Sections 66, 68, 71, 86, 88, 89 and 90: Companies Act Amendments

Section 66 - Reduction of share capital

What Section 66 covers: Section 66 of the Companies Act, 2013 governs reduction of share capital by a company limited by shares, or a company limited by guarantee having share capital. Subject to the statutory conditions, reduction generally requires a special resolution and confirmation by the National Company Law Tribunal.

2020 amendment: Sub-section (11) of Section 66 was omitted. The omission formed part of the broader rationalisation of penal provisions under the Companies (Amendment) Act, 2020.

Companies proposing a capital reduction should separately ensure compliance with the operative provisions of Section 66, the Companies (Share Capital and Debentures) Rules, 2014, Tribunal procedure and any other law applicable to the transaction.

Section 68 - Buy-back of securities

What Section 68 covers: Section 68 permits a company, subject to prescribed sources, approvals, limits and conditions, to purchase its own shares or other specified securities. It also regulates the manner and completion of a buy-back.

2020 amendment to sub-section (11): the words providing for imprisonment for a term that could extend to three years were omitted. The wording referring to "three lakh rupees, or with both" was correspondingly substituted so that the amended provision retains the monetary consequence stated in Section 68(11).

Section 71 - Debentures

What Section 71 covers: Section 71 regulates the issue of debentures and includes requirements concerning debenture trustees, redemption and protection of debenture holders, subject to the Act and applicable rules.

2020 amendment: Sub-section (11) of Section 71 was omitted. The remaining duties under Section 71 and the applicable rules continue to require careful compliance.

Section 86 - Punishment and penalty for contravention relating to charges

Context: Sections 77 to 87 deal broadly with registration and satisfaction of charges. Section 86 provides the consequence for default in complying with provisions of that Chapter.

Substituted Section 86(1): where a company defaults in complying with a provision of the Chapter, the company is liable to a penalty of Rs. 5 lakh and every officer of the company who is in default is liable to a penalty of Rs. 50,000.

Section 88 - Register of members and other security holders

What Section 88 covers: Section 88 requires prescribed statutory registers, including the register of members and registers of debenture-holders and other security holders, to be maintained in accordance with the Act.

Substituted Section 88(5): if a company does not maintain the required register, or fails to maintain it in accordance with sub-section (1) or (2), the company is liable to a penalty of Rs. 3 lakh and every officer in default is liable to a penalty of Rs. 50,000.

Section 89 - Declaration of beneficial interest in shares

What Section 89 covers: Section 89 addresses declarations where the registered holder of shares and the person holding the beneficial interest are different, and requires the prescribed declarations and company filings.

Penalty for failure to make a declaration

Under substituted sub-section (5), a person who fails to make a declaration required by sub-section (1), (2) or (3) is liable to a penalty of Rs. 50,000. A continuing failure attracts a further penalty of Rs. 200 for each day after the first, subject to a maximum of Rs. 5 lakh.

Penalty for company filing default

Under substituted sub-section (7), where a company required to file the return under sub-section (6) does not file it within the specified time, the company and every officer in default are liable to Rs. 1,000 for each day of continuing failure, subject to the statutory maximum of Rs. 5 lakh for the company and Rs. 2 lakh for an officer in default.

Exemption power under Section 89(11)

Sub-section (11), inserted by the 2020 amendment, empowers the Central Government, by notification and in the public interest, to exempt a class or classes of persons from requirements of Section 89 other than sub-section (10), either unconditionally or subject to specified conditions.

Section 90 - Register of significant beneficial owners

What Section 90 covers: Section 90 establishes the significant beneficial ownership framework. It requires prescribed declarations by significant beneficial owners and imposes duties on companies to maintain a register, file information and take necessary steps to identify such owners.

Substituted Section 90(10)

A person who fails to make the declaration required under sub-section (1) is liable to a penalty of Rs. 50,000. Continuing failure attracts a further penalty of Rs. 1,000 for each day after the first, subject to a maximum of Rs. 2 lakh.

Substituted Section 90(11)

A company that fails to maintain the register under sub-section (2), file information under sub-section (4), take necessary steps under sub-section (4A), or permits a default covered by the provision, is subject to the monetary penalties prescribed in Section 90(11). The substituted provision sets separate base and continuing penalties, with statutory maximums, for the company and every officer in default.