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The Companies Act, 1956

Title : The Companies Act, 1956

Year : 1956



(1) A person shall not be capable of being appointed director of a company by the articles, and shall not be named as a director or proposed director of a company in a prospectus issued by or on behalf of the company, or as proposed director of an intended company in a prospectus issued in relation to that intended company, or in a statement in lieu of prospectus filed with the Registrar by or on behalf of a company, unless, before the registration of the articles, the publication of the prospectus, or the filing of the statement in lieu of prospectus, as the case may be, he has, by himself or by hi s agent authorised in writing,-

(a) Signed and filed with the Registrar a consent in writing to act as such director; and

(b) Either-

(i) Signed the memorandum for shares not being less in number or value than that of hi s qualification shares, if any; or

(ii) Taken hi s qualification shares if any, from the company and paid or agreed to pay for them; or

(iii) Signed and filed with the Registrar an undertaking in writing to take from the company hi s qualification shares, if any, and pay for them; or

(iv) Made and filed with the Registrar an affidavit to the effect that shares, not being less in number or value than that of his qualification shares, if any, are registered in hi s name.

(2) Where a person has signed and filed as aforesaid an undertaking to take and pay for hi s qualification shares, he shall, as regards those shares, be in the same position as if he had signed the memorandum for shares of that number or value.

(3) References in this section to the share qualification of a director or proposed director shall be construed as including only a share qualification required within a period determined by reference to the time of appointment, and references therein to qualification shares shall be construed accordingly.

1[***]

(5) This section shall not apply to-

(a) A company not having a share capital;

(b) A private company;

(c) A company which was a private company before becoming a public company; or

(d) A prospectus issued by or on behalf of a company after the expiry of one year from the date on which the company was entitled to commence business.

266A -2*Application for allotment of Director Identification Number

Every-

(a) Individual, intending to be appointed as director of a company; or

(b) Director of a company appointed before the commencement of the Companies (Amendment) Act, 2006,shall make an application for allotment of Director Identification Number to the Central Government in such form, and manner (including electronic form) along with such fee, as may be prescribed:-

Provided that every director, appointed before the commencement of the Companies (Amendment) Act, 2006, shall make, within sixty days of the commencement of the said Act, such application to the Central Government:-

Provided further that every applicant, who has made an application under this section for allotment of a Director Identification Number, may be appointed as a director in a company, or, hold office as director in a company till such time such applicant has been allotted the Director Identification Number.

266B -2* Allotment of Director Identification Number

The Central Government shall, within one month from the receipt of the application under section 266A, allot a Director Identification Number to an applicant, in such manner as may be prescribed.

266C -2* Prohibition to obtain more than one Director Identification Number

No individual, who had already been allotted a Director Identification Number under section 266B, shall apply, obtain or possess another Director Identification Number.

266D - 2*Obligation of director to intimate Director Identification Number to concerned company or companies

Every existing director shall, within one month of the receipt of Director Identification Number from the Central Government, intimate his Director Identification Number to the company or all companies wherein he is a director.

266E - 2* Obligation of company to inform Director Identification Number to Registrar

(1) Every company shall, within one week of the receipt of intimation under section 266D, furnish the Director Identification Number of all its directors to the Registrar or any other officer or authority as may be specified by the Central Government.

(2) Every intimation under sub-section (1) shall be furnished in such form and manner as may be prescribed.

266F - 2* Obligation to indicate Director Identification Number

Every person or company, while furnishing any return, information or particulars as are required to be furnished under this Act, shall quote the Director Identification Number in such return, information or particulars in case such return, information or particulars relate to the director or contain any reference of the director.

266G -2* Penalty for contravention of provisions of section 266A or section 266C or section 266D or section 266E

If any individual or director, referred to in section 266A or section 266C or section 266D or a company referred to in section 266E, contravenes any of the provisions of those sections, every such individual or director or the company, as the case may be, who or which, is in default, shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which the contravention continues.

Explanation.-For the purposes of sections 266A, 266B, 266C, 266D, 266E and 266F, the Director Identification Number means an identification number which the Central Government may allot to any individual, intending to be appointed as director or to any existing directors of a company, for the purpose of his identification as such.".

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1. Sub-section (4) omitted by Act 31 of 1965, Section 33 (w.e.f. 15-10-1965).

