Companies Act Section 88

Companies Act, Section 88: Register of Members, Debenture Holders, and Other Security Holders

Section 88 of the Companies Act mandates every company to maintain specific statutory registers related to its members, debenture holders, and other security holders. 

This section establishes clear guidelines regarding the format, manner, and maintenance of these registers, ensuring transparency in the ownership structure of a company. 

Furthermore, it prescribes penalties for non-compliance to reinforce adherence to statutory obligations. Below is a detailed explanation of the provisions of Section 88:

Subsection (1): Obligation to Maintain Registers

Registers to be Maintained

Every company is required to maintain the following registers in a prescribed form and manner:

1. Register of Members:

This register must contain the names, details, and other relevant particulars of the company’s members.

It must specify the class of shares held by each member.

Separate records should be maintained for each class of equity and preference shares.

Members residing in India must be recorded distinctly from those residing outside India.

2. Register of Debenture Holders:

This register must document the details of all individuals or entities holding debentures issued by the company.

3. Register of Other Security Holders:

A similar register must be maintained for holders of any other type of securities issued by the company.

Subsection (2): Index of Names

Inclusion of an Index

Every register maintained under Subsection (1) must include an index of names listed in the register.

The purpose of the index is to facilitate easy navigation and retrieval of information related to members, debenture holders, and other security holders.

Subsection (3): Registers Maintained by Depositories

Deemed Registers and Indexes

The register and index of beneficial owners maintained by a depository under Section 11 of the Depositories Act, 1996, shall be considered equivalent to the registers and indexes required under this Act.

This provision simplifies the compliance process for companies with securities held in dematerialized form, recognizing the records maintained by the depository as sufficient for regulatory purposes.

Subsection (4): Foreign Registers

Maintenance of a Foreign Register

If authorized by its articles of association, a company may maintain a part of the required registers outside India. This part is referred to as the foreign register.

Contents of the Foreign Register

The foreign register may include the names and particulars of:

Members,

Debenture holders,

Other security holders, or

Beneficial owners who reside outside India.

Prescribed Manner

The foreign register must be maintained in accordance with the rules and regulations prescribed under the Companies Act to ensure uniformity and compliance.

Subsection (5): Penalties for Non-Compliance

Failure to Maintain Registers

If a company:

Fails to maintain the register of members, debenture holders, or other security holders, or

Fails to maintain them in accordance with Subsection (1) or (2),

It will be subject to penalties.

Penalties Imposed

For the Company: A penalty of three lakh rupees will be levied.

For Defaulting Officers: Every officer of the company who is in default will face a penalty of fifty thousand rupees.

Key Objectives of Section 88

1. Transparency and Recordkeeping:

The requirement to maintain detailed registers ensures transparency in the company’s operations and governance.

These records provide clarity regarding ownership, voting rights, and other entitlements of the company’s stakeholders.

2. Facilitation of Compliance:

By including indexes and allowing for foreign registers, the section promotes efficient organization and retrieval of information.

3. Integration with Depository Systems:

Recognizing registers maintained by depositories under the Depositories Act simplifies compliance for companies with dematerialized securities.

4. Accountability Through Penalties:

The imposition of penalties for non-compliance reinforces the importance of adhering to statutory requirements and ensures accountability among companies and their officers.