Section 216 - Investigation Of Ownership Of Company

Section 216 of the Companies Act 2013 is a part of Chapter XIV which deals with Inspection, Inquiry, and Investigation. Section 216 provides for the investigation of the ownership of the company by the Central Government. Member is any person who is a subscriber to the memorandum of the company or a person who has agreed in writing to become a member of the company or a person who holds shares and is recorded as a beneficial owner in the depository records.

Section 216(1) vests upon the Central government the power to order an investigation on the matters relating to the company and its membership to determine:

The true persons who are or have been who are or have been financially interested in the success or failure, whether real or apparent, of the company.

The true persons who are or have been able to control or materially influence the policy of the company; or

The true persons who have or had a beneficial interest in shares of a company or who are or have been beneficial owners or significant beneficial owners of a company.

Section 216(2) provides the National Company Law Tribunal with the power to direct an investigation into the matters regarding the ownership in the course of any proceeding. The Central Government will appoint one or more investigators in the case that the tribunal orders an investigation.

Section 216(3) provides the Central Government with the power to define the scope of the matter or the period to which the investigation may extend. The section also provides the power to limit the investigation to particular shares or debentures.

Section 216(4) provides the inspector the power to investigate the circumstances that suggest the presence of an arrangement or an understanding (even though such arrangement or understanding is not legally binding) that was observed or likely to be observed and which is relevant to the purpose of the investigation.