2. Inserted by Companies (Amendment) Act, 2006, w.e.f. 01.11.2006.

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No company shall, after the commencement of this Act, appoint or employ, or continue the appointment or employment of, any person as its managing or whole-time director who-

(a) Is an undischarged insolvent, or has at any time been adjudged an insolvent;

(b) Suspends, or has at any time suspended, payment to hi s creditors, or makes, or has at any time made, a composition with them; or

(c) Is, or has at any time been, convicted by a Court1[***] of an offence involving moral turpitude.

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1. The words "in India" omitted by Act 65 of 1960, Section 90 (w.e.f. 28-12-1960).

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In the case of a public company or a private company which is a subsidiary of a public company, an amendment of any provision relating to the appointment or re-appointment of a managing or whole-time director or of a director not liable to retire by rotation, whether that provision be contained in the company's memorandum or articles, or in an agreement entered into by it or in any resolution passed by the company in general meeting or by its Board of directors, shall not have any effect unless approved by the Central Government; and the amendment shall become void if, and insofar as, it is disapproved by that Government.



(1) On and from the commencement of the Companies (Amendment) Act, 1988 , every public company, or a private company which is a subsidiary of a public company, having a paid up share capital of such sum as may be prescribed, shall have a managing or whole-time director or a  manager.

(2) On and from the commencement of the Companies (Amendment) Act, 1988 , no appointment of a person as a managing or whole-time director or a manager in a public company or a private company which is a subsidiary of a public company shall be made except with the approval of the Central Government unless such appointment is made in accordance with the conditions specified in Parts I and II of Schedule XIII (the said Parts being subject to the provisions of Part III of that Schedule) and a return in the prescribed form is filed within ninety days from the date of such appointment.

(3) Every application seeking approval to the appointment of a managing or whole-time director or a manager shall be made to the Central Government within a period of ninety days from the date of such appointment.

(4) The Central Government shall not accord its approval to an application made under sub-section ( 3 ), if it is satisfied that

(a) The managing or whole-time director or the manager appointed is, in its opinion, not a fit and proper person to be appointed as such or such appointment is not in the public interest; or

(b) The terms and conditions of the appointment of managing or whole-time director or the manager are not fair and reasonable.

(5) It shall be competent for the Central Government while according approval to an appointment under sub-section (3) to accord approval for a period lesser than the period for which the appointment is proposed to be made.

(6) If the appointment of a person as a managing or whole-time director or a manager is not approved by the Central Government under sub-section (4), the person as appointed shall vacate hi s office as such managing or whole-time director or manager on the date on which the decision of the Central Government is communicated to the company, and if he omits or fails to do so, he shall be punishable with fine which may extend to2*[five thousand rupees] for every day during which he omits or fails to vacate such office.

(7) Where the Central Government suomotu or on any information received by it is, prima facie, of the opinion that any appointment made under sub-section (2) without the approval of the Central Government has been made in contravention of the requirements of Schedule XIII, it shall be competent for the Central Government to refer the matter to the3*[Tribunal] for decision.

(8) The3*[Tribunal] shall, on receipt of a reference under sub-section (7), issue a notice to the company, the managing or whole-time director or the manager, as the case may be, and the director or other officer responsible for complying with the requirements of Schedule XIII, to show cause as to why such appointment shall not be terminated and the penalties provided under sub-section (10) shall not be imposed.

(9) The3*[Tribunal] shall, if, after giving a reasonable opportunity to the company, the managing or whole-time director or the manager, or the officer who is in default, as the case may be, comes to the conclusion that the appointment has been made in contravention of the requirements of Schedule XIII, made an order declaring that a contravention of the requirements of Schedule XIII has taken place.

(10) On the making of an order by the3[Tribunal] under sub-section (9),-

(a) The company shall be liable to a fine which may extend to4*[fifty thousand rupees];

(b) Every officer of the company who is in default shall be liable to a fine of5*[one lakh rupees]; and

(c) The appointment of the managing or whole-time director or manager, as the case may be, shall be deemed to have come to an end and the person so appointed shall, in addition to being liable to pay a fine of5*[one lakh rupees], refund to the company the entire amount of salaries, commissions and perquisites received or enjoyed by hi m between the date of hi s appointment and the passing of such order.

(11) If a company contravenes the provisions of sub-section (10) or any direction given by the3*[Tribunal] under that sub-section every officer of the company who is in default and the managing or whole-time director or the manager, as the case may be, shall be punishable with imprisonment for a term which may extend to three years and shall also be liable to a fine which may extend to6*[five hundred rupees] for every day of default.

