MEMBERS AND DEBENTURES – HOLDERS

Clause 55 of Section 2 says that member in relation to a company means –

(a)  the subscriber to the memorandum of the company who shall be deemed to have agreed to become member of the company, and on its registration shall be entered as member in its register of member;

(b) every other person who agrees in writing to become a member of the company and whose name is entered in the register of the company; and

(c)  every person holding shares of the company and whose name is entered as a beneficial owner in the records of a depository.

On the other hand, a holder of a debentures is called a debentures – holder.

REGISTER OF MEMBERS, DEBENTURES – HOLDERS AND SECURITY – HOLDERS (SECTION 88):

Ever company shall keep and maintain these registers –

(a)  Register of members, resident – status and class wise;

(b) Register of debenture – holders; and

(c)  Register of any other security holders.

There will be an index of the names in every such register.

The register and index of beneficial owners maintained by a depository shall be deemed to be the corresponding register and index for the purpose of this Act.

A company may also have a Foreign Register which contain names and particulars of members, debenture – holders, other security holders or beneficial owners residing outside India. This may include a register maintained by a depository outside India containing details of beneficial owners in case of global or other depository issues.

If a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day, after the first during which the failure continues.

DECLARATION OF BENEFICIAL INTEREST IN SHARE (SECTION 89):

Where the name of a person is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares, such person shall make a declaration within such time and in such form as may be prescribed to the company specifying the name and other particulars of the person who holds the beneficial interest in such shares.

SHARE CERTIFICATE of the Bombay Electric Supply and Tramways company (Photo credit: Wikipedia)

Secondly, where the name of a person is entered in the register of members of a company as the holder of shares in that company but who does not hold the beneficial interest in such shares, such person shall make a declaration within such time and in such form as may be prescribed to the company specifying the name and other particulars of the person who holds the beneficial interest in such shares.

Where any change occurs in the beneficial interest in such shares, the member and the beneficial owner shall, within a period of thirty days from the date of such change, make a declaration to the company in such form and containing such particulars as may be prescribed.

Where any declaration under this section is made to a company, the company shall make a note of such declaration in the register concerned and shall file, within thirty days from the date of receipt of declaration by it, a return in the prescribed form with the Registrar in respect of such declaration with such fees or additional fees as may be prescribed, within the time specified under section 403.

In simple language, registered member and beneficial owner both shall make declaration to the company about their status and any change therein. The company shall note such declaration in the register and shall also file a return with the Registrar of companies. This is very important provision in case of foreign investment. This section may be called door for wholly – owned – subsidiary of a company.

No right in relation to any share in respect of which a declaration is required to be made under this section but not made by the beneficial owner, shall be enforceable by him or by any person claiming through him.

Nothing in this section shall be deemed to prejudice the obligation of a company to pay dividend to its members under this Act and the said obligation shall, on such payment, stand discharged. The company may pay dividend to the registered member not to beneficial owner and such payment to registered member shall discharge the company from its obligation for payment of dividend.

If any person fails, to make a declaration, without any reasonable cause, he shall be punishable with fine which may extend to fifty thousand rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues.

If a company, required to file a return, fails to do so before the expiry of the time specified, 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 one thousand rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the failure continues.

INVESTIGATION OF BENEFICIAL OWNERSHIP (SECTION 90):

Where it appears to the Central Government that there are reasons so to do, it may appoint one or more competent persons to investigate and report as to beneficial ownership with regard to any share or class of shares and the provisions of section 216 shall, as far as may be, apply to such investigation as if it were an investigation ordered under that section.

POWER TO CLOSE THESE REGISTERS (SECTION 91):

A company may close the register of members or the register of debenture – holders or the register of other security holders for any period or periods not exceeding in the aggregate forty-five days in each year, but not exceeding thirty days at any one time. The Company shall give a previous notice of at least seven days or such lesser period as may be specified by Securities and Exchange Board for listed companies or the companies which intend to get their securities listed, in such manner as may be prescribed.

If the register of members or of debenture-holders or of other security holders is closed without giving the notice or after giving shorter notice than that so provided, or for a continuous or an aggregate period in excess of the limits specified, the company and every officer of the company who is in default shall be liable to a penalty of five thousand rupees for every day subject to a maximum of one lakh rupees during which the register is kept closed.

POWER TO NOMINATE (SECTION 72):

Every holder of securities of a company may, at any time, nominate any person to whom his securities shall vest in the event of his death.

Where the securities of a company are held by more than one person jointly, the joint holders may together nominate any person to whom all the rights in the securities shall vest in the event of death of all the joint holders.

In case of joint holdings, after death of joint – holder remaining joint – holders shall continue as holder of the security. Where they all have nominated a person when all of them alive, that nominee shall be holder of these securities after death of all joint – holders. Where there is no nomination, joint – holding will be converted to sole – holding when last joint – holder remain, but thereafter legal heirs shall be the holders. Even last joint – holder, after becoming sole – holder may nominate a person as nominee.

Where a nomination made purports to confer on any person the right to vest the securities of the company, the nominee shall, on the death of the holder of securities become entitled to all the rights in the securities, of the holder in relation to such securities, to the exclusion of all other persons, unless the nomination is varied or cancelled. This provision clarifies a long standing legal position where nominee is only a trusty for all legal heirs of the person. This provision also negates possibility where a person is nominated under this section and another person declared as heir under will of deceased person.

Where the nominee is a minor, it shall be lawful for the holder of the securities, making the nomination to appoint any person to become entitled to the securities of the company, in the event of the death of the nominee during his minority.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

Related articles

• SHARE CAPITAL (Companies Act, 2013) (aishmghrana.me)
• DEBENTURE (Companies Act 2013) (aishmghrana.me)
• TRANSFER AND TRANSMISSION OF SECURITIES (Companies Act, 2013) (aishmghrana.me)
• ALTERATION OF SHARE CAPITAL (Companies Act 2013) (aishmghrana.me)
• PURCHASE OF OWN SHARES AND BUYBACK (Companies Act, 2013) (aishmghrana.me)
• FINANCIAL TREATMENT RELATED TO SHARE CAPITAL (Companies Act, 2013) (aishmghrana.me)