Companies Act Section 171

Companies Act: Section 171: Members’ Right to Inspect

1. Right of Members to Inspect the Register Maintained Under Section 170

Every company is required to maintain a register under Section 170 of the Companies Act, which contains details of its directors and key managerial personnel, along with information on their shareholding in the company, its holding company, subsidiaries, or associate companies.

Under Section 171, members of the company are granted specific rights to inspect this register. These rights ensure transparency and accessibility of corporate records to shareholders and stakeholders. The provisions regarding the inspection of this register are outlined below:

1.1 Accessibility of the Register

The register maintained under Section 170(1) shall be open for inspection by the members of the company during business hours at the registered office of the company.
Business hours shall be considered as those officially declared by the company for administrative functions, ensuring that members have ample opportunity to access these records without undue restrictions.
Members shall have the right to inspect the register at no additional cost.
If a member makes a formal request to inspect the register, the company must comply with such a request without any unnecessary delays.
1.2 Right to Extract Information and Obtain Copies

In addition to inspecting the register, members of the company have the right to take extracts from the register.
If a member requests a copy of the register or any portion thereof, the company must provide such copies free of cost within a maximum period of thirty (30) days from the date of request.
This provision ensures that members can access relevant details about the company’s governance structure without facing financial or administrative hurdles.
1.3 Obligation to Make the Register Available at the Annual General Meeting (AGM)

The register must be made available for inspection at every annual general meeting (AGM) of the company.
Any person attending the AGM, whether a member or not, must be allowed access to the register to examine the details contained within it.
This ensures transparency in the governance of the company and enables shareholders to make informed decisions regarding their participation in company affairs.
2. Consequences of Denial of Inspection or Failure to Provide Copies

If a company refuses to allow inspection of the register as required under Clause (a) of Sub-section (1) of Section 171, or if it fails to provide the requested copies within the stipulated thirty (30) days, the affected member has the right to escalate the matter to the Registrar of Companies (ROC). The process and consequences are detailed below:

2.1 Application to the Registrar of Companies (ROC)

If the company does not comply with the request for inspection or fails to provide copies within the mandated timeframe, the aggrieved member may file an application with the Registrar of Companies (ROC).
The application should specify the details of the request, the company’s failure to comply, and any evidence supporting the claim.
2.2 Order by the Registrar for Immediate Compliance

Upon receiving the complaint, the Registrar has the authority to order immediate inspection of the register.
The Registrar may also direct the company to provide the requested copies to the member without further delay.
Such an order is binding on the company, and failure to comply with the Registrar’s directive could lead to regulatory penalties and legal consequences.
3. Importance of Section 171 in Corporate Governance

The provisions under Section 171 play a crucial role in ensuring transparency and accountability in corporate governance. By granting members the right to inspect key corporate records, the law aims to:

Promote transparency in the company’s operations and decision-making processes.
Prevent fraudulent practices by allowing shareholders to verify the credentials and shareholding details of directors and key managerial personnel.
Empower shareholders by providing them with access to information that enables them to exercise their rights effectively in company affairs.
Ensure compliance with statutory obligations, thereby reducing the risk of disputes related to corporate governance.