(12) All acts done by a managing or whole-time director or a manager, as the case may be, purporting to act in such capacity and whose appointment has been found to be in contravention of Schedule XIII, shall, if the acts so done are valid otherwise, be valid notwithstanding any order made by the3[Tribunal] under sub¬section (9).

Explanation.- In this section "appointment" includes re- appointment and "whole-time director" includes a director in the 'whole-time employment of the company'.]

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1. Section 269 substituted by Act 65 of 1960, sec. 91 (w.e.f. 28-12-1960) and again substituted by Act 31 of 1988, sec. 46 (w.e.f. 15-6-1988).

2. Substituted by Act 53 of 2000, sec. 130, for "five hundred rupees" (w.e.f. 13-12-2000).

3. Substituted by Act 11 of 2003, sec. 33, for "Company Law Board".

4. Substituted by Act  53 of 2000, sec. 130, for "five thousand rupees" (w.e.f. 13-12-2000).

5.Substituted by Act  53 of 2000, sec. 130, for "ten thousand rupees" (w.e.f. 13-12-2000).

6. Substituted by Act 53 of 2000, sec. 130, for "fifty rupees" (w.e.f. 13-12-2000).

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(1) Without prejudice to the restrictions imposed by section 266, it shall be the duly of every director who is required by the articles of the company to hold a specified share qualification and who is not already qualified in that respect, to obtain his qualification within two months after his appointment as director.

(2) Any provision in the articles of the company (whether made before or after the commencement of this Act) shall be void insofar as it requires a person to hold the qualification shares before his appointment as a director or to obtain them within a shorter time than two months after his appointment as such.

(3) The nominal value of the qualification shares shall not exceed five thousand rupees, or the nominal value of one share where it exceeds five thousand rupees.

(4) For the purpose of any provision in the articles requiring a director to hold a specified share qualification, the bearer of a share warrant shall not be deemed to be the holder of the shares specified in the warrant.



Rep. by the Companies (Amendment) Act, 1965(31 of 1965), Section 34 (w.e.f. 15-10-1965).



If, after the expiry of the said period of two months, any person acts as a director of the company when he does not hold the qualification shares referred to in section 270 , he shall be punishable with fine which may extend to1*[five hundred rupees] for every day between such expiry and the last day on which he acted as a director.

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1. Substituted  by Act 53 of 2000, sec. 131, for "fifty rupees" (w.e.f. 13-12-2000).

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Sections 270 1*[and 272 ] shall not apply to a private company, unless it is a subsidiary of a public company.

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1. Substituted by Act 31 of 1965, sec. 35, for "272" (w.e.f. 15-10-1965).

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(1) A person shall not be capable of being appointed director of a company, if -

(a) He has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force;

(b) He is an undischarged insolvent;

(c) He has applied to be adjudicated as an insolvent and hi s application is pending;

(d) He has been convicted by a court1[***] of any offence involving moral turpitude and sentenced in respect thereof to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence;

(e) He has not paid any call in respect of shares of the company held by hi m, whether alone or jointly with others, and six months have elapsed from the last day fixed for the payment of the call; or

(f) An order disqualifying hi m for appointment as director has been passed by a court in pursuance of section 203 and is in force, unless the leave of the court has been obtained for hi s appointment in pursuance of that section.

2*(g) Such person is already a director of a public company which, -

(A) has not filed the annual accounts and annual returns for any continuous three financial years commencing on and after the first day of April, 1999 ; or

(B) has failed to repay its deposit or interest thereon on due date or redeem its debentures on due date or pay dividend and such failure continues for one year or more:-

Provided
that such person shall not be eligible to be appointed as a director of any other public company for a period of five years from the date on which such public company, in which he is a director, failed to file annual accounts and annual returns under sub-clause (A) or has failed to repay its deposit or interest or redeem its debentures on due date or pay dividend referred to in clause (B).

(2) The Central Government may, by notification in the Official Gazette, remove -

(a) The disqualification incurred by any person in virtue of clause (d) of sub-section ( 1 ), either generally or in relation to any company or companies specified in the notification; or

(b) The disqualification, incurred by any person in virtue of clause (e) of sub-section ( 1 ).

