address of the policy, if any,shall be disclosed in the Board's report.]

(5) The Board of Directors of a company which consists of more than one thousand shareholders,debenture-holders, deposit-holders and any other security holders at any time during a financial year shallconstitute a Stakeholders Relationship Committee consisting of a chairperson who shall be a nonexecutivedirector and such other members as may be decided by the Board.

(6) The Stakeholders Relationship Committee shall consider and resolve the grievances of securityholders of the company.

(7) The chairperson of each of the committees constituted under this section or, in his absence, anyother member of the committee authorised by him in this behalf shall attend the general meetings of thecompany.

(8) In case of any contravention of the provisions of section 177 and this section, the company shallbe punishable with fine which shall not be less than one lakh rupees but which may extend to five lakhrupees and every officer of the company who is in default shall be punishable with imprisonment for aterm which may extend to one year or with fine which shall not be less than twenty-five thousand rupeesbut which may extend to one lakh rupees, or with both:

Provided that 4[inability to resolve or consider any grievance] by the Stakeholders RelationshipCommittee in good faith shall not constitute a contravention of this section.

Explanation.-- The expression "senior management" means personnel of the company who aremembers of its core management team excluding Board of Directors comprising all members ofmanagement one level below the executive directors, including the functional heads.

1. Subs. by Act 1 of 2018, s. 58, for "every listed company" (w.e.f. 7-5-2018).

2. Subs. by s. 58, ibid., for "shall carry out evaluation of every director's performance" (w.e.f. 7-5-2018).

3. Subs. by s. 58, ibid., for the proviso (w.e.f. 7-5-2018).

4. Subs. by Act 1 of 2018, s. 58, for non-consideration of resolution of any grievance (w.e.f. 7-5-2018)

(1) The Board of Directors of a company shall be entitled to exercise allsuch powers, and to do all such acts and things, as the company is authorised to exercise and do:

Provided that in exercising such power or doing such act or thing, the Board shall be subject to theprovisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations notinconsistent therewith and duly made thereunder, including regulations made by the company in generalmeeting:

Provided further that the Board shall not exercise any power or do any act or thing which is directedor required, whether under this Act or by the memorandum or articles of the company or otherwise, to beexercised or done by the company in general meeting.

(2) No regulation made by the company in general meeting shall invalidate any prior act of the Boardwhich would have been valid if that regulation had not been made.

(3) The Board of Directors of a company shall exercise the following powers on behalf of thecompany by means of resolutions passed at meetings of the Board, namely:--

(a) to make calls on shareholders in respect of money unpaid on their shares;

(b) to authorise buy-back of securities under section 68;

(c) to issue securities, including debentures, whether in or outside India;

(d) to borrow monies;

(e) to invest the funds of the company;

(f) to grant loans or give guarantee or provide security in respect of loans;

(g) to approve financial statement and the Boards report;

(h) to diversify the business of the company;

(i) to approve amalgamation, merger or reconstruction;

(j) to take over a company or acquire a controlling or substantial stake in another company;

(k) any other matter which may be prescribed:

Provided that the Board may, by a resolution passed at a meeting, delegate to any committee ofdirectors, the managing director, the manager or any other principal officer of the company or in the caseof a branch office of the company, the principal officer of the branch office, the powers specified inclauses (d) to (f) on such conditions as it may specify:

Provided further that the acceptance by a banking company in the ordinary course of its business ofdeposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft,order or otherwise, or the placing of monies on deposit by a banking company with another bankingcompany on such conditions as the Board may prescribe, shall not be deemed to be a borrowing ofmonies or, as the case may be, a making of loans by a banking company within the meaning of thissection.

Explanation I.--Nothing in clause (d) shall apply to borrowings by a banking company from otherbanking companies or from the Reserve Bank of India, the State Bank of India or any other banksestablished by or under any Act.

Explanation II.--In respect of dealings between a company and its bankers, the exercise by thecompany of the power specified in clause (d) shall mean the arrangement made by the company with itsbankers for the borrowing of money by way of overdraft or cash credit or otherwise and not the actualday-to-day operation on overdraft, cash credit or other accounts by means of which the arrangement somade is actually availed of.

(4) Nothing in this section shall be deemed to affect the right of the company in general meeting toimpose restrictions and conditions on the exercise by the Board of any of the powers specified in thissection.

(1) The Board of Directors of a company shall exercise thefollowing powers only with the consent of the company by a special resolution, namely:--

(a) to sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking ofthe company or where the company owns more than one undertaking, of the whole or substantiallythe whole of any of such undertakings.

Explanation.-- For the purposes of this clause,--

(i) "undertaking" shall mean an undertaking in which the investment of the company exceedstwenty per cent. of its net worth as per the audited balance sheet of the preceding financial year oran undertaking which generates twenty per cent. of the total income of the company during theprevious financial year;

(ii) the expression "substantially the whole of the undertaking" in any financial year shallmean twenty per cent. or more of the value of the undertaking as per the audited balance sheet ofthe preceding financial year;

(b) to invest otherwise in trust securities the amount of compensation received by it as a result ofany merger or amalgamation;

(c) to borrow money, where the money to be borrowed, together with the money alreadyborrowed by the company will exceed aggregate of its 1[paid-up share capital, free reserves andsecurities premium], apart from temporary loans obtained from the companyu2019s bankers in the ordinarycourse of business:

Provided that the acceptance by a banking company, in the ordinary course of its business, ofdeposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque,draft, order or otherwise, shall not be deemed to be a borrowing of monies by the banking companywithin the meaning of this clause.

Explanation.-- For the purposes of this clause, the expression "temporary loans" means loansrepayable on demand or within six months from the date of the loan such as short-term, cash creditarrangements, the discounting of bills and the issue of other short-term loans of a seasonal character,but does not include loans raised for the purpose of financial expenditure of a capital nature;

(d) to remit, or give time for the repayment of, any debt due from a director.

(2) Every special resolution passed by the company in general meeting in relation to the exercise ofthe powers referred to in clause (c) of sub-section (1) shall specify the total amount up to which moniesmay be borrowed by the Board of Directors.

(3) Nothing contained in clause (a) of sub-section (1) shall affect--

(a) the title of a buyer or other person who buys or takes on lease any property, investment orundertaking as is referred to in that clause, in good faith; or

(b) the sale or lease of any property of the company where the ordinary business of the companyconsists of, or comprises, such selling or leasing.

(4) Any special resolution passed by the company consenting to the transaction as is referred to inclause (a) of sub-section (1) may stipulate such conditions as may be specified in such resolution,including conditions regarding the use, disposal or investment of the sale proceeds which may result fromthe transactions:

Provided that this sub-section shall not be deemed to authorise the company to effect any reduction inits capital except in accordance with the provisions contained in this Act.

(5) No debt incurred by the company in excess of the limit imposed by clause (c) of sub-section (1)shall be valid or effectual, unless the lender proves that he advanced the loan in good faith and withoutknowledge that the limit imposed by that clause had been exceeded.

1. Subs. by Act 1 of 2018, s. 59, for u201cpaid-up share capital and free reservesu201d (w.e.f. 9-2-2018)

The Board of Directors of acompany may contribute to bona fide charitable and other funds:

Provided that prior permission of the company in general meeting shall be required for suchcontribution in case any amount the aggregate of which, in any financial year, exceed five per cent. of itsaverage net profits for the three immediately preceding financial years.

(1) Notwithstandinganything contained in any other provision of this Act, a company, other than a Government company and a company which has been in existence for less than three financial years, may contribute any amountdirectly or indirectly to any political party:

1

Provided 2 that no such contribution shall be made by a company unless a resolution authorisingthe making of such contribution is passed at a meeting of the Board of Directors and such resolution shall,subject to the other provisions of this section, be deemed to be justification in law for the making 3 ofthe contribution authorised by it.

(2) Without prejudice to the generality of the provisions of sub-section (1),--

(a) a donation or subscription or payment caused to be given by a company on its behalf or on itsaccount to a person who, to its knowledge, is carrying on any activity which, at the time at whichsuch donation or subscription or payment was given or made, can reasonably be regarded as likely toaffect public support for a political party shall also be deemed to be contribution of the amount ofsuch donation, subscription or payment to such person for a political purpose;

(b) the amount of expenditure incurred, directly or indirectly, by a company on an advertisementin any publication, being a publication in the nature of a souvenir, brochure, tract, pamphlet or thelike, shall also be deemed,--

(i) where such publication is by or on behalf of a political party, to be a contribution of suchamount to such political party, and

(ii) where such publication is not by or on behalf of, but for the advantage of a political party,to be a contribution for a political purpose.

4[(3) Every company shall disclose in its profit and loss account the total amount contributed by it underthis section during the financial year to which the account relates.

(3A) Notwithstanding anything contained in sub-section (1), the contribution under this section shallnot be made except by an account payee cheque drawn on a bank or an account payee bank draft or use ofelectronic clearing system through a bank account:

Provided that a company may make contribution through any instrument, issued pursuant to anyscheme notified under any law for the time being in force, for contribution to the political parties.]

(4) If a company makes any contribution in contravention of the provisions of this section, thecompany shall be punishable with fine which may extend to five times the amount so contributed andevery officer of the company who is in default shall be punishable with imprisonment for a term whichmay extend to six months and with fine which may extend to five times the amount so contributed.

Explanation.-- For the purposes of this section, "political party" means a political party registeredunder section 29A of the Representation of the People Act, 1951 (43 of 1951).

1. The proviso omitted by Act 7 of 2017, s. 154 (w.e.f. 31-3-2017).

2. The word u201cfurtheru201d omitted by s. 154, ibid. (w.e.f. 31-3-2017).

3. The words u201cand the acceptanceu201d omitted by s. 154, ibid. (w.e.f. 31-3-2017).

4. Subs. by s. 154, ibid., for sub-section (3) (w.e.f. 31-3-2017).

(1) The Board of Directors of any company or any person or authority exercising the powers of the Boardof Directors of a company, or of the company in general meeting, may, notwithstanding anythingcontained in sections 180, 181 and section 182 or any other provision of this Act or in the memorandum,articles or any other instrument relating to the company, contribute such amount as it thinks fit to theNational Defence Fund or any other Fund approved by the Central Government for the purpose ofnational defence.

