Summary: Clause 31 of the Corporate Laws (Amendment) Bill, 2026 proposes inserting new sub-section (2A) in Section 88 of the Companies Act, 2013 to provide that no notice of any express, implied, or constructive trust shall be entered in a company’s register of members or register of debenture holders. The existing Section 88 requires companies to maintain statutory registers of members, debenture holders, and other security holders but does not expressly prohibit recording notices of trust. The proposal would expressly bar such entries, require companies to recognise only the registered holder of shares or debentures for corporate purposes, simplify maintenance of statutory registers, and provide statutory clarity. The FAQ illustrates the proposal through examples involving family trusts, nominee shareholding, and voting rights, stating that trust or beneficial ownership arrangements would not be recorded in the registers. The material further states that the amendment substantially restores the principle contained in Section 153 of the Companies Act, 1956, which expressly prohibited entry of notices of trust in the register, a provision that was not carried forward into the Companies Act, 2013.
FAQ- Proposed amendment – Insertion of New Sub-section (2A) in Section 88 of the Companies Act, 2013?
Question: What is the proposed amendment – Insertion of New Sub-section (2A) in Section 88 of the Companies Act, 2013?
Answer: The proposed amendment in Clause 31 of the Corporate Laws (Amendment) Bill, 2026 seeks to insert a new sub-section (2A) in Section 88 of the Companies Act, 2013.
Under the proposed provision, no notice of any trust, whether express, implied or constructive, shall be entered in the register of members or the register of debenture holders maintained by a company.
Question: What is the current position as on date regarding Section 88 of the Companies Act, 2013?
Answer: As on date, Section 88 of the Companies Act, 2013 requires every company to maintain statutory registers of:
- Members;
- Debenture holders; and
- Other security holders.
These registers contain the particulars prescribed under the Companies Act, 2013 and the applicable rules.
However, the Companies Act, 2013 does not expressly prohibit the entry of notices relating to express, implied or constructive trusts in these statutory registers. In other words, there is presently no specific statutory provision under Section 88 that bars a company from recording a notice of trust in its register of members or register of debenture holders.
The proposed insertion of sub-section (2A) under Clause 31 of the Corporate Laws (Amendment) Bill, 2026 seeks to expressly provide that no notice of any trust shall be entered in the register of members or the register of debenture holders maintained by a company, thereby bringing statutory clarity to this position.
Question: Can you explain the proposed amendment to Section 88(2A) of the Companies Act, 2013 with an example?
Answer: Yes. The proposed amendment can be understood with the following simple examples.
Example 1 – Family Trust
Suppose Mr. A purchases 10,000 shares of XYZ Ltd. in his own name but holds them as a trustee for his minor son, B.
- Registered (Legal) Owner: Mr. A
- Beneficial Owner: B
Mr. A requests the company to record in its Register of Members that he is holding the shares in trust for B.
Current Position: The Companies Act, 2013 does not expressly prohibit such an entry, although companies generally do not record trust arrangements in their statutory registers.
After the Proposed Amendment: The company cannot record the trust in its Register of Members. The register will simply show:
| Name | No. of Shares |
| Mr. A | 10,000 |
There will be no mention that Mr. A holds the shares in trust for B.
Example 2 – Nominee Shareholding
Mrs. X purchases shares on behalf of Mr. Y under a private arrangement. Although Mr. Y is the actual investor, the shares are registered in the name of Mrs. X.
Mr. Y requests the company to record that Mrs. X is holding the shares in trust for him.
After the Proposed Amendment: The company must refuse the request. Its Register of Members will contain only the name of Mrs. X, who is the registered shareholder. The company will deal only with Mrs. X for all purposes under the Companies Act.
Example 3 – Voting Rights
Mr. A is the registered shareholder, while Mr. B claims to be the beneficial owner under a trust. At the Annual General Meeting, Mr. B claims that he should be allowed to vote because he is the real owner.
After the Proposed Amendment:
The company can lawfully refuse the request and state that only Mr. A, whose name appears in the Register of Members, is entitled to exercise voting rights. The company is not concerned with any trust or beneficial ownership arrangement.
