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COMPLETE ANALYSIS – OFFICER AND OFFICER WHO IS IN DEFAULT

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OFFICER

As per section 2 (59) of the companies act, 2013 Officer includes any director, manager or key managerial personnel or any person with whose directions or instruction the board of directors are accustomed to act (Shadow director).

Example :-  If a holding company gives direction to its subsidiary company and the board of directors of the subsidiary company are accustomed to follow the same then the holding company can be considered as shadow director.

OFFICER WHO IS IN DEFAULT

As per section 2 (60) of the companies act, 2013 an officer who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officer of the company, namely;

  1. Whole time director,
  2. Key managerial personnel,
  3. Where there is no key managerial personnel, such directors specified by board in this behalf given their consent in writing to the board to such specification( intimation to ROC in Form GNL-3)
  4. Any person who, under the immediate authority of the board is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorizes, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default; (Intimation form- GNL-3)
  5. Any person in accordance with whose advice, direction, instructions the board of directors is accustomed to act but not give advice in a professional capacity,
  6. Every director, who is aware of contravention of the provision of the act,
  7. In respect of issue or transfer of any shares of the company, the share transfer agent, registrar and merchant banker to the issue or transfer.

 

Analytical points

 

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  1. If any of the above mentioned persons want to defend himself, he can do so under section 463 i.e. Power of court to grant relief to officer in default from criminal liability.
  2. If company has two or more whole time directors all of them will be considered as office in default.
  3. If company has no KMP and not even having whole time director i.e. all the directors are part time director then company if some of the part time directors give written consent to be treated as officer in default and board of director pass a resolution for accepting their consent and subsequently inform ROC in form GNL-3 about the same then aforesaid part time directors who have given written consent will be treated as officer in default.

If none of the part time directors give written consent to be treated as officer in default then all part time directors will be treated as officer in default

  1. In case of Sahara India Ltd., Supreme Court held that Mr. Subrata Roy is shadow director who gives direction to the board of directors. He is officer in default.
  2. Part time director and independent directors can seek defense u/s 149 (12), where whole time directors can seek defense u/s 463 of the companies act, 2013.
  3. Officer in default includes ex- officer in default.

 

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