Companies Act Section 117

Companies Act, Section 117: Resolutions and Agreements to be Filed

Section 117 of the Companies Act outlines the requirement for companies to file certain resolutions and agreements with the Registrar of Companies (ROC) within a specified timeframe. This ensures transparency, accountability, and legal compliance in corporate decision-making.

The section applies to special resolutions, Board resolutions, and agreements that affect a company’s governance, structure, or financial obligations. It also establishes penalties for non-compliance and specifies exemptions for certain financial institutions.

1. Obligation to File Resolutions and Agreements

(a) Requirement to File with the Registrar

Every company must file a copy of specified resolutions and agreements with the Registrar of Companies (ROC) within 30 days of passing the resolution or executing the agreement. This filing must include:

1. The resolution or agreement itself.

2. An explanatory statement (if applicable), as required under Section 102, which must be attached to the notice of the meeting where the resolution was passed.

3. Prescribed fees, as determined by regulatory authorities.

(b) Special Requirements for Amendments to Articles of Association

If the resolution results in an amendment to the Articles of Association (AoA) or involves any agreement mentioned in subsection (3), the company must:

Include the amended resolution or agreement in every copy of the Articles of Association issued after the resolution is passed or the agreement is executed.

Ensure that shareholders and potential investors have access to the latest Articles of Association that accurately reflect the company’s governance framework.

2. Consequences of Non-Compliance

If a company fails to file the required resolution or agreement within the stipulated 30-day period, the following penalties will apply:

(a) Penalty for the Company

A fine of ?10,000 for failing to file within the prescribed period.

An additional penalty of ?100 per day for each day of delay beyond the first day, subject to a maximum fine of ?2,00,000.

(b) Penalty for Officers in Default

Every officer of the company who is responsible for the default, including the liquidator (if applicable), will be liable for a fine of ?10,000.

In case of continued non-compliance, an additional penalty of ?100 per day will be imposed, up to a maximum of ?50,000.

These penalties serve as a deterrent to ensure that companies comply with their legal obligations in a timely manner.

3. Types of Resolutions and Agreements Covered

The requirement to file resolutions and agreements with the Registrar of Companies (ROC) applies to the following categories:

(a) Special Resolutions

A special resolution is a resolution passed with at least three times the number of votes in favor compared to those against. These typically involve:

Changes to the Memorandum of Association (MoA) or Articles of Association (AoA).

Alterations in capital structure, including share capital reductions.

Approval for mergers, acquisitions, or voluntary winding-up.

(b) Resolutions Unanimously Agreed Upon by All Members

If a resolution is unanimously agreed upon by all members, but it would otherwise have required a special resolution, it must still be filed with the ROC.

(c) Board Resolutions Relating to Managing Directors

Resolutions passed by the Board of Directors regarding the appointment, reappointment, renewal, or modification of the terms of appointment of a Managing Director must be filed.

This ensures that all stakeholders, including regulatory authorities, investors, and creditors, are aware of key managerial appointments and contractual changes.

(d) Resolutions or Agreements Binding on a Class of Shareholders

If a resolution or agreement is binding on a particular class of shareholders (e.g., preference shareholders) but was not unanimously agreed upon, it must still be filed.

This ensures minority shareholders are aware of decisions impacting their rights.

(e) Resolutions for Voluntary Winding-Up of a Company

If a company passes a resolution for voluntary winding-up, it must be filed under Section 59 of the Insolvency and Bankruptcy Code, 2016.

This ensures transparency in insolvency proceedings and prevents misrepresentation of a company’s financial position.

(f) Resolutions Passed Under Section 179(3)

Certain Board resolutions passed under Section 179(3) must be filed with the ROC.

This includes resolutions related to:

Granting loans.

Giving guarantees.

Providing security for loans.

(g) Exemptions for Certain Financial Institutions

Banking companies, non-banking financial companies (NBFCs), and housing finance companies are exempt from filing resolutions related to granting loans, guarantees, or security, provided these activities fall within their ordinary course of business.

These exemptions are granted in consultation with the Reserve Bank of India (RBI) and the National Housing Bank (NHB).

(h) Other Prescribed Resolutions and Agreements

Any other resolutions or agreements that are required by law to be made publicly available must also be filed.

4. Inspection and Access to Filed Resolutions

As a general rule, resolutions and agreements filed under Section 117 are placed in the public domain for inspection by shareholders, investors, and regulatory authorities.

Exception: Under Section 399, certain resolutions (e.g., internal financial resolutions) cannot be inspected or copied by the public.

This ensures confidentiality of sensitive business decisions while maintaining corporate transparency where required.

5. Importance of Section 117

The filing of resolutions and agreements serves several critical functions:

Ensures Legal Compliance: Companies must comply with legal obligations, avoiding penalties and legal disputes.

Promotes Transparency: Stakeholders, including shareholders and creditors, can access important corporate decisions.

Protects Minority Shareholders: Filing prevents decisions from being made without proper disclosure or approval.

Facilitates Regulatory Oversight: Authorities can monitor corporate governance and detect financial irregularities or misconduct.

Maintains Accurate Records: Filed resolutions create a public record of decisions that may impact company valuation, financial stability, and investor confidence.