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Holding 100% control over a company - Section 89 of the companies act, 2013

Gaurav Jain , Last updated: 07 January 2017  
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Companies Act, 2013, gives freedom to the Companies to do anything, which is legal and in the interest of stakeholders but with the approval of authority or by intimating authority in a manner as may be prescribed by the act.

In Companies Act, 2013, section 89 is the only section which gives a way to a person/company to hold 100% control over a company .Under section 89 we have 2 options to incorporate a company having full control over it by a single person:

1- OPC (One Person Company)
2- With the help of sec 89

In case of OPC only "PRIVATE COMPANY" can be registered by one person 

But under Section 89 not only Private Company but also "PUBLIC COMPANY" can be registered by required number of members but ultimately controlled by single person. 

The purpose of this section is as follow:-

1- To satisfy the requirement of minimum number of members (i.e. 2 in case of Pvt. Ltd. and 7 in case of Pub. Ltd. )
2- To make a wholly owned subsidiary company 

Example for understanding to this section easily:

Mr. A wants to hold 100% shareholding in X Pvt. Ltd,  but he can't do so as he will have to take care the limit of minimum number of members, so in that case he will need at least one more person to fulfil minimum Requirement i.e. 2 (at least)

Now he can present a person say Mr. B, on his behalf whose name shall be presented on register of members but indirectly he will be the owner (beneficial owner) and will be controlling company.

In this case 

Mr. B is Registered Owner 
Mr. A is Beneficial Owner
X Pvt. Ltd. Is Company 

Same example can also be taken for Public Company (where there must be at least 7 members).
In place of X Pvt. Ltd., any company can be there. 

In this section responsibility arises to 3 persons namely:

1- Registered owner 
2- Beneficial owner
3- Company 

Intimation to Registrar:

Under this section Registered owner/ Beneficial owner/ Company is required to intimate to ROC after entering his name in register of members or change therein the declaration so filed. 

1- Registered owner shall file with COMPANY, a declaration in form MGT-4 within 30 days of entering his name in register of members or change therein as the case may be.

2- Beneficial owner shall file with COMPANY, a declaration in form MGT-5 within 30 days of entering his name in register of members or change therein as the case may be. 

3- Company Shall file with ROC, a return in form MGT-6 within 30 days of receiving such declaration. 

Penalty as per Section 89(5) & Section 89(7):

1- Registered owner: 

Fine may extend to Rs. 50,000 and if offence is continuing one with a further fine which may extend to Rs. 1,000 for every day. Here we can see that shareholder is also punishable under this section which doesn’t happen usually.

2- Beneficial owner:

Fine may extend to Rs. 50,000 and if offence is continuing one with a further fine which may extend to Rs. 1,000 for every day. We can see that shareholder is also punishable under this section which doesn’t happen generally.

3- Company and officers: 

Fine not less than Rs. 5,00 but may extend to Rs. 1,000 and if the offence is continuing one with a further fine which may extend to Rs. 1,000 for every day.

Note: Government companies are exempted from this section vide notification dated 5th June, 2015.

Disclaimer: This is an effort by Lexcomply.com to contribute towards improving compliance management regime. User is advised not to construe this service as legal opinion and is advisable to take a view of subject experts. 


Published by

Gaurav Jain
(Company Secretary)
Category Corporate Law   Report

  7420 Views

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