(3) A private company which is not a subsidiary of a public company may, by its articles, provide that a person shall be disqualified for appointment as a director on any grounds in addition to those specified in sub-section (1).

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1. The words "in India" omitted by Act 65 of 1960, sec. 93 (w.e.f. 28-12-1960).

2. Inserted by Act 53 of 2000, sec. 132 (w.e.f. 13-12-2000).

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After the commencement of this Act, no person shall, save as otherwise provided in section 276 , hold office at the same time as director in more than1*[fifteen companies].

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1. Substituted by Act 53 of 2000, sec. 133, for "twenty companies" (w.e.f. 13-12-2000).

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(1) Any person holding office as director in more than1*[fifteen] companies immediately before the commencement of this Act shall, within two months from such commencement, -

(a) Choose not more than1[fifteen] of those companies, as companies in which he wishes to continue to hold the office of director;

(b) Resign hi s office as director in the other companies; and

(c) Intimate the choice made by hi m under clause (a) to each of the companies in which he was holding the office of director before such commencement, to the Registrar having jurisdiction in respect of each such company, and also to the Central Government.

(2) Any resignation made in pursuance of clause (b) of sub-section (1) shall become effective immediately on the dispatch thereof to the company concerned.

(3) No such person shall act as director -

(a) In more than1*[fifteen] companies, after the expiry of two months from the commencement of2*[the Companies (Amendment) Act, 2000 ]; or

(b) Of any company after dispatching the resignation of hi s office as director thereof, in pursuance of clause (b) of sub-section (1).

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1. Substituted by Act 53 of 2000, sec. 134, for "twenty" (w.e.f. 13-12-2000).

2. Substituted by Act 53 of 2000, sec. 134, for "this Act" (w.e.f. 13-12-2000).

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(1) Where a person already holding the office of director in1*[fifteen companies] is appointed, after the commencement of2*[the Companies (Amendment) Act, 2000], as a director of any other company, the appointment -

(a) Shall not take effect unless such person has, within fifteen days thereof, effectively vacated his office as director in any of the companies in which he was already a director, and

(b) Shall become void immediately on the expiry of the fifteen days if he has not, before such expiry, effectively vacated his office as director in any of the other companies aforesaid.

(2) Where a person already holding the office of director in3*[fourteen companies] or less is appointed, after the commencement of2*[the Companies (Amendment) Act, 2000], as a director of other companies, making the total number of his directorships more than4*[fifteen], he shall choose the directorships which he wishes to continue to hold or to accept, so however that the total number of the directorships, old and new, held by him shall not exceed4*[fifteen]. None of the new appointments of director shall take effect until such choice is made; and all the new appointments shall become void if the choice is not made within fifteen days of the day on which the last of them was made.

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1. Substituted by Act 53 of 2000, sec. 135, for "twenty companies" (w.e.f. 13-12-2000).

2. Substituted by Act 53 of 2000, sec. 135, for "this Act" (w.e.f. 13-12-2000).

3. Substituted by Act 53 of 2000, sec. 135, for "nineteen companies" (w.e.f. 13-12-2000).

4. Substituted by Act 53 of 2000, sec. 135, for "twenty" (w.e.f. 13-12-2000).

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(1) In calculating, for the purposes of sections 275, 276 and 277, the number of companies of which a person may be a director the following companies shall be excluded, namely:-

(a) A private company which is neither a subsidiary nor a holding company of a public company;

(b) An unlimited company;

(c) An association not carrying on business for profit or which prohibits the payment of a dividend;

(d) A company in which such person is only an alternate director, that is to say, a director who is only qualified to act as such during the absence or incapacity of some other director.

(2) In making the calculation aforesaid, any company referred to in clauses (a), (b) and (c) of sub-section (1) shall be excluded for a period of three months from the date on which the company ceases to fall within the purview of those clauses.



Any person who holds office, or acts, as a director of more than1*[fifteen companies] in contravention of the foregoing provisions shall be punishable with fine which may extend to2*[fifty thousand rupees] in respect of each of those companies after the first twenty.

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1. Substituted by Act 53 of 2000, sec. 136, for "twenty companies" (w.e.f. 13-12-2000).

2. Substituted by Act 53 of 2000, sec. 136, for "five thousand rupees" (w.e.f. 13-12-2000).

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Rep, by the Companies (Amendment) Act, 1965 (31 of 1965), Section 36 (w.e.f. 15-10-1965).

Last updated on August, 2016

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