(2) Every company shall disclose in its profits and loss account the total amount or amountscontributed by it to the Fund referred to in sub-section (1) during the financial year to which the amountrelates.

(1) Every director shall at the first meeting of the Board inwhich he participates as a director and thereafter at the first meeting of the Board in every financial yearor whenever there is any change in the disclosures already made, then at the first Board meeting held aftersuch change, disclose his concern or interest in any company or companies or bodies corporate, firms, orother association of individuals which shall include the shareholding, in such manner as may beprescribed.

(2) Every director of a company who is in any way, whether directly or indirectly, concerned orinterested in a contract or arrangement or proposed contract or arrangement entered into or to be enteredinto--

(a) with a body corporate in which such director or such director in association with any otherdirector, holds more than two per cent. shareholding of that body corporate, or is a promoter, manager, Chief Executive Officer of that body corporate; or

(b) with a firm or other entity in which, such director is a partner, owner or member, as the casemay be,

shall disclose the nature of his concern or interest at the meeting of the Board in which the contract orarrangement is discussed and shall not participate in such meeting:

Provided that where any director who is not so concerned or interested at the time of entering intosuch contract or arrangement, he shall, if he becomes concerned or interested after the contract orarrangement is entered into, disclose his concern or interest forthwith when he becomes concerned orinterested or at the first meeting of the Board held after he becomes so concerned or interested.

(3) A contract or arrangement entered into by the company without disclosure under sub-section (2)or with participation by a director who is concerned or interested in any way, directly or indirectly, in thecontract or arrangement, shall be voidable at the option of the company.

((4) If a director of the company contravenes the provisions of sub-section (1) or sub-section (2), suchdirector shall be punishable with imprisonment for a term which may extend to one year or with finewhich 1 may extend to one lakh rupees, or with both.

(5) Nothing in this section--

(a) shall be taken to prejudice the operation of any rule of law restricting a director of a companyfrom having any concern or interest in any contract or arrangement with the company;

²[(b) shall apply to any contract or arrangement entered into or to be entered into between twocompanies or between one or more companies and one or more bodies corporate where any of thedirectors of the one company or body corporate or two or more of them together holds or hold not morethan two per cent. of the paid-up share capital in the other company or the body corporate.]

1. The words "shall not be less than fifty thousand rupees but which" omitted by Act 1 of 2018, s. 60 (w.e.f. 9-2-2018).

1. Subs. by s. 61, ibid., for section 185 (w.e.f. 7-5-2018).

1[185. Loans to directors, etc. (1) No company shall, directly or indirectly, advance any loan,including any loan represented by a book debt to, or give any guarantee or provide any security inconnection with any loan taken by,--

(a) any director of company, or of a company which is its holding company or any partner orrelative of any such director; or

(b) any firm in which any such director or relative is a partner.

(2) A company may advance any loan including any loan represented by a book debt, or give anyguarantee or provide any security in connection with any loan taken by any person in whom any of thedirector of the company is interested, subject to the condition that--

(a) a special resolution is passed by the company in general meeting:

Provided that the explanatory statement to the notice for the relevant general meeting shall disclosethe full particulars of the loans given, or guarantee given or security provided and the purpose forwhich the loan or guarantee or security is proposed to be utilised by the recipient of the loan orguarantee or security and any other relevant fact; and

(b) the loans are utilised by the borrowing company for its principal business activities.

Explanation.-- For the purposes of this sub-section, the expression "any person in whom any of thedirector of the company is interested" means--

(a) any private company of which any such director is a director or member;

(b) any body corporate at a general meeting of which not less than twenty-five per cent. of the totalvoting power may be exercised or controlled by any such director, or by two or more such directors,together; or

(c) any body corporate, the Board of directors, managing director or manager, whereof isaccustomed to act in accordance with the directions or instructions of the Board, or of any director ordirectors, of the lending company.

(3) Nothing contained in sub-sections (1) and (2) shall apply to--

(a) the giving of any loan to a managing or whole-time director--

(i) as a part of the conditions of service extended by the company to all its employees; or

(ii) pursuant to any scheme approved by the members by a special resolution; or

(b) a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a ratenot less than the rate of prevailing yield of one year, three years, five years or ten years Governmentsecurity closest to the tenor of the loan; or

(c) any loan made by a holding company to its wholly owned subsidiary company or any guaranteegiven or security provided by a holding company in respect of any loan made to its wholly ownedsubsidiary company; or

(d) any guarantee given or security provided by a holding company in respect of loan made by anybank or financial institution to its subsidiary company:

Provided that the loans made under clauses (c) and (d) are utilised by the subsidiary company forits principal business activities.

(4) If any loan is advanced or a guarantee or security is given or provided or utilised in contraventionof the provisions of this section,--

(i) the company shall be punishable with fine which shall not be less than five lakh rupees butwhich may extend to twenty-five lakh rupees;

(ii) every officer of the company who is in default shall be punishable with imprisonment for a termwhich may extend to six months or with fine which shall not be less than five lakh rupees but whichmay extend to twenty-five lakh rupees; and

(iii) the director or the other person to whom any loan is advanced or guarantee or security is givenor provided in connection with any loan taken by him or the other person, shall be punishable withimprisonment which may extend to six months or with fine which shall not be less than five lakhrupees but which may extend to twenty-five lakh rupees, or with both.]

1. Subs. by s. 61, ibid., for section 185 (w.e.f. 7-5-2018).

(1) Without prejudice to the provisions contained in thisAct, a company shall unless otherwise prescribed, make investment through not more than two layers ofinvestment companies:

Provided that the provisions of this sub-section shall not affect,--

(i) a company from acquiring any other company incorporated in a country outside India if suchother company has investment subsidiaries beyond two layers as per the laws of such country;

(ii) a subsidiary company from having any investment subsidiary for the purposes of meeting therequirements under any law or under any rule or regulation framed under any law for the time beingin force.

(2) No company shall directly or indirectly.--

(a) give any loan to any person or other body corporate;

(b) give any guarantee or provide security in connection with a loan to any other body corporateor person; and

(c) acquire by way of subscription, purchase or otherwise, the securities of any other bodycorporate,

exceeding sixty per cent. of its paid-up share capital, free reserves and securities premium account or onehundred per cent. of its free reserves and securities premium account, whichever is more.

1[Explanation.-- For the purposes of this sub-section, the word person does not include anyindividual who is in the employment of the company.]

2[(3) Where the aggregate of the loans and investment so far made, the amount for which guarantee orsecurity so far provided to or in all other bodies corporate along with the investment, loan, guarantee orsecurity proposed to be made or given by the Board, exceed the limits specified under sub-section (2), noinvestment or loan shall be made or guarantee shall be given or security shall be provided unlesspreviously authorised by a special resolution passed in a general meeting:

(Provided that where a loan or guarantee is given or where a security has been provided by a companyto its wholly owned subsidiary company or a joint venture company, or acquisition is made by a holdingcompany, by way of subscription, purchase or otherwise of, the securities of its wholly owned subsidiarycompany, the requirement of this sub-section shall not apply:

Provided further that the company shall disclose the details of such loans or guarantee or security oracquisition in the financial statement as provided under sub-section (4).]

(4) The company shall disclose to the members in the financial statement the full particulars of theloans given, investment made or guarantee given or security provided and the purpose for which the loanor guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security.

(5) No investment shall be made or loan or guarantee or security given by the company unless theresolution sanctioning it is passed at a meeting of the Board with the consent of all the directors present atthe meeting and the prior approval of the public financial institution concerned where any term loan issubsisting, is obtained:

Provided that prior approval of a public financial institution shall not be required where the aggregateof the loans and investments so far made, the amount for which guarantee or security so far provided to orin all other bodies corporate, along with the investments, loans, guarantee or security proposed to be madeor given does not exceed the limit as specified in sub-section (2), and there is no default in repayment ofloan instalments or payment of interest thereon as per the terms and conditions of such loan to the publicfinancial institution.

(6) No company, which is registered under section 12 of the Securities and Exchange Board of IndiaAct, 1992 (15 of 1992) and covered under such class or classes of companies as may be prescribed, shalltake inter-corporate loan or deposits exceeding the prescribed limit and such company shall furnish in itsfinancial statement the details of the loan or deposits.

(7) No loan shall be given under this section at a rate of interest lower than the prevailing yield of oneyear, three year, five year or ten year Government Security closest to the tenor of the loan.

(8) No company which is in default in the repayment of any deposits accepted before or after thecommencement of this Act or in payment of interest thereon, shall give any loan or give any guarantee orprovide any security or make an acquisition till such default is subsisting.

(9) Every company giving loan or giving a guarantee or providing security or making an acquisitionunder this section shall keep a register which shall contain such particulars and shall be maintained insuch manner as may be prescribed.

(10) The register referred to in sub-section (9) shall be kept at the registered office of the companyand--

(a) shall be open to inspection at such office; and

(b) extracts may be taken therefrom by any member, and copies thereof may be furnished to anymember of the company on payment of such fees as may be prescribed.

3[(11) Nothing contained in this section, except sub-section (1), shall apply--

(a) to any loan made, any guarantee given or any security provided or any investment made by abanking company, or an insurance company, or a housing finance company in the ordinary course ofits business, or a company established with the object of and engaged in the business of financingindustrial enterprises, or of providing infrastructural facilities;

(b) to any investment--

(i) made by an investment company;

(ii) made in shares allotted in pursuance of clause (a) of sub-section (1) of section 62 or inshares allotted in pursuance of rights issues made by a body corporate;

(iii) made, in respect of investment or lending activities, by a non-banking financial companyregistered under Chapter III-B of the Reserve Bank of India Act, 1934 (2 of 1934) and whoseprincipal business is acquisition of securities.]

(12) The Central Government may make rules for the purposes of this section.

(13) If a company contravenes the provisions of this section, the company shall be punishable withfine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupeesand every officer of the company who is in default shall be punishable with imprisonment for a termwhich may extend to two years and with fine which shall not be less than twenty-five thousand rupees butwhich may extend to one lakh rupees.--

Explanation.-- For the purposes of this section,

(a) the expression "investment company" means a company whose principal business is theacquisition of shares, debentures or other securities];

(b) the expression "infrastructure facilities" means the facilities specified in Schedule VI.

