Register of Members of a Company under Companies Act 2013

As per Section 88(1), companies are required to maintain a register for different categories of members in a prescribed manner:

Maintenance of Register of Members:

• Register of Equity and Preference Shareholders:

  In accordance with Section 88(1)(a), companies must maintain separate registers for equity shareholders and preference shareholders, regardless of whether they reside in India or abroad.

• Register of Debenture and Security Holders:

  As per Section 88(1)(b) and (c), any company issuing or allotting debentures or securities is mandated to maintain a dedicated register for debenture holders and security holders. These registers must comply with Form No. MGT-2 under Rule 4 of the Companies (Management & Administration) Rules, 2014.

Index of Register of members

Section 88(2) stipulates that the registers maintained under sub-section (1) must also include an index listing the names of members. If a company has at least 50 members, it is necessary to maintain a register with an index containing sufficient and legally relevant details regarding each folio.

Responsibility for Register Maintenance

According to Section 88(3), the register and index must be maintained by a depository, as defined under Section 11 of the Depositories Act, 1996. A depository is responsible for recording the ownership of shares and securities in a dematerialized form, eliminating the risks associated with physical share certificates. While the depository remains the registered owner of the securities, it holds no rights over them, with general investors recognized as the beneficial owners. Section 11 of the Depositories Act mandates that the depository must ensure that the records of beneficial ownership are consistently updated.

Foreign Register of Members

If permitted by its articles of association, a company may maintain a portion of the register specified in sub-section (1) in a foreign country, referred to as the “foreign register.” This register must follow the same format as the principal register and record details of members, debenture holders, security holders, or beneficial owners residing in that particular country. The foreign register forms an integral part of the company’s principal register.

Penalty Non Maintenance of Register of Members

Failure to maintain the required registers for members, debenture holders, security holders, or beneficial owners, as stipulated under sub-sections (1) and (2), attracts penalties. The company, along with the responsible employees, may face a fine ranging from ₹50,000 to ₹3,00,000. In cases of continued non-compliance, an additional penalty of ₹1,000 per day will be imposed for each day the default persists.

Conclusion

Section 88 of the Companies Act, 2013, mandates companies to maintain specific registers for various categories of stakeholders, including equity shareholders, preference shareholders, debenture holders, and security holders. Companies with at least 50 members must maintain an indexed register to keep records updated. Depositories are responsible for managing these registers and ensuring accurate records of beneficial ownership. Additionally, companies may establish a foreign register if authorized by their articles of association. Failure to comply with these requirements results in substantial penalties for both the company and defaulting officers.

Frequently Asked Questions (FAQs) on Register of Members

1. What are the relevant case laws related to Section 88 of the Companies Act, 2013?
   In the case of Regus Office Centre (Mumbai) Pvt. Ltd. before the Bombay High Court, it was held that issuing shares without updating the register of members is unlawful and does not align with the company’s objectives.
2. What registers are maintained under Section 88?
   The registers include records of members, who may be equity shareholders, debenture holders, or security holders, with details of share issuances recorded accordingly.
3. What is the foreign register under Section 88 of the Companies Act, 2013?
   If a company’s articles of association permit, it may maintain a portion of its register in a foreign country, formatted identically to the principal register.
4. What are the penalties for non-compliance under Section 88?
   If a company and its officers fail to maintain the register as required, they are liable for a fine ranging from ₹50,000 to ₹3,00,000. Continued non-compliance results in an additional penalty of ₹1,000 per day.
5. What does Section 88 of the Companies Act, 2013, entail?
   Section 88 mandates that companies with at least 50 members must maintain a register containing updated records of their members.

Bibliography

• Section 88, The Companies Act, 2013