Amitav Ganguly

Amitav GangulyBACKGROUND

The Directors and other Key Managerial Personnel {KMP} of a company constitute its top management with statutory positions, authorities and accountabilities. Their appointments and changes along with their prescribed particulars, including details of the securities held/sold by them in the company etc. are legally required to be entered in a statutory register maintained in terms of section 170 0f the new Companies Act 2013. {new Act}. In view of the transparency enunciated by the corporate governance provisions, it is logical that the law provides that members of the company shall have a right to inspect such register and take extract and copies, pursuant to section 171 of the new Act. It is a valuable information- right.

This type of provision was also present in section 304 of the erstwhile Companies Act 1956 but this new section 171 provides a change in as much that the access is restricted to only the members and those persons who attend an Annual General Meeting {AGM}. Significantly, “any other person” has no such right in the new dispensation which right was present in section 304. Pertinently in section 304 there was also no stipulation as to taking of extracts and copies.

Significantly, right also exists in respect of inspection of register of members and annual returns of a company as per section 94 of the new Act. Any member, debenture holder, other security holder or beneficial owner has this right and for taking extracts and requiring of copies thereof. In this provision, however, “any other person” also has the right.

Here, we will confine our discussion to section 171 of the new Act.

LAW

SECTION 171

171. (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 take extracts therefrom and copies thereof, on a request by the members, be provided to them free of cost within thirty days; and

(b) shall also be kept open for inspection at every annual general meeting of the company and shall 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 required under that clause is not sent within thirty days from the date of receipt of such request, the Registrar shall on an application made to him order immediate inspection and supply of copies required thereunder.

OVERALL VIEW

The section states that the statutory register must be open for inspection: –

{a} During business hours;

  • the membersshall have a right to take extracts therefrom and copies thereof, on a request by the members, be provided to them free of cost within thirty days;

{b} At every AGM:

  • it shall be made accessible to any person attending the meeting.

ANALYSIS

REGISTER OPEN FOR INSPECTION

Clause {a} of Subsection {1}:

A. As already stated, the statutory register of directors and key managerial personnel and their shareholding maintained,under section 170 of the Companies Act 2013 {new Act} read with Rules 17 & 18 of the Companies {Appointment and Qualification of Directors} Rules 2014, by a company is to be kept open for inspection at its Registered office during its business hours.

B. Significantly, the said register is to be kept open throughout the year. There is no minimum or maximum time fixed for each day during which inspection will have to be allowed.

C. The members of the company shall have the statutory right to inspect and take extracts from the said register. They shall also have the right to take copies of the said register. They however must make a request to this effect. It is not clear whether a written request must be made or an oral request will suffice. However, the company may insist on a written request and to this effect may make a provision in its articles of association. Moreover, no prior request of minimum period is also required.

D. Extract and copy of the register must be provided free of cost by the company.

E. Although it is not clear but a view may be taken that a member should first inspect the register,for which pertinently no prior request is required, where- after he can request the company for the extracts and the copies thereof. Many times, in practice, the members send written requests and ask for extracts and copies of the statutory register, as for instance, the register of members, and never come to the office of the company for any inspection.

F. As per the section 171, when a request is received from the member the company shall have to comply within thirty days of the receipt of the request.There is no option open to the company to refuse this request.

G. This right is not open to “any other person” but only to members. This is unlike in section 304 of the Companies Act 1956, as stated earlier. It was held in the case of D Padamjee & Co v N H Moos, AIR, 1918 Lah.28, that persons dealing with company from outside are not expected to search the register of directors to find out whether a person acting as director in fact is a director and his name is appearing therein. The doctrine of constructive notice was restricted only to such documents as were required to be filed with ROC.

It can be said that in addition to maintenance of said statutory register, the details of directors and KMP are also required to be filed with ROC as per section 170 of the new Act. Hence the doctrine of constructive notice will apply to persons dealing with company from outside in respect of these details which are filed.

Open for inspection at AGM

Clause {b} of Subsection {1}:  The said register is also to be kept open for inspection at every annual general meeting {AGM} of the company and can be accessed by any person attending the AGM. It appears that this person may or may not be a member of the company. Significantly a non- member, in terms of section 101 of the Companies Act 2013, will constitute:

  • the legal representative of a deceased member,
  • the assignee of an insolvent member,
  • auditors of the company, and
  • every director of the company.

These persons are entitled to the notice of AGM. Thus, when on attending an AGM they are entitled to make the inspection of the register. It may be noted that this clause of the sub section does not permit these persons to take extracts and copies of the register. Moreover, it also appears that persons like employees of the company, security personnel, other staff etc., who may be in the AGM venue for various work of the meeting, cannot exercise this right. Also, it goes without saying that this provision is applicable only at AGM and not at any other general meeting.

INSPECTION/COPY REFUSED

1. Sub section {2} of section 171: provides for remedy only to the members of the company and not to the persons attending annual general meeting {AGM}. Failure on the part of the company to comply with the provisions of clause(a) of sub-section (1) of section 171, {that is, refusal to allow inspection of the register or not sending a copy}, will give a right to the member concerned to make a written application to the concerned Registrar of companies who is empowered to order immediate inspection by the member and supply to him of the required copies.

2. However, in respect of failure on the part of the company to comply with the provisions of clause(b) of sub-section (1) of section 171, {that is, not keeping the register open for inspection at the AGM}, another section 172 of the new Act will apply which states that if a company contravenes any of the provisions of this Chapter {which is Chapter XI} and for which no specific punishment is provided therein, the company and every officer of the company who is in default shall be punishable with minimum fine of fifty thousand rupees but which may extend to five lakh rupees.

CONCLUSION

It is worth reiterating that the right u/s 171 of the Companies Act 2013 is valuable information- right available to a member and any person attending an AGM, based on which he may be able to exercise his other statutory rights in terms of the law. There have been some changes in the new law compared to corresponding earlier provisions. Hopefully with more pragmatic provisions laid down herein and better implementation of the new law, this right will be duly exercised, as and when required, in line with corporate governance.

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