Conclusion: The proposed amendment makes it expressly clear that a company will recognize only the registered holder of shares or debentures. Any trust, nominee arrangement, or beneficial ownership will remain a matter between the concerned parties and cannot be recorded in the company’s statutory registers. Consequently, all statutory rights—including voting rights, dividend entitlement, and participation in meetings—will be determined solely on the basis of the registered ownership recorded by the company.
Question: What will be the impact of the proposed insertion of sub-section (2A) in Section 88 of the Companies Act, 2013?
Answer: The proposed insertion of sub-section (2A) in Section 88 seeks to reinforce the long-established principle that a company is concerned only with the legal ownership of shares or debentures and not with the beneficial or equitable interests arising from trusts or private arrangements.
The key impacts of the proposed amendment are as follows:
- No recording of trusts: Companies will not be permitted to record any notice of an express, implied or constructive trust in the register of members or the register of debenture holders.
- Recognition of registered holders only: For all corporate purposes, the company will recognize only the registered holder of shares or debentures, irrespective of any beneficial ownership or trust arrangement.
- Simplified maintenance of statutory registers: Companies will no longer have to deal with trust-related entries, making the maintenance of statutory registers more straightforward.
- Reduction in disputes: The amendment is expected to reduce administrative difficulties and legal disputes arising from claims based on beneficial ownership or equitable interests.
- Greater legal certainty: Rights such as voting rights, dividend entitlement, participation in meetings and other statutory rights will be determined solely on the basis of the registered ownership recorded in the company’s registers.
- Statutory clarity: The amendment expressly incorporates into the Companies Act a principle that has traditionally been followed under company law, thereby eliminating ambiguity.
In conclusion, the proposed amendment is clarificatory and declaratory in nature. It does not invalidate trusts or beneficial ownership arrangements between private parties. Instead, it makes it clear that such arrangements are matters of trust law or private contracts and are not required to be recognised or recorded by the company in its statutory registers.
Question: Whether this provision already existed under the Companies Act, 1956?
Answer: Yes. The proposed amendment substantially restores a provision that already existed under the Companies Act, 1956.
Position under the Companies Act, 1956
The Companies Act, 1956 contained Section 153, titled “Trusts not to be entered on register”, which provided:
“No notice of any trust, express, implied or constructive, shall be entered on the register of members or of debenture holders.”
Accordingly, companies were expressly prohibited from recording any notice of an express, implied or constructive trust in their register of members or debenture holders.
Position under the Companies Act, 2013
When the Companies Act, 2013 replaced the Companies Act, 1956, Section 153 was not carried forward. As a result, the 2013 Act did not contain any express provision prohibiting the recording of trusts in the statutory registers maintained under Section 88.
Nevertheless, companies continued to follow the established principle in practice by recognizing only the registered holder of shares or debentures.
What does Clause 31 of the Corporate Laws (Amendment) Bill, 2026 propose?
Clause 31 proposes to insert a new Section 88(2A), which provides:
“No notice of any trust, whether express, implied or constructive, shall be entered in the register of members or debenture holders maintained under sub-section (1).”
This provision effectively reintroduces the same principle that previously existed under Section 153 of the Companies Act, 1956, but incorporates it into Section 88 of the Companies Act, 2013.
Comparative Position-
| Companies Act, 1956 | Companies Act, 2013 (Before Amendment) | Proposed Amendment, 2026 |
| Section 153 expressly prohibited the entry of notices of trust in the register of members or debenture holders. | No corresponding provision existed under the 2013 Act. | Proposed Section 88(2A) restores the same prohibition by expressly barring the recording of notices of trust in the statutory registers. |
Practical Significance
The proposed amendment is restorative rather than revolutionary. It revives a well-established principle of company law that existed under the Companies Act, 1956 but was omitted when the Companies Act, 2013 was enacted. The amendment provides statutory clarity by reaffirming that a company is concerned only with the registered legal owner of shares or debentures and will not record any express, implied or constructive trust in its statutory registers.
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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.
