Shares and section 154 of the Companies Act, 1956 contains guidelines for closing the register of members. It lays down.
1, A company may, after giving not less than previous seven days notice in some newspaper advertisement circulating in the district in which the company registered office is located, close the register of members or the debenture register holders for any period or not exceeding periods in the forty-five days aggregate in each year, but not exceeding at any time thirty days at any one time.
2. If the members register or of closed debenture holders without issuing the provided notice in Sub-section (1), or after issuing shorter notice than that so given., for a continuous or an aggregate period in excess of limit specified in that sub-section, or after give notice shorter than that so provided, or for a continuous or a period which is aggregate in the specified limits which is excess in that sub-section, with fine shall be punishable which may exceed to rupees five thousand for every day during which the register is so closed.
The provisions in Section 154 contained is permissive and not important. The section has only application when a company desires its register to close of members and in such a situation, the section requirements are to be compiled with.
A company is not bound to close its register for a day even. But if it does choose the section provisions will have to be compiled with. The Madras High court is of the view that it is the mandatory section at least to this extent that if the company chooses to close the members register at least to this extent that if the chooses to close its members register it would have to comply with this section requirements .
In this section the power is not intended for the company convenience in order to enable the members register to be brought for the purpose up-to the date of dividend calculating and bonus,. etc., However, even if the members register is finished, the company is obliged to make entries certain during the closure period such as entries to registration related and probates and administration letters, change of name notices and address and orders court, such as orders changing, etc.,
The register closure is cloaked with the right the transfer refuse the shares transfer/debentures. Date of record is an alternate for the register closing. The purpose of the registers closing is to get the updated registers and to fix a cut-off date for the payment purpose of dividend or the rights issue and shares of bonus. The purpose can also be achieved by a record fixing for a day.
The companies, whose listed shares on one or more exchanges of stock are needed under the Listing Agreement for closure to fix dates of the register in consultation with the exchanges of stock concerned. Companies are need to give the stock exchange(s) that are concerned notice advance required by the Listing Agreement.
Register of foreign.
Section 157 of the Companies Act, companies empower to keep registers that are foreign of debenture holders or members, mentions.
A company which has share capital or which has debentures issued may if so authorized by its articles, keep in any country or State or out of country in India, a branch of members register or resident of debenture holders in that Country or State, (In this Act called a “foreign register”).
The company shall, within thirty days form the opening date of any register of foreign, file with the registrar notice of the office situation where register such is kept; and in the event in the situation of any change of such office or of its discontinuance, shall, within thirty days from such change date or discontinuance, as may be the case, notice of file with the registrar of such discontinuance or change, as may be the case, notice of file with the registrar of such discontinuance or change.
If default is made with the sub-section (2) requirements in complying, every company officer and the company who is in default, shall be with fine punishable which may extend to rupees five hundred for every day during which continues the default.
A register of foreign is deemed to the company part principal register and in the same manner it should be kept as the principal register and be likewise to inspection open.
Such register duplicate should be maintained at the office registered in India and all entries in the register of foreign made should be made in the register duplicate at the office registered as soon as possible.
A company may discontinue a register of foreign at any time but all the entries made in it to the principal register must be transferred.
The competent Court decision in the Country or State in which a register of foreign is kept, with regard to its rectification, shall be as effective as if it were a Competent court decision in India, if the Central Government, by notification in the Official Gazette, so directs.
Preservation of Registers, etc.
The Companies (Preservation and records disposal ) rules, 1966 regulate the preservation and registers disposal which the registered companies under the Companies Act, 1956 are needed to maintain.
Rule 2 of the mentioned rules, lays down that :
- Register of members commencing from the registration date of the permanent company and is not to be destroyed at any point of time.
- Index of members is also a record which is permanent and is not to be destroyed at any point of time.
- Register and debenture holders Index should be safeguarded for fifteen years till after the debentures redemption.
- All annual returns copies prepared under Section 159 and Section 160 and all document copies needed to be annexed thereof to under Sections 160 and 161 for eight years are to be safeguarded from the date of filing with the Companies registrar.
