Section 91 of Companies Act. Power to close the register of members, debenture holders, or other security holders.

“S91: (1) A company may close the register of members, the register of debenture holders, or the register of other security holders for any period or periods not exceeding in aggregate forty-five days in each year but not exceeding thirty days at any one time, subject to giving previous notice of at least seven days or such lesser period as may be specified by the Securities and Exchange Board for listed companies or the companies that intend to get their securities listed, in such manner as may be prescribed.

(2) If the register of members or of debenture holders or of other security holders is closed without giving the notice as provided in sub-section (1), or after giving shorter notice than that so provided, or for a continuous or aggregate period in excess of the limits specified in that sub-section, the company and every officer of the company who is in default shall be liable to a penalty of five thousand rupees for every day subject to a maximum of one lakh rupees during which the register is kept closed.”

Scope of Section 91 of Companies Act

The power for cancelling the transfer of the shares can be unseen by the closure of the register. An alternative to closing the registers is a record date. Closing the register serves to update the registers and set a deadline for the payment of dividends or the issuance of bonus shares and rights.

When to close the register of members?

When a company serving a prior notice not less than 7 days, or and if it’s listed company or such company intent to list their securities, a lower period may be specified by the Security & Exchange Board, close to member, debentures, or any other security holder register for any such period or periods not exceeding the 45 days in year, but not more than 3o times at a time.

Rule 10 of Companies (Management & Administration), 2014

When a company listing their securities or closing the membership, debentures, or other security register, it must give at least7 days’ notice & follows the procedure set forth by the Securities & Exchange Board of India. This procedure may include publishing and advertisement at least once in a local newspaper that is widely read in the company’s registered office location and its written in the primary vernacular the language of the district. 

And at least once in English in a newspaper published in that district that is widely read in the area where the company has its registered office. Additionally, the notice would be posted online as soon as the central government notifies it to be done. So, as well as on the company’s holder Additionally, the notice should be posted online as soon as the Central Government notifies it to be done so, as well as on the company’s website, if any.

A private corporation is exempt from the provisions of subrule (1) if notice has been given to all of its members at least seven days before the register of members, holders of debentures, and holders of other securities is closed.

What if the notice is not given?

The company and each officer who is in default will be liable to a penalty of five thousand rupees for each day, up to a maximum of one lakh rupees, that the register of members, debenture holders, or other security holders is kept closed without providing the notice required under sub-section (1), after providing a notice that is shorter than that required, or for a continuous or aggregate period exceeding the limits specified in that sub-section.

Case study under Section 91 of Companies Act: Talayar Tea Company Limited vs. Union of India and Others

The Talayar Tea Company Ltd. appealed to the Company Law Board to challenge the order of February 10, 1983, which was made pursuant to Section 111 of the Companies Act, 1956. The company had declined to register share certificates on December 17, 1980, because they were not in conformity with Section 109(1A) of the Act. The company petitions were filed in this court for rectification of the company’s register, and on their dismissal, C.S.A. Nos. 28 to 35 of 1981 have been filed and are pending disposal.

The learned judge upheld the order, leading to the filing of the writ appeals. The crucial point raised was whether the requirements under Section 154 of the Companies Act are mandatory or directory-like in nature. The learned judge held that its requirements are mandatory in nature.

The petitioners’ counsel argued that the decisions referred to by the learned judge have been overruled in All India Reporter Karamchari Sangh v. The closure of the register of transfer of shares from May 7, 1980, to May 12, 1980, having been published in the Daily Official List of Stock Exchange Limited, there was proper publication as contemplated under Section 154, and the refusal to register the share certificates presented on December 17, 1980, cannot be held to be illegal.

The requirements for closing the register include giving seven days’ previous notice by advertisement in a newspaper circulating in the district where the registered office is situated. If such an advertisement is made, the company can close its register for a period not exceeding 45 days in the aggregate in each year but not exceeding 30 days at any one time.

The All India Reporter, Criminal Law Journal, and similar publications are considered newspapers under the Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955. The court ruled that legal publications with a news element are newspapers, as defined in the Act. The judge relied on the decision in CIT v. Vasan Publications P.Ltd. [1986] 159 ITR 381 (Mad) to conclude that a publication cannot be treated as a newspaper. The refusal to register was based on the claim that the registers were closed during the relevant period, and therefore, the tender of share certificates was not accepted. The refusal to register must be held improper once the closure does not satisfy the Act’s requirements. The appeals are dismissed with costs and a counsel fee of Rs. 1,000 for the entire batch of appeals to the second respondent.

FAQs

1. What is the applicability of Section 91 of the Companies Act 2013?

A company has the possibility to close its member, debenture, and other security holder registrations.

2. What is the penalty for Section 91 of the Companies Act, 2013?

Maximum: INR 5 lakh for the business. Maximum: INR 2 lakh per noncompliant officer Maximum: One thousand Indian rupees every day of default.

3. What are the minimum days of book closure?

Every year, the entire closing duration cannot be longer than 45 days.

4. What is the difference between a book closure and a record date?

The record date book later, i.e., after the closure, becomes book closure.

5. What is the purpose of book closure?

In general, “book closure” refers to closing a member’s register in order to finalize the list of members eligible for dividends, right shares, or bonus shares. The company sets a record date and notifies members of it for this finalization purpose.