Section 88 of Companies Act 2013. Register of Member.

“(1) Every company shall keep and maintain the following registers in such form and in such manner as may be prescribed, namely: — 

(a) register of members indicating separately for each class of equity and preference shares held by each member residing in or outside India;

(b) register of debenture-holders; and

(c) register of any other security holders.

(2) Every register maintained under sub-section (1) shall include an index of the names included therein. 

(3) The register and index of beneficial owners maintained by a depository under section 11 of the Depositories Act, 1996 (22 of 1996), shall be deemed to be the corresponding register and index for the purposes of this Act. 

(4) A company may, if so, authorised by its articles, keep in any country outside India, in such manner as may be prescribed, a part of the register referred to in sub-section (1), called ―foreign register‖ containing the names and particulars of the members, debenture-holders, other security holders or beneficial owners residing outside India. 

(5) If a company does not maintain a register of members or debenture-holders or other security holders or fails to maintain them in accordance with the provisions of sub-section (1) or sub-section (2), the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and where the failure is a continuing one, with a further fine which may extend to one thousand rupees for every day, after the first during which the failure continues.”

Anatomization of Section 88 of Companies Act 2013

• The sub-section (1), states or guides every company to maintain a register for each classified member in such prescribed manners:

1. Register of Equity Holders and Preference Shareholders: Under Section 88(1)(a), there are equity holders as well as preference shareholders in each company. Each company shall maintain a separate register for them, whether they’re residing in India or outside India.
2. Register of Debenture Holders or Security Holders: Under Section 88(1)(b) and (c), every company that issues or allots debentures or securities shall maintain a separate register for the debenture holders and security holders under Form No. MGT-2 as per Rule 4 of the Companies (Management & Administration) Rules, 2014.

• Register Index: The sub-section (2) states that the register that is to be maintained under sub-section (1) shall consist of an index of the names of the members contained therein, i.e., any company with not less than 50 members has to maintain the register with an index in which sufficient entries are to be made for any folio and consist of such valid data as is necessary for legal binding.

• Register and index to be maintained by: Sub-section (3) talks about the fact that the register and the index shall be maintained by ‘Depository’, which is under Section 11 of the Depositories Act, 1996. A depository is an organization that keeps track of ownership of shares or other securities in a dematerialized format, eliminating the disadvantages associated with actual share certificates. The depository, which continues to be the registered owner but does not have any rights over the shares, is the name under which they are issued. The general investors are the beneficial owners. The depository is required by Section 11 of the Depositories Act, 1996, to keep the beneficial owner record up to date.

• Maintenance foreign register: If permitted by its articles, a company may maintain a part of the register mentioned in sub-section (1) known as the “foreign register” in any nation outside of India in the same format as the principal or major register. Such a registry keeps track of the information about the citizens of that nation who are members, holders of debentures, holders of any other securities, or beneficial owners. Only citizens of the nation where it is kept would have their details included in this record. This register will be considered a component of the major register of the corporation to which it pertains.

• Failure of maintaining the register: If the company does not maintain the register of members, debenture holders, security holders, or such beneficial owners or fails to maintain the register prescribed under sub-sections (1) and (2), then the company and such employee of the company who is in default or fails to maintain the register shall be punishable with not less than 50 thousand rupees, which may extend up to 3 lakh rupees. If the failure is a continuing failure or default, then such failure will be further punishable with one thousand rupees per day from the date on which the failure continues.

Conclusion

Section 88 of the Companies Act, 2013 requires companies to maintain a register for each classified member, including equity holders, preference shareholders, and debenture holders or security holders. The company not having less than 50 member shall maintain a register of members, register must consist of an index of members names. The register and index are maintained by a depository, which is required to keep the beneficial owner record up-to-date. A company may also maintain a foreign register in a foreign country, keeping information about citizens who are members, holders of debentures, or beneficial owners. Failure to maintain the register can result in penalties of 50 thousand rupees which may extend up to 3 lakh rupees for the company and employee in default. If the failure continues, the penalty increases to one thousand rupees per day.

FAQ’s 

Q. What is Section 88 Companies Act, 2013 case laws?

In the case of REGUS OFFICE CENTRE(MUMBAI) Pvt. Ltd. at Bombay High Court: Without updating the register of member issuing the shares is not legal to achieve the companies’ objectives.

Q. Which register is maintained under Section 88?

Register of members where the member can be equity holder or debenture holder or securities holder where the entry’s to be made for issuance of shares.

Q. What is Section 88 of the Companies Act, 2013 Foreign Register?

Where by article of a company is authorise to maintain the register outside India in any country, then a part of register shall be referred in the same form of principal register.

Q. Penalty under section 88 of Companies Act, 2013?

Where a company and the officer of the company is at default for not maintaining the register of members, it shall be punishable with minimum fine of fifty thousand rupees which may extend up to three lakh rupees.

Q. What’s section 88 of Companies Act, 2013?

This section states that every company not having less than 50 members shall maintain a register for their members which is to hold the record and to update their members.