According to Rule 3 of the Rules, the Companies registrar may, by order in writing, direct any company to safeguard any of the above registers and documents beyond the specified period for retention above.
Rule 4 makes it obligatory on the companies part to maintain a register in the prescribed form in the rules where they shall enter particulars brief of the destroyed documents and made all entries therein shall be authenticated by the secretary or such other person may be authorized for the purpose by the board.
No notice of Trust.
Sometimes shares are held in trust. For example, shares of which A is the real owner may be registered in the name of B by him. A, in this case is the owner beneficial and B is the trustee. B holds in trust for A the shares. B name’s in the company register of members will be entered and he alone is the entitled member to the membership rights and is liable also as member and as contributory in the company event going into liquidation, for the unpaid amount on shares . According to Section 153 of the companies Act; “No notice of any trust, constructive, express or implied, shall be entered on the members register or of debenture holders.
In Murshidabad Loan Office Ltd, v. Satish Chandra Chakravarti, A.I.R. 1943 Cal. 440, S, a lady was registered as holder of company certain shares. The company, on learning that actually the shares belonged to her husband, sued her husband for the calls unpaid on the shares. Held, he was not liable as he was not the company members. It is only the member registered, who is liable on the shares, though he or she may not be the shares real owner. The Court observed: ” Assuming that the shareholder registered is not the owner which is real but if he is the member of the company books, it is alone he who would be entitled to the shareholders rights and he alone is liable for call on shares and to be put on the contributories list.
In a Madras High court decision it has been held that the section does not prevent the director which is managing of a company from contending that the held shares by his wife were held only by her for him as benamider .
Though as per this Section terms no notice of any trust is to be entered in the members register, the section does not prevent taking notice of the company of a trust which is brought to its notice from other evidence.
Central Government Power to investigate into Shares ownership.
Sometimes, the share holders registered in a company may be some other person nominee, who really own shares. This person enables, who in fact control a company, to conceal their status which is real from the shareholders and from the public and fraud practice to the company management with regard. To check such a practice, Sections 247 and 248 empower the Central Government an inspector to appoint to investigate into and report on the company ownership.
Declaration by Persons not holding in any share Beneficial Interest.
The sections 247 and 248 main purpose which empower the central Government to investigate the shares ownership of the companies is to know the shareholding benami. However, proved these sections in this regard ineffective. Therefore, Section 187C was inserted by the Companies (Amendment) Act, 1974 in the Companies Act, 1956 which made it obligatory of a person on part, whose name was entered of the Amendment Act at the commencement. 1st February, 1975 in the members of a company register as of a shareholder in that company but who didn’t hold beneficial interest in such share to the company to make a declaration indicating the name and of the person other particulars who held the interest which is beneficial in such share [Sub-section (10)].
Sub-section (2) of the Section made it obligatory for any person who, after 1st February, 1975, in a share beneficial interest held or in a company class of shares or where there in the beneficial interest change in a company in share, the beneficial interest holder shall make within thirty days a declaration, to the company in the Form prescribed and Sub-section (4) makes it obligatory on the company part to make a note of such declaration of members in it register and to file within thirty days with the Companies registrar in the prescribed form a return with regard to such a declaration.
Sub-section (5) prescribes for non-compliance penalty of the foregoing provisions of Section 187C which may extend to one thousand rupees for every day during which continues the failure.
The companies (declaration for beneficial interest in shares) Rule, 1975 has prescribed three forms. Form I is needed to be filed by share holders. Form II is to be filed by the shares beneficial owner and Form II is to be file by the company return with the companies registrar.
It would, thus, be seen that Sections 153C and 187C which need to take notice of the companies of the trusts and specify the name of the benami shareholders in the members register when a declaration is made to the company negates virtually the provision of Section 153 which needs the companies not to take any notice trust. Further Section 187C(8) of the Act directs that the Section 187 provisions shall not apply to the referred trustee to in Section 187B on or after 13.12.2000.