1. Ins. by Act 1 of 2018, s. 62 (w.e.f. 7-5-2018).

2. Subs. by s. 62, ibid., for "sub-section(3)" (w.e.f. 7-5-2018).

3. Subs. by Act 1 of 2018, s. 62 for sub-section (11) (w.e.f. 7-5-2018).

(1) All investments made or held by acompany in any property, security or other asset shall be made and held by it in its own name:

Provided that the company may hold any shares in its subsidiary company in the name of anynominee or nominees of the company, if it is necessary to do so, to ensure that the number of members ofthe subsidiary company is not reduced below the statutory limit.

(2) Nothing in this section shall be deemed to prevent a company--

(a) from depositing with a bank, being the bankers of the company, any shares or securities forthe collection of any dividend or interest payable thereon; or

(b) from depositing with, or transferring to, or holding in the name of, the State Bank of India or ascheduled bank, being the bankers of the company, shares or securities, in order to facilitate thetransfer thereof:

Provided that if within a period of six months from the date on which the shares or securities aretransferred by the company to, or are first held by the company in the name of, the State Bank ofIndia or a scheduled bank as aforesaid, no transfer of such shares or securities takes place, thecompany shall, as soon as practicable after the expiry of that period, have the shares or securities retransferredto it from the State Bank of India or the scheduled bank or, as the case may be, again holdthe shares or securities in its own name; or

(c) from depositing with, or transferring to, any person any shares or securities, by way ofsecurity for the repayment of any loan advanced to the company or the performance of any obligationundertaken by it;

(d) from holding investments in the name of a depository when such investments are in the formof securities held by the company as a beneficial owner.

(3) Where in pursuance of clause (d) of sub-section (2), any shares or securities in which investmentshave been made by a company are not held by it in its own name, the company shall maintain a registerwhich shall contain such particulars as may be prescribed and such register shall be open to inspection byany member or debenture-holder of the company without any charge during business hours subject tosuch reasonable restrictions as the company may by its articles or in general meeting impose.

(4) If a company contravenes the provisions of this section, the company shall be punishable with finewhich shall not be less than twenty-five thousand rupees but which may extend to twenty-five lakh rupeesand every officer of the company who is in default shall be punishable with imprisonment for a termwhich may extend to six months or with fine which shall not be less than twenty-five thousand rupees butwhich may extend to one lakh rupees, or with both.

(1) Except with the consent of the Board of Directors given by aresolution at a meeting of the Board and subject to such conditions as may be prescribed, no companyshall enter into any contract or arrangement with a related party with respect to--

(a) sale, purchase or supply of any goods or materials;

(b) selling or otherwise disposing of, or buying, property of any kind;

(c) leasing of property of any kind;

(d) availing or rendering of any services;

(e) appointment of any agent for purchase or sale of goods, materials, services or property;

(f) such related party's appointment to any office or place of profit in the company, its subsidiarycompany or associate company; and

(g) underwriting the subscription of any securities or derivatives thereof, of the company:

Provided that no contract or arrangement, in the case of a company having a paid-up share capital ofnot less than such amount, or transactions exceeding such sums, as may be prescribed, shall be enteredinto except with the prior approval of the company by a 1[resolution]:

Provided further that no member of the company shall vote on such 1[resolution], to approve anycontract or arrangement which may be entered into by the company, if such member is a related party:

2[Provided also that nothing contained in the second proviso shall apply to a company in which ninetyper cent. or more members, in number, are relatives of promoters or are related parties:]

Provided also that nothing in this sub-section shall apply to any transactions entered into by thecompany in its ordinary course of business other than transactions which are not on an arms length basis:

3[Provided also that the requirement of passing the resolution under first proviso shall not beapplicable for transactions entered into between a holding company and its wholly owned subsidiarywhose accounts are consolidated with such holding company and placed before the shareholders at thegeneral meeting for approval.]

Explanation.-- In this sub-section,--

(a) the expression "office or place of profit" means any office or place--

(i) where such office or place is held by a director, if the director holding it receives from thecompany anything by way of remuneration over and above the remuneration to which he isentitled as director, by way of salary, fee, commission, perquisites, any rent-free accommodation,or otherwise;

(ii) where such office or place is held by an individual other than a director or by any firm,private company or other body corporate, if the individual, firm, private company or bodycorporate holding it receives from the company anything by way of remuneration, salary, fee,commission, perquisites, any rent-free accommodation, or otherwise;

(b) the expression "arm's length transaction" means a transaction between two related parties thatis conducted as if they were unrelated, so that there is no conflict of interest.

(2) Every contract or arrangement entered into under sub-section (1) shall be referred to in theBoards report to the shareholders along with the justification for entering into such contract orarrangement.

(3) Where any contract or arrangement is entered into by a director or any other employee, withoutobtaining the consent of the Board or approval by a 1[resolution] in the general meeting undersub-section (1) and if it is not ratified by the Board or, as the case may be, by the shareholders at ameeting within three months from the date on which such contract or arrangement was entered into, suchcontract or arrangement 4[shall be voidable at the option of the Board or, as the case may be, of theshareholders] and if the contract or arrangement is with a related party to any director, or is authorised byany other director, the directors concerned shall indemnify the company against any loss incurred by it.

(4) Without prejudice to anything contained in sub-section (3), it shall be open to the company toproceed against a director or any other employee who had entered into such contract or arrangement incontravention of the provisions of this section for recovery of any loss sustained by it as a result of suchcontract or arrangement.

(5) Any director or any other employee of a company, who had entered into or authorised the contractor arrangement in violation of the provisions of this section shall,

(i) in case of listed company, be punishable with imprisonment for a term which may extend toone year or with fine which shall not be less than twenty-five thousand rupees but which may extendto five lakh rupees, or with both; and

(ii) in case of any other company, be punishable with fine which shall not be less than twenty-fivethousand rupees but which may extend to five lakh rupees.

1. Subs. by Act 21 of 2015, s. 16, for special resolution (w.e.f. 29-5-2015).

2. The proviso ins. by Act 1 of 2018, s. 63 (w.e.f. 9-2-2018).

3. Ins. by s. 16, ibid. (w.e.f. 29-5-2015).

4. Subs. by Act 1 of 2018, s. 63, for "shall be voidable at the option of the Board" (w.e.f. 9-2-2018).

(1) Everycompany shall keep one or more registers giving separately the particulars of all contracts orarrangements to which sub-section (2) of section 184 or section 188 applies, in such manner andcontaining such particulars as may be prescribed and after entering the particulars, such register orregisters shall be placed before the next meeting of the Board and signed by all the directors present at themeeting.

(2) Every director or key managerial personnel shall, within a period of thirty days of hisappointment, or relinquishment of his office, as the case may be, disclose to the company the particularsspecified in sub-section (1) of section 184 relating to his concern or interest in the other associationswhich are required to be included in the register under that sub-section or such other information relatingto himself as may be prescribed.

(3) The register referred to in sub-section (1) shall be kept at the registered office of the company andit shall be open for inspection at such office during business hours and extracts may be taken therefrom,and copies thereof as may be required by any member of the company shall be furnished by the companyto such extent, in such manner, and on payment of such fees as may be prescribed.

(4) The register to be kept under this section shall also be produced at the commencement of everyannual general meeting of the company and shall remain open and accessible during the continuance ofthe meeting to any person having the right to attend the meeting.--

(5) Nothing contained in sub-section (1) shall apply to any contract or arrangement

(a) for the sale, purchase or supply of any goods, materials or services if the value of such goodsand materials or the cost of such services does not exceed five lakh rupees in the aggregate in anyyear; or

(b) by a banking company for the collection of bills in the ordinary course of its business.

(6) Every director who fails to comply with the provisions of this section and the rules madethereunder shall be liable to a penalty of twenty-five thousand rupees.

(1) Every companyshall keep at its registered office,--

(a) where a contract of service with a managing or whole-time director is in writing, a copy of thecontract; or

(b) where such a contract is not in writing, a written memorandum setting out its terms.

(2) The copies of the contract or the memorandum kept under sub-section (1) shall be open toinspection by any member of the company without payment of fee.

(3) If any default is made in complying with the provisions of sub-section (1) or sub-section

(2), thecompany shall be liable to a penalty of twenty-five thousand rupees and every officer of the companywho is in default shall be liable to a penalty of five thousand rupees for each default.

(4) The provisions of this section shall not apply to a private company.

(1) No director of a company shall, in connection with--

(a) the transfer of the whole or any part of any undertaking or property of the company; or

(b) the transfer to any person of all or any of the shares in a company being a transfer resultingfrom--

(i) an offer made to the general body of shareholders;

(ii) an offer made by or on behalf of some other body corporate with a view to a companybecoming a subsidiary company of such body corporate or a subsidiary company of its holdingcompany;

(iii) an offer made by or on behalf of an individual with a view to his obtaining the right toexercise, or control the exercise of, not less than one-third of the total voting power at any generalmeeting of the company; or

(iv) any other offer which is conditional on acceptance to a given extent, receive any paymentby way of compensation for loss of office or as consideration for retirement from office, or inconnection with such loss or retirement from such company or from the transferee of suchundertaking or property, or from the transferees of shares or from any other person, not beingsuch company, unless particulars as may be prescribed with respect to the payment proposed tobe made by such transferee or person, including the amount thereof, have been disclosed to themembers of the company and the proposal has been approved by the company in general meeting.

(2) Nothing in sub-section (1) shall affect any payment made by a company to a managing director orwhole-time director or manager of the company by way of compensation for loss of office or asconsideration for retirement from office or in connection with such loss or retirement subject to limits orpriorities, as may be prescribed.

(3) If the payment under sub-section (1) or sub-section (2) is not approved for want of quorum eitherin a meeting or an adjourned meeting, the proposal shall not be deemed to have been approved.

(4) Where a director of a company receives payment of any amount in contravention of sub-section(1) or the proposed payment is made before it is approved in the meeting, the amount so received by thedirector shall be deemed to have been received by him in trust for the company.

