Our readers searched clause 241, 242, 243 and 244 of Companies bill on finhow.com. All these Sections 241, 242, 243, 244 and 245 are part of Chapter XVI Prevention of Oppression and Mismanagement of Companies Bill 2012. The post Class Action Clause 245 in Companies Bill 2012 already talks about Section 245 and we will present Sections 241, 242, 243, 244 in this post.
Who and when
The chapter XVI addresses prevention of oppression and mismanagement of a company. If there is an evidence or suspicion of mismanagement or material change, change of ownership/directors that may be beneficial to one section of members of company at the expense of other section of members of company then a complaint may be lodged against company to the Tribunal. Such complaint can be made by
- Member(s) of the company, provided
- If company has share capital then least of the following
- 100 or more members of the company
- 1/10 of more number of members of the company
- If company does not have share capital then
- 1/5 of the total number of members of the company
- If company has share capital then least of the following
- Central Government
Powers of Tribunal
If Tribunal believes that the company’s affairs have caused/will cause undue advantage/disadvantage to certain members of the company at the expense of others and closing the company may cause undue advantage/disadvantage then Tribunal may order any one or more of the following:
- Conduct/change conduct of day to day to affairs of company
- Order company to purchase shares of company and thus reducing share capital of company
- Restrict transfer or allotment of shares
- Terminate or modify any agreement between the company and any other person including Managing Director of the company
- Restrict transfer/delivery of goods, payment, execution or any act related to property conducted by company up to 3 months prior to date of complaint against the company to the Tribunal
- Remove Managing Director or any Director of the company
- Order recovery of undue gains made by Managing Director or any Director of the company
- Appoint new Directors as Tribunal deems fit
- Order imposition of cost on the company as Tribunal deems fit
- Pass any other order as Tribunal deems fit
Provisions for Non-Compliance
A certified copy of the order of Tribunal needs to be filed by the company with the Registrar of company within thirty days of the order of the Tribunal. Company may not conduct any activity which is inconsistent with the order of Tribunal. Tribunal may give some flexibility (aka leave) to company on its order but there should not be any other change beyond that. If company violates the order of Tribunal then
- The company may be fined for Rs 1 lac to Rs 25 lac
- Every officer of the company which is at default
- May be imprisoned for up to 6 months
- May be fined for Rs 25000 to Rs 1 lac
Consequences of Termination or Modification of Certain Agreements by Tribunal
A person will not be eligible to claim compensation as a consequence of termination or modification of any agreement between the company and that person.
If Managing Director or any Director is removed from company then that Director or Managing Director may not act as Director or Managing Director in the company for a period of at least 5 years unless Tribunal permits to do so. Any such person who knowingly acts as Managing Director or Director or Manager of the company without permission of Tribunal
- May be imprisoned for up to 6 months
- May be fined for up to Rs 5 lac
- May be both imprisoned and fined as per above two bullet points
Conclusion
Section 241 to 244 along with the Class Action Section 245 brings respite to shareholders and other stakeholders of the company from monopolizing of company’s business by few stakeholders. The spirit of this law looks good and the effect will depend on implementation. What do you think about these Sections? Post a comment so that we all benefit.