1[(5) If a director of the company makes any default in complying with the provisions of this section,such director shall be liable to a penalty of one lakh rupees.]

(6) Nothing in this section shall be taken to prejudice the operation of any law requiring disclosure tobe made with respect to any payment received under this section or such other like payments made to adirector.

1. Subs. by Act 22 of 2019, s. 28, for sub-section (5) (w.e.f. 2-11-2018).

(1) No company shall enter intoan arrangement by which--

(a) a director of the company or its holding, subsidiary or associate company or a personconnected with him acquires or is to acquire assets for consideration other than cash, from thecompany; or

(b) the company acquires or is to acquire assets for consideration other than cash, from suchdirector or person so connected,

unless prior approval for such arrangement is accorded by a resolution of the company in general meetingand if the director or connected person is a director of its holding company, approval under this subsectionshall also be required to be obtained by passing a resolution in general meeting of the holdingcompany.

(2) The notice for approval of the resolution by the company or holding company in general meetingunder sub-section (1) shall include the particulars of the arrangement along with the value of the assetsinvolved in such arrangement duly calculated by a registered valuer.

(3) Any arrangement entered into by a company or its holding company in contravention of theprovisions of this section shall be voidable at the instance of the company unless--

(a) the restitution of any money or other consideration which is the subject matter of thearrangement is no longer possible and the company has been indemnified by any other person for anyloss or damage caused to it; or

(b) any rights are acquired bona fide for value and without notice of the contravention of theprovisions of this section by any other person.

(1) Where One Person Company limited by shares or byguarantee enters into a contract with the sole member of the company who is also the director of the company, the company shall, unless the contract is in writing, ensure that the terms of the contract oroffer are contained in a memorandum or are recorded in the minutes of the first meeting of the Board ofDirectors of the company held next after entering into contract:

Provided that nothing in this sub-section shall apply to contracts entered into by the company in theordinary course of its business.

(2) The company shall inform the Registrar about every contract entered into by the company andrecorded in the minutes of the meeting of its Board of Directors under sub-section (1) within a period offifteen days of the date of approval by the Board of Directors.

[Prohibition on forward dealings in securities of company by director or key managerialpersonnel.] Omitted by the Companies (Amendment) Act, 2017 (1 of 2018), s. 64 (w.e.f. 9-2-2018).

[Prohibition on insider trading of securities.] Omitted by s. 65, ibid. (w.e.f. 9-2-2018).

(1) No companyshall appoint or employ at the same time a managing director and a manager.

(2) No company shall appoint or re-appoint any person as its managing director, whole-time directoror manager for a term exceeding five years at a time:

Provided that no re-appointment shall be made earlier than one year before the expiry of his term.

(3) No company shall appoint or continue the employment of any person as managing director,whole-time director or manager who --

(a) is below the age of twenty-one years or has attained the age of seventy years:

Provided that appointment of a person who has attained the age of seventy years may be made bypassing a special resolution in which case the explanatory statement annexed to the notice for suchmotion shall indicate the justification for appointing such person;

1Provided further that where no such special resolution is passed but votes cast in favour of themotion exceed the votes, if any, cast against the motion and the Central Government is satisfied, onan application made by the Board, that such appointment is most beneficial to the company, theappointment of the person who has attained the age of seventy years may be made.]";

(b) is an undischarged insolvent or has at any time been adjudged as an insolvent;

(c) has at any time suspended payment to his creditors or makes, or has at any time made, acomposition with them; or

(d) has at any time been convicted by a court of an offence and sentenced for a period of morethan six months.

(4) Subject to the provisions of section 197 and Schedule V, a managing director, whole-time directoror manager shall be appointed and the terms and conditions of such appointment and remunerationpayable be approved by the Board of Directors at a meeting which shall be subject to approval by aresolution at the next general meeting of the company and by the Central Government in case suchappointment is at variance to the conditions 2[specified in Part I of that Schedule]:

Provided that a notice convening Board or general meeting for considering such appointment shallinclude the terms and conditions of such appointment, remuneration payable and such other mattersincluding interest, of a director or directors in such appointments, if any:

Provided further that a return in the prescribed form shall be filed within sixty days of suchappointment with the Registrar.

(5) Subject to the provisions of this Act, where an appointment of a managing director, whole-timedirector or manager is not approved by the company at a general meeting, any act done by him beforesuch approval shall not be deemed to be invalid.

1. The proviso ins. by Act 1 of 2018, s. 66 (w.e.f. 12-9-2018).

2. Subs. by s. 66, ibid., for the words "specified in that Schedule" (w.e.f. 12-9-2018).

(1) The total managerial remuneration payable by a publiccompany, to its directors, including managing director and whole-time director, and its manager in respectof any financial year shall not exceed eleven per cent. of the net profits of that company for that financialyear computed in the manner laid down in section 198 except that the remuneration of the directors shallnot be deducted from the gross profits:

Provided that the company in general meeting may, 1 authorise the payment of remunerationexceeding eleven per cent. of the net profits of the company, subject to the provisions of Schedule V:

Provided further that, except with the approval of the company in general meeting, 2[by a specialresolution,]--

(i) the remuneration payable to any one managing director; or whole-time director or managershall not exceed five per cent. of the net profits of the company and if there is more than one such director remuneration shall not exceed ten per cent. of the net profits to all such directors andmanager taken together;

(ii) the remuneration payable to directors who are neither managing directors nor whole-timedirectors shall not exceed,--

(A) one per cent. of the net profits of the company, if there is a managing or whole-timedirector or manager;

(B) three per cent. of the net profits in any other case.

3[Provided also that, where the company has defaulted in payment of dues to any bank or publicfinancial institution or non-convertible debenture holders or any other secured creditor, the prior approvalof the bank or public financial institution concerned or the non-convertible debenture holders or othersecured creditor, as the case may be, shall be obtained by the company before obtaining the approval inthe general meeting.]

(2) The percentages aforesaid shall be exclusive of any fees payable to directors under sub-section(5).

(3) Notwithstanding anything contained in sub-sections (1) and (2), but subject to the provisions ofSchedule V, if, in any financial year, a company has no profits or its profits are inadequate, the companyshall not pay to its directors, including any managing or whole-time director or manager, by way ofremuneration any sum exclusive of any fees payable to directors under sub-section (5) hereunder exceptin accordance with the provisions of Schedule V 4.

(4) The remuneration payable to the directors of a company, including any managing or whole-timedirector or manager, shall be determined, in accordance with and subject to the provisions of this section,either by the articles of the company, or by a resolution or, if the articles so require, by a specialresolution, passed by the company in general meeting and the remuneration payable to a directordetermined aforesaid shall be inclusive of the remuneration payable to him for the services rendered byhim in any other capacity:

Provided that any remuneration for services rendered by any such director in other capacity shall notbe so included if--

(a) the services rendered are of a professional nature; and

(b) in the opinion of the Nomination and Remuneration Committee, if the company is coveredunder sub-section (1) of section 178, or the Board of Directors in other cases, the director possessesthe requisite qualification for the practice of the profession.

(5) A director may receive remuneration by way of fee for attending meetings of the Board orCommittee thereof or for any other purpose whatsoever as may be decided by the Board:

Provided that the amount of such fees shall not exceed the amount as may be prescribed:

Provided further that different fees for different classes of companies and fees in respect ofindependent director may be such as may be prescribed.

(6) A director or manager may be paid remuneration either by way of a monthly payment or at aspecified percentage of the net profits of the company or partly by one way and partly by the other.

5

(8) The net profits for the purposes of this section shall be computed in the manner referred to insection 198.

6[(9) If any director draws or receives, directly or indirectly, by way of remuneration any such sumsin excess of the limit prescribed by this section or without approval required under this section, he shallrefund such sums to the company, within two years or such lesser period as may be allowed by thecompany, and until such sum is refunded, hold it in trust for the company.]

(10) The company shall not waive the recovery of any sum refundable to it under sub-section (9)unless 7[approved by the company by special resolution within two years from the date the sum becomesrefundable.]

8[Provided that where the company has defaulted in payment of dues to any bank or public financialinstitution or non-convertible debenture holders or any other secured creditor, the prior approval of thebank or public financial institution concerned or the non-convertible debenture holders or other securedcreditor, as the case may be, shall be obtained by the company before obtaining approval of such waiver.]

(11) In cases where Schedule V is applicable on grounds of no profits or inadequate profits, anyprovision relating to the remuneration of any director which purports to increase or has the effect ofincreasing the amount thereof, whether the provision be contained in the companys memorandum orarticles, or in an agreement entered into by it, or in any resolution passed by the company in generalmeeting or its Board, shall not have any effect unless such increase is in accordance with the conditionsspecified in that Schedule 9.

(12) Every listed company shall disclose in the Boards report, the ratio of the remuneration of eachdirector to the median employees remuneration and such other details as may be prescribed.

(13) Where any insurance is taken by a company on behalf of its managing director, whole-timedirector, manager, Chief Executive Officer, Chief Financial Officer or Company Secretary forindemnifying any of them against any liability in respect of any negligence, default, misfeasance, breachof duty or breach of trust for which they may be guilty in relation to the company, the premium paid onsuch insurance shall not be treated as part of the remuneration payable to any such personnel:

Provided that if such person is proved to be guilty, the premium paid on such insurance shall betreated as part of the remuneration.

(14) Subject to the provisions of this section, any director who is in receipt of any commission fromthe company and who is a managing or whole-time director of the company shall not be disqualified fromreceiving any remuneration or commission from any holding company or subsidiary company of suchcompany subject to its disclosure by the company in the Board's report.

10[(15) If any person makes any default in complying with the provisions of this section, he shall beliable to a penalty of one lakh rupees and where any default has been made by a company, the companyshall be liable to a penalty of five lakh rupees.]

11[(16) The auditor of the company shall, in his report under section 143, make a statement as towhether the remuneration paid by the company to its directors is in accordance with the provisions of thissection, whether remuneration paid to any director is in excess of the limit laid down under this sectionand give such other details as may be prescribed..

(17) On and from the commencement of the Companies (Amendment) Act, 2017, any applicationmade to the Central Government under the provisions of this section [as it stood before suchcommencement], which is pending with that Government shall abate, and the company shall, within oneyear of such commencement, obtain the approval in accordance with the provisions of this section, as soamended.]

1. The words "with the approval of the Central Government", omitted by Act 1 of 2018, s. 67 (w.e.f. 12-9-2018).

2. Ins. by s. 67, ibid., (w.e.f. 12-9-2018).

3. The proviso ins. by s. 67, ibid. (w.e.f. 12-9-2018).

4. The words "and if it is not able to comply with such provisions, with the previous approval of the Central Government"omitted by s. 67, ibid., (w.e.f.12-9-2018).

5. Sub-section (7) omitted by Act 22 of 2019, s. 29 (w.e.f. 2-11-2018).

6. Subs. by Act 1 of 2018, s. 67 (w.e.f. 12-9-2018).

7. Subs. by s. 67, ibid., for "permitted by the Central Government" (w.e.f. 12-9-2018).

8. The proviso ins. by s. 67, ibid., (w.e.f. 12-9-2018).

9. The words "and if such conditions are not being complied, the approval of the Central Government had been obtained" bys. 67, ibid., (w.e.f. 12-9-2018).

10. Subs. by Act 22 of 2019, s. 29, for sub-section (15) (w.e.f. 2-11-2018).

11. Ins. by Act 1 of 2018, s. 67 (w.e.f. 12-9-2018).

(1) In computing the net profits of a company in any financial year forthe purpose of section 197,--

(a) credit shall be given for the sums specified in sub-section (2), and credit shall not be given forthose specified in sub-section (3); and

(b) the sums specified in sub-section (4) shall be deducted, and those specified in sub-section (5)shall not be deducted.

(2) In making the computation aforesaid, credit shall be given for the bounties and subsidies receivedfrom any Government, or any public authority constituted or authorised in this behalf, by anyGovernment, unless and except in so far as the Central Government otherwise directs.

(3) In making the computation aforesaid, credit shall not be given for the following sums, namely:--

(a) profits, by way of premium on shares or debentures of the company, which are issued or soldby the company 1[unless the company is an investment company as referred to in clause (a) of theExplanation to section 186];

(b) profits on sales by the company of forfeited shares;

(c) profits of a capital nature including profits from the sale of the undertaking or any of theundertakings of the company or of any part thereof;

(d) profits from the sale of any immovable property or fixed assets of a capital nature comprisedin the undertaking or any of the undertakings of the company, unless the business of the companyconsists, whether wholly or partly, of buying and selling any such property or assets:

Provided that where the amount for which any fixed asset is sold exceeds the written-down valuethereof, credit shall be given for so much of the excess as is not higher than the difference betweenthe original cost of that fixed asset and its written-down value;

(e) any change in carrying amount of an asset or of a liability recognised in equity reservesincluding surplus in profit and loss account on measurement of the asset or the liability at fair value.

2[(f) any amount representing unrealised gains, notional gains or revaluation of assets.]

(4) In making the computation aforesaid, the following sums shall be deducted, namely:--

(a) all the usual working charges;

(b) directors remuneration;

(c) bonus or commission paid or payable to any member of the company's staff, or to anyengineer, technician or person employed or engaged by the company, whether on a whole-time or ona part-time basis;

(d) any tax notified by the Central Government as being in the nature of a tax on excess orabnormal profits;

(e) any tax on business profits imposed for special reasons or in special circumstances andnotified by the Central Government in this behalf;

(f) interest on debentures issued by the company;

(g) interest on mortgages executed by the company and on loans and advances secured by acharge on its fixed or floating assets;

(h) interest on unsecured loans and advances;

(i) expenses on repairs, whether to immovable or to movable property, provided the repairs arenot of a capital nature;

(j) outgoings inclusive of contributions made under section 181;

(k) depreciation to the extent specified in section 123;

(l) the excess of expenditure over income, which had arisen in computing the net profits inaccordance with this section in any year 1, in so far as such excess has not been deducted in anysubsequent year preceding the year in respect of which the net profits have to be ascertained;

(m) any compensation or damages to be paid in virtue of any legal liability including a liabilityarising from a breach of contract;

(n) any sum paid by way of insurance against the risk of meeting any liability such as is referredto in clause (m);

(o) debts considered bad and written off or adjusted during the year of account.

(5) In making the computation aforesaid, the following sums shall not be deducted, namely:--

(a) income-tax and super-tax payable by the company under the Income-tax Act, 1961 (43 of1961), or any other tax on the income of the company not falling under clauses (d) and (e) of subsection(4);

(b) any compensation, damages or payments made voluntarily, that is to say, otherwise than invirtue of a liability such as is referred to in clause (m) of sub-section (4);

(c) loss of a capital nature including loss on sale of the undertaking or any of the undertakings ofthe company or of any part thereof not including any excess of the written-down value of any assetwhich is sold, discarded, demolished or destroyed over its sale proceeds or its scrap value;

(d) any change in carrying amount of an asset or of a liability recognised in equity reservesincluding surplus in profit and loss account on measurement of the asset or the liability at fair value.

1. Ins. by s. 68, iibid., (w.e.f. 12-9-2018).

2. Clause (f) ins. by s. 68, ibid., (w.e.f. 12-9-2018).

3. The words "which begins at or after the commencement of this Act" omitted by Act 1 of 2018, s. 68 (w.e.f. 12-9-2018)

Without prejudice to any liability incurred underthe provisions of this Act or any other law for the time being in force, where a company is required to restateits financial statements due to fraud or non-compliance with any requirement under this Act and therules made thereunder, the company shall recover from any past or present managing director or wholetimedirector or manager or Chief Executive Officer (by whatever name called) who, during the period forwhich the financial statements are required to be re-stated, received the remuneration (including stockoption) in excess of what would have been payable to him as per restatement of financial statements.

Notwithstanding anything contained in this Chapter, 2 a company may, while according its approvalunder section 196, to any appointment or to any remuneration under section 197 in respect of cases wherethe company has inadequate or no profits, fix the remuneration within the limits specified in this Act, atsuch amount or percentage of profits of the company, as it may deem fit and while fixing theremuneration, 1 the company shall have regard to--

(a) the financial position of the company;

(b) the remuneration or commission drawn by the individual concerned in any other capacity;

(c) the remuneration or commission drawn by him from any other company;

(d) professional qualifications and experience of the individual concerned;

(e) such other matters as may be prescribed.

1. The words "which begins at or after the commencement of this Act" omitted by Act 1 of 2018, s. 68 (w.e.f. 12-9-2018).

2. The words "the Central Government or" omitted s. 69, ibid., (w.e.f. 12-9-2018).

(1) Every application made tothe Central Government under ¹[section 196] shall be in such form as may be prescribed.

(2) (a) Before any application is made by a company to the Central Government under ²[section 196], there shall be issued by or on behalf of the company a general notice to the members thereof, indicatingthe nature of the application proposed to be made.

(b) Such notice shall be published at least once in a newspaper in the principal language of the districtin which the registered office of the company is situate and circulating in that district, and at least once inEnglish in an English newspaper circulating in that district.

(c) The copies of the notices, together with a certificate by the company as to the due publicationthereof, shall be attached to the application.

1The words "this Chapter" omitted by s. 70, ibid., (w.e.f. 12-9-2018).

2. Subs. by s. 70, ibid., for "any of the sections aforesaid" (w.e.f. 12-9-2018)

(1) Acompany may make payment to a managing or whole-time director or manager, but not to any otherdirector, by way of compensation for loss of office, or as consideration for retirement from office or inconnection with such loss or retirement.

(2) No payment shall be made under sub-section (1) in the following cases, namely:--

(a) where the director resigns from his office as a result of the reconstruction of the company,orof its amalgamation with any other body corporate or bodies corporate, and is appointed as themanaging or whole-time director, manager or other officer of the reconstructed company or of thebody corporate resulting from the amalgamation;

(b) where the director resigns from his office otherwise than on the reconstruction of the companyor its amalgamation as aforesaid;

(c) where the office of the director is vacated under sub-section (1) of section 167;

(d) where the company is being wound up, whether by an order of the Tribunal or voluntarily,provided the winding up was due to the negligence or default of the director;

(e) where the director has been guilty of fraud or breach of trust in relation to, or of grossnegligence in or gross mismanagement of, the conduct of the affairs of the company or any subsidiarycompany or holding company thereof; and

(f) where the director has instigated, or has taken part directly or indirectly in bringing about, thetermination of his office.

(3) Any payment made to a managing or whole-time director or manager in pursuance of sub-section (1) shall not exceed the remuneration which he would have earned if he had been in office for theremainder of his term or for three years, whichever is shorter, calculated on the basis of the averageremuneration actually earned by him during a period of three years immediately preceding the date onwhich he ceased to hold office, or where he held the office for a lesser period than three years, duringsuch period:

Provided that no such payment shall be made to the director in the event of the commencement of thewinding up of the company, whether before or at any time within twelve months after, the date on whichhe ceased to hold office, if the assets of the company on the winding up, after deducting the expensesthereof, are not sufficient to repay to the shareholders the share capital, including the premiums, if any,contributed by them.

(4) Nothing in this section shall be deemed to prohibit the payment to a managing or whole-timedirector, or manager, of any remuneration for services rendered by him to the company in any othercapacity.

(1) Every company belonging to such class orclasses of companies as may be prescribed shall have the following whole-time key managerialpersonnel,--

(i) managing director, or Chief Executive Officer or manager and in their absence, a whole-timedirector;

(ii) company secretary; and

(iii) Chief Financial Officer :

Provided that an individual shall not be appointed or reappointed as the chairperson of thecompany, in pursuance of the articles of the company, as well as the managing director or ChiefExecutive Officer of the company at the same time after the date of commencement of this Actunless,--

(a) the articles of such a company provide otherwise; or

(b) the company does not carry multiple businesses:

Provided further that nothing contained in the first proviso shall apply to such class ofcompanies engaged in multiple businesses and which has appointed one or more Chief ExecutiveOfficers for each such business as may be notified by the Central Government.

(2) Every whole-time key managerial personnel of a company shall be appointed by means of aresolution of the Board containing the terms and conditions of the appointment including theremuneration.

(3) A whole-time key managerial personnel shall not hold office in more than one company except inits subsidiary company at the same time:

Provided that nothing contained in this sub-section shall disentitle a key managerial personnel frombeing a director of any company with the permission of the Board:

Provided further that whole-time key managerial personnel holding office in more than one companyat the same time on the date of commencement of this Act, shall, within a period of six months from suchcommencement, choose one company, in which he wishes to continue to hold the office of keymanagerial personnel:

Provided also that a company may appoint or employ a person as its managing director, if he is themanaging director or manager of one, and of not more than one, other company and such appointment oremployment is made or approved by a resolution passed at a meeting of the Board with the consent of allthe directors present at the meeting and of which meeting, and of the resolution to be moved thereat,specific notice has been given to all the directors then in India.

(4) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall befilled-up by the Board at a meeting of the Board within a period of six months from the date of suchvacancy.

1[(5) If any company makes any default in complying with the provisions of this section, suchcompany shall be liable to a penalty of five lakh rupees and every director and key managerial personnelof the company who is in default shall be liable to a penalty of fifty thousand rupees and where the defaultis a continuing one, with a further penalty of one thousand rupees for each day after the first during whichsuch default continues but not exceeding five lakh rupees.]

1. Subs. by Act 22 of 2019, s. 30, for sub-section (5) (w.e.f. 2-11-2018).

(1) Every listed company and a company belongingto other class of companies as may be prescribed shall annex with its Boards report made in terms ofsub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in suchform as may be prescribed.

(2) It shall be the duty of the company to give all assistance and facilities to the company secretary inpractice, for auditing the secretarial and related records of the company.

(3) The Board of Directors, in their report made in terms of sub-section (3) of section 134, shallexplain in full any qualification or observation or other remarks made by the company secretary inpractice in his report under sub-section (1).

(4) If a company or any officer of the company or the company secretary in practice, contravenes theprovisions of this section, the company, every officer of the company or the company secretary inpractice, who is in default, shall be punishable with fine which shall not be less than one lakh rupees butwhich may extend to five lakh rupees.

(1) The functions of the company secretary shallinclude,--

(a) to report to the Board about compliance with the provisions of this Act, the rules madethereunder and other laws applicable to the company;

(b) to ensure that the company complies with the applicable secretarial standards;

(c) to discharge such other duties as may be prescribed.

Explanation.--For the purpose of this section, the expression secretarial standards meanssecretarial standards issued by the Institute of Company Secretaries of India constituted under section 3 ofthe Company Secretaries Act, 1980 (56 of 1980) and approved by the Central Government.

(2) The provisions contained in section 204 and section 205 shall not affect the duties and functionsof the Board of Directors, chairperson of the company, managing director or whole-time director underthis Act, or any other law for the time being in force.

(1) Where on ascrutiny of any document filed by a company or on any information received by him, the Registrar is ofthe opinion that any further information or explanation or any further documents relating to the companyis necessary, he may by a written notice require the company--

(a) to furnish in writing such information or explanation; or

(b) to produce such documents,

within such reasonable time, as may be specified in the notice.

(2) On the receipt of a notice under sub-section (1), it shall be the duty of the company and of itsofficers concerned to furnish such information or explanation to the best of their knowledge and powerand to produce the documents to the Registrar within the time specified or extended by the Registrar:

Provided that where such information or explanation relates to any past period, the officers who hadbeen in the employment of the company for such period, if so called upon by the Registrar through anotice served on them in writing, shall also furnish such information or explanation to the best of theirknowledge.

(3) If no information or explanation is furnished to the Registrar within the time specified under subsection(1) or if the Registrar on an examination of the documents furnished is of the opinion that theinformation or explanation furnished is inadequate or if the Registrar is satisfied on a scrutiny of the documents furnished that an unsatisfactory state of affairs exists in the company and does not disclose afull and fair statement of the information required, he may, by another written notice, call on the companyto produce for his inspection such further books of account, books, papers and explanations as he mayrequire at such place and at such time as he may specify in the notice:

Provided that before any notice is served under this sub-section, the Registrar shall record his reasonsin writing for issuing such notice.

(4) If the Registrar is satisfied on the basis of information available with or furnished to him or on arepresentation made to him by any person that the business of a company is being carried on for afraudulent or unlawful purpose or not in compliance with the provisions of this Act or if the grievances ofinvestors are not being addressed, the Registrar may, after informing the company of the allegations madeagainst it by a written order, call on the company to furnish in writing any information or explanation onmatters specified in the order within such time as he may specify therein and carry out such inquiry as hedeems fit after providing the company a reasonable opportunity of being heard:

Provided that the Central Government may, if it is satisfied that the circumstances so warrant, directthe Registrar or an inspector appointed by it for the purpose to carry out the inquiry under this subsection:

Provided further that where business of a company has been or is being carried on for a fraudulent orunlawful purpose, every officer of the company who is in default shall be punishable for fraud in themanner as provided in section 447.

(5) Without prejudice to the foregoing provisions of this section, the Central Government may, if it issatisfied that the circumstances so warrant, direct inspection of books and papers of a company by aninspector appointed by it for the purpose.

(6) The Central Government may, having regard to the circumstances by general or special order,authorise any statutory authority to carry out the inspection of books of account of a company or class ofcompanies.

(7) If a company fails to furnish any information or explanation or produce any document requiredunder this section, the company and every officer of the company, who is in default shall be punishablewith a fine which may extend to one lakh rupees and in the case of a continuing failure, with an additionalfine which may extend to five hundred rupees for every day after the first during which the failurecontinues.

(1) Where a Registrar or inspector calls for the books ofaccount and other books and papers under section 206, it shall be the duty of every director, officer orother employee of the company to produce all such documents to the Registrar or inspector and furnishhim with such statements, information or explanations in such form as the Registrar or inspector mayrequire and shall render all assistance to the Registrar or inspector in connection with such inspection.

(2) The Registrar or inspector, making an inspection or inquiry under section 206 may, during thecourse of such inspection or inquiry, as the case may be,--

(a) make or cause to be made copies of books of account and other books and papers; or

(b) place or cause to be placed any marks of identification in such books in token of theinspection having been made.

(3) Notwithstanding anything contained in any other law for the time being in force or in any contractto the contrary, the Registrar or inspector making an inspection or inquiry shall have all the powers as arevested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respectof the following matters, namely:--

(a) the discovery and production of books of account and other documents, at such place and timeas may be specified by such Registrar or inspector making the inspection or inquiry;

(b) summoning and enforcing the attendance of persons and examining them on oath; and

(c) inspection of any books, registers and other documents of the company at any place.

(4) (i) If any director or officer of the company disobeys the direction issued by the Registrar or theinspector under this section, the director or the officer shall be punishable with imprisonment which mayextend to one year and with fine which shall not be less than twenty-five thousand rupees but which mayextend to one lakh rupees.

(ii) If a director or an officer of the company has been convicted of an offence under this section, thedirector or the officer shall, on and from the date on which he is so convicted, be deemed to have vacatedhis office as such and on such vacation of office, shall be disqualified from holding an office in anycompany.

The Registrar or inspector shall, after the inspection of thebooks of account or an inquiry under section 206 and other books and papers of the company undersection 207, submit a report in writing to the Central Government along with such documents, if any, andsuch report may, if necessary, include a recommendation that further investigation into the affairs of thecompany is necessary giving his reasons in support.

(1) Where, upon information in his possession or otherwise, theRegistrar or inspector has reasonable ground to believe that the books and papers of a company, orrelating to the key managerial personnel or any director or auditor or company secretary in practice if thecompany has not appointed a company secretary, are likely to be destroyed, mutilated, altered, falsified orsecreted, he may, after obtaining an order from the Special Court for the seizure of such books andpapers,--

(a) enter, with such assistance as may be required, and search, the place or places where suchbooks or papers are kept; and

(b) seize such books and papers as he considers necessary after allowing the company to takecopies of, or extracts from, such books or papers at its cost.

(2) The Registrar or inspector shall return the books and papers seized under subsection (1), as soonas may be, and in any case not later than one hundred and eightieth day after such seizure, to the companyfrom whose custody or power such books or papers were seized:

Provided that the books and papers may be called for by the Registrar or inspector for a further periodof one hundred and eighty days by an order in writing if they are needed again:

Provided further that the Registrar or inspector may, before returning such books and papers asaforesaid, take copies of, or extracts from them or place identification marks on them or any part thereofor deal with the same in such other manner as he considers necessary.

(3) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to searches orseizures shall apply, mutatis mutandis, to every search and seizure made under this section.

(1) Where the Central Government is of the opinion,that it is necessary to investigate into the affairs of a company,--

(a) on the receipt of a report of the Registrar or inspector under section 208;

(b) on intimation of a special resolution passed by a company that the affairs of the companyought to be investigated; or

(c) in public interest,

it may order an investigation into the affairs of the company.

(2) Where an order is passed by a court or the Tribunal in any proceedings before it that the affairs ofa company ought to be investigated, the Central Government shall order an investigation into the affairsof that company.

(3) For the purposes of this section, the Central Government may appoint one or more persons asinspectors to investigate into the affairs of the company and to report thereon in such manner as theCentral Government may direct.

(1) The Central Government shall, by notification, establish an office to be called the Serious Fraud Investigation Office to investigate fraudsrelating to a company:

Provided that until the Serious Fraud Investigation Office is established under subsection (1), theSerious Fraud Investigation Office set-up by the Central Government in terms of the Government of IndiaResolution No. 45011/16/2003-Adm-I, dated the 2nd July, 2003 shall be deemed to be the Serious FraudInvestigation Office for the purpose of this section.

(2) The Serious Fraud Investigation Office shall be headed by a Director and consist of such numberof experts from the following fields to be appointed by the Central Government from amongst persons ofability, integrity and experience in,--

(i) banking;

(ii) corporate affairs;

(iii) taxation;

(iv) forensic audit;

(v) capital market;

(vi) information technology;

(vii) law; or

(viii) such other fields as may be prescribed.

(3) The Central Government shall, by notification, appoint a Director in the Serious FraudInvestigation Office, who shall be an officer not below the rank of a Joint Secretary to the Government ofIndia having knowledge and experience in dealing with matters relating to corporate affairs.

(4) The Central Government may appoint such experts and other officers and employees in theSerious Fraud Investigation Office as it considers necessary for the efficient discharge of its functionsunder this Act.

(5) The terms and conditions of service of Director, experts, and other officers and employees of theSerious Fraud Investigation Office shall be such as may be prescribed.

(1) Withoutprejudice to the provisions of section 210, where the Central Government is of the opinion, that it isnecessary to investigate into the affairs of a company by the Serious Fraud Investigation Office--

(a) on receipt of a report of the Registrar or inspector under section 208;

(b) on intimation of a special resolution passed by a company that its affairs are required to beinvestigated;

(c) in the public interest; or

(d) on request from any Department of the Central Government or a State Government,

the Central Government may, by order, assign the investigation into the affairs of the said company to theSerious Fraud Investigation Office and its Director, may designate such number of inspectors, as he mayconsider necessary for the purpose of such investigation.

(2) Where any case has been assigned by the Central Government to the Serious Fraud InvestigationOffice for investigation under this Act, no other investigating agency of Central Government or any StateGovernment shall proceed with investigation in such case in respect of any offence under this Act and incase any such investigation has already been initiated, it shall not be proceeded further with and theconcerned agency shall transfer the relevant documents and records in respect of such offences under thisAct to Serious Fraud Investigation Office.

(3) Where the investigation into the affairs of a company has been assigned by the CentralGovernment to Serious Fraud Investigation Office, it shall conduct the investigation in the manner and follow the procedure provided in this Chapter; and submit its report to the Central Government withinsuch period as may be specified in the order.

(4) The Director, Serious Fraud Investigation Office shall cause the affairs of the company to beinvestigated by an Investigating Officer who shall have the power of the inspector under section 217.

(5) The company and its officers and employees, who are or have been in employment of thecompany shall be responsible to provide all information, explanation, documents and assistance to theInvestigating Officer as he may require for conduct of the investigation.

(6) Notwithstanding anything contained in the Code of Criminal Procedure, 1973 (2 of 1974), 1[offence covered under section 447] of this Act shall be cognizable and no person accused of any offenceunder those sections shall be released on bail or on his own bond unless--

(i) the Public Prosecutor has been given an opportunity to oppose the application for such release;and

(ii) where the Public Prosecutor opposes the application, the court is satisfied that there arereasonable grounds for believing that he is not guilty of such offence and that he is not likely tocommit any offence while on bail:

Provided that a person, who, is under the age of sixteen years or is a woman or is sick or infirm, maybe released on bail, if the Special Court so directs:

Provided further that the Special Court shall not take cognizance of any offence referred to this subsectionexcept upon a complaint in writing made by--

(i) the Director, Serious Fraud Investigation Office; or

(ii) any officer of the Central Government authorised, by a general or special order in writing inthis behalf by that Government.

(7) The limitation on granting of bail specified in sub-section (6) is in addition to the limitations underthe Code of Criminal Procedure, 1973 (2 of 1974) or any other law for the time being in force on grantingof bail.

(8) 2[If any officer not below the rank of Assistant Director] of Serious Fraud Investigation Officeauthorised in this behalf by the Central Government by general or special order, has on the basis ofmaterial in his possession reason to believe (the reason for such belief to be recorded in writing) that anyperson has been guilty of any offence punishable under sections referred to in sub-section (6), he mayarrest such person and shall, as soon as may be, inform him of the grounds for such arrest.

(9) 3[The officer authorized under sub-section (8) shall, immediately after arrest of such person undersuch sub-section], forward a copy of the order, along with the material in his possession, referred to inthat sub-section, to the Serious Fraud Investigation Office in a sealed envelope, in such manner as may beprescribed and the Serious Fraud Investigation Office shall keep such order and material for such periodas may be prescribed.

(10) Every person arrested under sub-section (8) shall within twenty-four hours, be taken to a4[Special Court or Judicial Magistrate] or a Metropolitan Magistrate, as the case may be, havingjurisdiction:

Provided that the period of twenty-four hours shall exclude the time necessary for the journey fromthe place of arrest to the 5[Special Court or Magistrate's court].

(11) The Central Government if so directs, the Serious Fraud Investigation Office shall submit aninterim report to the Central Government.

(12) On completion of the investigation, the Serious Fraud Investigation Office shall submit theinvestigation report to the Central Government.

(13) Notwithstanding anything contained in this Act or in any other law for the time being in force, acopy of the investigation report may be obtained by any person concerned by making an application inthis regard to the court.

(14) On receipt of the investigation report, the Central Government may, after examination of thereport (and after taking such legal advice, as it may think fit), direct the Serious Fraud InvestigationOffice to initiate prosecution against the company and its officers or employees, who are or have been inemployment of the company or any other person directly or indirectly connected with the affairs of thecompany.

6[(14A) Where the report under sub-section (11) or sub-section (12) states that fraud has taken placein a company and due to such fraud any director, key managerial personnel, other officer of the companyor any other person or entity, has taken undue advantage or benefit, whether in the form of any asset,property or cash or in any other manner, the Central Government may file an application before theTribunal for appropriate orders with regard to disgorgement of such asset, property or cash and also forholding such director, key managerial personnel, other officer or any other person liable personallywithout any limitation of liability.]

(15) Notwithstanding anything contained in this Act or in any other law for the time being in force,the investigation report filed with the Special Court for framing of charges shall be deemed to be a reportfiled by a police officer under section 173 of the Code of Criminal Procedure, 1973 (2 of 1974).

(16) Notwithstanding anything contained in this Act, any investigation or other action taken orinitiated by Serious Fraud Investigation Office under the provisions of the Companies Act, 1956 (1 of1956) shall continue to be proceeded with under that Act as if this Act had not been passed.

(17) (a) In case Serious Fraud Investigation Office has been investigating any offence under this Act,any other investigating agency, State Government, police authority, income-tax authorities having anyinformation or documents in respect of such offence shall provide all such information or documentsavailable with it to the Serious Fraud Investigation Office;

(b) The Serious Fraud Investigation Office shall share any information or documents available with it,with any investigating agency, State Government, police authority or income-tax authorities, which maybe relevant or useful for such investigating agency, State Government, police authority or income-taxauthorities in respect of any offence or matter being investigated or examined by it under any other law.

1. Subs. by Act 21 of 2015, s. 17, for certain words, brackets and figures (w.e.f. 29-5-2015).

2. Subs. by Act 22 of 2019, s. 31, for "If the Director, Additional Director or Assistant Director" (w.e.f. 15-8-2019).

3. Subs. by Act 22 of 2019, s. 31, for "The Director, Additional Director or Assistant Director of Serious Fraud InvestigationOffice shall, immediately after arrest of such person under sub-section (8)" (w.e.f. 15-8-2019).

4. Subs. by s. 31, ibid., for "Judicial Magistrate" (w.e.f. 15-8-2019).

5. Subs. by s. 31, ibid., for "Magistrateu2018s Court" (w.e.f. 15-8-2019).

6. Ins. by s. 31, ibid., (w.e.f. 15-8-2019).

The Tribunal may,--

(a) on an application made by--

(i) not less than one hundred members or members holding not less than one-tenth of the totalvoting power, in the case of a company having a share capital; or

(ii) not less than one-fifth of the persons on the companys register of members, in the case ofa company having no share capital,

and supported by such evidence as may be necessary for the purpose of showing that the applicants havegood reasons for seeking an order for conducting an investigation into the affairs of the company; or

(b) on an application made to it by any other person or otherwise, if it is satisfied that there arecircumstances suggesting that--

(i) the business of the company is being conducted with intent to defraud its creditors, membersor any other person or otherwise for a fraudulent or unlawful purpose, or in a manner oppressive toany of its members or that the company was formed for any fraudulent or unlawful purpose;

(ii) persons concerned in the formation of the company or the management of its affairs have inconnection therewith been guilty of fraud, misfeasance or other misconduct towards the company ortowards any of its members; or

(iii) the members of the company have not been given all the information with respect to itsaffairs which they might reasonably expect, including information relating to the calculation of thecommission payable to a managing or other director, or the manager, of the company,

order, after giving a reasonable opportunity of being heard to the parties concerned, that the affairs of thecompany ought to be investigated by an inspector or inspectors appointed by the Central Government andwhere such an order is passed, the Central Government shall appoint one or more competent persons asinspectors to investigate into the affairs of the company in respect of such matters and to report thereuponto it in such manner as the Central Government may direct:

Provided that if after investigation it is proved that--

(i) the business of the company is being conducted with intent to defraud its creditors, membersor any other persons or otherwise for a fraudulent or unlawful purpose, or that the company wasformed for any fraudulent or unlawful purpose; or

(ii) any person concerned in the formation of the company or the management of its affairs havein connection therewith been guilty of fraud,

then, every officer of the company who is in default and the person or persons concerned in the formationof the company or the management of its affairs shall be punishable for fraud in the manner as providedin section 447.

Where an investigation isordered by the Central Government in pursuance of clause (b) of sub-section (1) of section 210, or inpursuance of an order made by the Tribunal under section 213, the Central Government may beforeappointing an inspector under subsection (3) of section 210 or clause (b) of section 213, require theapplicant to give such security not exceeding twenty-five thousand rupees as may be prescribed, as it maythink fit, for payment of the costs and expenses of the investigation and such security shall be refunded tothe applicant if the investigation results in prosecution.

No firm, bodycorporate or other association shall be appointed as an inspector.

(1) Where it appears to the Central Governmentthat there is a reason so to do, it may appoint one or more inspectors to investigate and report on mattersrelating to the company, and its membership for the purpose of determining the true persons--

(a) who are or have been financially interested in the success or failure, whether real or apparent,of the company; or

(b) who are or have been able to control or to materially influence the policy of the 1[company; or].

2[(c) who have or had beneficial interest in shares of a company or who are or have beenbeneficial owners or significant beneficial owner of a company].

(2) Without prejudice to its powers under sub-section (1), the Central Government shall appoint oneor more inspectors under that sub-section, if the Tribunal, in the course of any proceeding before it,directs by an order that the affairs of the company ought to be investigated as regards the membership ofthe company and other matters relating to the company, for the purposes specified in sub-section (1).

(3) While appointing an inspector under sub-section (1), the Central Government may define thescope of the investigation, whether as respects the matters or the period to which it is to extend orotherwise, and in particular, may limit the investigation to matters connected with particular shares ordebentures.

(4) Subject to the terms of appointment of an inspector, his powers shall extend to the investigation ofany circumstances suggesting the existence of any arrangement or understanding which, though notlegally binding, is or was observed or is likely to be observed in practice and which is relevant for thepurposes of his investigation.

1. Subs. by Act 1 of 2018, s. 71 for "company" (w.e.f. 13-6-2018).

2. Ins. by s. 71, ibid., (w.e.f. 13-6-2018).

(1) It shall be the duty of all officers and otheremployees and agents including the former officers, employees and agents of a company which is underinvestigation in accordance with the provisions contained in this Chapter, and where the affairs of anyother body corporate or a person are investigated under section 219, of all officers and other employeesand agents including former officers, employees and agents of such body corporate or a person--

(a) to preserve and to produce to an inspector or any person authorised by him in this behalf allbooks and papers of, or relating to, the company or, as the case may be, relating to the other bodycorporate or the person, which are in their custody or power; and

(b) otherwise to give to the inspector all assistance in connection with the investigation whichthey are reasonably able to give.

(2) The inspector may require any body corporate, other than a body corporate referred to in subsection(1), to furnish such information to, or produce such books and papers before him or any person authorised by him in this behalf as he may consider necessary, if the furnishing of such information or theproduction of such books and papers is relevant or necessary for the purposes of his investigation.

(3) The inspector shall not keep in his custody any books and papers produced under sub-section (1)or sub-section (2) for more than one hundred and eighty days and return the same to the company, bodycorporate, firm or individual by whom or on whose behalf the books and papers were produced:

Provided that the books and papers may be called for by the inspector if they are needed again for afurther period of one hundred and eighty days by an order in writing.

(4) An inspector may examine on oath--

(a) any of the persons referred to in sub-section (1); and

(b) with the prior approval of the Central Government, any other person,

in relation to the affairsof the company, or other body corporate or person, as the case may be, and for that purpose mayrequire any of those persons to appear before him personally:

Provided that in case of an investigation under section 212, the prior approval of Director, SeriousFraud Investigation Office shall be sufficient under clause (b).

(5) Notwithstanding anything contained in any other law for the time being in force or in any contractto the contrary, the inspector, being an officer of the Central Government, making an investigation underthis Chapter shall have all the powers as are vested in a civil court under the Code of Civil Procedure,1908 (5 of 1908), while trying a suit in respect of the following matters, namely:--

(a) the discovery and production of books of account and other documents, at such place and timeas may be specified by such person;

(b) summoning and enforcing the attendance of persons and examining them on oath; and

(c) inspection of any books, registers and other documents of the company at any place.

(6) (i) If any director or officer of the company disobeys the direction issued by the Registrar or theinspector under this section, the director or the officer shall be punishable with imprisonment which mayextend to one year and with fine which shall not be less than twenty-five thousand rupees but which mayextend to one lakh rupees.

(ii) If a director or an officer of the company has been convicted of an offence under this section, thedirector or the officer shall, on and from the date on which he is so convicted, be deemed to have vacatedhis office as such and on such vacation of office, shall be disqualified from holding an office in anycompany.

(7) The notes of any examination under sub-section (4) shall be taken down in writing and shall beread over to, or by, and signed by, the person examined, and may thereafter be used in evidence againsthim.

(8) If any person fails without reasonable cause or refuses--

(a) to produce to an inspector or any person authorised by him in this behalf any book or paperwhich is his duty under sub-section (1) or sub-section (2) to produce;

(b) to furnish any information which is his duty under sub-section (2) to furnish;

(c) to appear before the inspector personally when required to do so under subsection (4) or toanswer any question which is put to him by the inspector in pursuance of that sub-section; or

(d) to sign the notes of any examination referred to in sub-section (7),

he shall be punishable with imprisonment for a term which may extend to six months and with fine whichshall not be less than twenty-five thousand rupees but which may extend to one lakh rupees, and also witha further fine which may extend to two thousand rupees for every day after the first during which thefailure or refusal continues.

(9) The officers of the Central Government, State Government, police or statutory authority shallprovide assistance to the inspector for the purpose of inspection, inquiry or investigation, which the

inspector may, with the prior approval of the Central Government, require.

(10) The Central Government may enter into an agreement with the Government of a foreign State forreciprocal arrangements to assist in any inspection, inquiry or investigation under this Act or under thecorresponding law in force in that State and may, by notification, render the application of this Chapter inrelation to a foreign State with which reciprocal arrangements have been made subject to suchmodifications, exceptions, conditions and qualifications as may be deemed expedient for implementingthe agreement with that State.

(11) Notwithstanding anything contained in this Act or in the Code of Criminal Procedure, 1973 (2 of1974) if, in the course of an investigation into the affairs of the company, an application is made to thecompetent court in India by the inspector stating that evidence is, or may be, available in a country orplace outside India, such court may issue a letter of request to a court or an authority in such country orplace, competent to deal with such request, to examine orally, or otherwise, any person, supposed to beacquainted with the facts and circumstances of the case, to record his statement made in the course ofsuch examination and also to require such person or any other person to produce any document or thing,which may be in his possession pertaining to the case, and to forward all the evidence so taken orcollected or the authenticated copies thereof or the things so collected to the court in India which hadissued such letter of request:

Provided that the letter of request shall be transmitted in such manner as the Central Government mayspecify in this behalf:

Provided further that every statement recorded or document or thing received under this sub-sectionshall be deemed to be the evidence collected during the course of investigation.

(12) Upon receipt of a letter of request from a court or an authority in a country or place outside India,competent to issue such letter in that country or place for the examination of any person or production ofany document or thing in relation to affairs of a company under investigation in that country or place, theCentral Government may, if it thinks fit, forward such letter of request to the court concerned, which shallthereupon summon the person before it and record his statement or cause any document or thing to beproduced, or send the letter to any inspector for investigation, who shall thereupon investigate into theaffairs of company in the same manner as the affairs of a company are investigated under this Act and theinspector shall submit the report to such court within thirty days or such extended time as the court mayallow for further action:

Provided that the evidence taken or collected under this sub-section or authenticated copies thereof orthe things so collected shall be forwarded by the court, to the Central Government for transmission, insuch manner as the Central Government may deem fit, to the court or the authority in country or placeoutside India which had issued the letter of request.

(1) Notwithstanding anything contained inany other law for the time being in force, if--

(a) during the course of any investigation of the affairs and other matters of or relating to acompany, other body corporate or person under section 210, section 212, section 213 or section 219or of the membership and other matters of or relating to a company, or the ownership of shares in ordebentures of a company or body corporate, or the affairs and other matters of or relating to acompany, other body corporate or person, under section 216; or

(b) during the pendency of any proceeding against any person concerned in the conduct andmanagement of the affairs of a company under Chapter XVI,such company, other body corporate or person proposes

(i) to discharge or suspend any employee; or

(ii) to punish him, whether by dismissal, removal, reduction in rank or otherwise; or

(iii) to change the terms of employment to his disadvantage,

the company, other body corporate or person, as the case may be, shall obtain approval of the Tribunal ofthe action proposed against the employee and if the Tribunal has any objection to the action proposed, itshall send by post notice thereof in writing to the company, other body corporate or person concerned.

(2) If the company, other body corporate or person concerned does not receive within thirty days ofmaking of application under sub-section (1), the approval of the Tribunal, then and only then, thecompany, other body corporate or person concerned may proceed to take against the employee, the actionproposed.

(3) If the company, other body corporate or person concerned is dissatisfied with the objection raisedby the Tribunal, it may, within a period of thirty days of the receipt of the notice of the objection, preferan appeal to the Appellate Tribunal in such manner and on payment of such fees as may be prescribed.

(4) The decision of the Appellate Tribunal on such appeal shall be final and binding on the Tribunaland on the company, other body corporate or person concerned.

(5) For the removal of doubts, it is hereby declared that the provisions of this section shall have effectwithout prejudice to the provisions of any other law for the time being in force.

If aninspector appointed under section 210 or section 212 or section 213 to investigate into the affairs of acompany considers it necessary for the purposes of the investigation, to investigate also the affairs of

(a) any other body corporate which is, or has at any relevant time been the companys subsidiarycompany or holding company, or a subsidiary company of its holding company;

(b) any other body corporate which is, or has at any relevant time been managed by any person asmanaging director or as manager, who is, or was, at the relevant time, the managing director or themanager of the company;

(c) any other body corporate whose Board of Directors comprises nominees of the company or isaccustomed to act in accordance with the directions or instructions of the company or any of itsdirectors; or

(d) any person who is or has at any relevant time been the companys managing director ormanager or employee,

he shall, subject to the prior approval of the Central Government, investigate into and report on the affairsof the other body corporate or of the managing director or manager, in so far as he considers that theresults of his investigation are relevant to the investigation of the affairs of the company for which he isappointed.

(1) Where in the course of an investigation under thisChapter, the inspector has reasonable grounds to believe that the books and papers of, or relating to, anycompany or other body corporate or managing director or manager of such company are likely to bedestroyed, mutilated, altered, falsified or secreted, the inspector may--

(a) enter, with such assistance as may be required, the place or places where such books andpapers are kept in such manner as may be required; and

(b) seize books and papers as he considers necessary after allowing the company to take copiesof, or extracts from, such books and papers at its cost for the purposes of his investigation.

(2) The inspector shall keep in his custody the books and papers seized under this section for such aperiod not later than the conclusion of the investigation as he considers necessary and thereafter shallreturn the same to the company or the other body corporate, or, as the case may be, to the managingdirector or the manager or any other person from whose custody or power they were seized:

Provided that the inspector may, before returning such books and papers as aforesaid, take copies of,or extracts from them or place identification marks on them or any part thereof or deal with the same insuch manner as he considers necessary.

(3) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches orseizures shall apply mutatis mutandis to every search or seizure made under this section.