1.

Closure of register members

1.1 Purpose of closing Register of members-

The purpose of closing the register of members and the register of debenture-holders is to
ascertain the names of members or debenture holders on a particular date or to determine
eligibility for any of the purposes mentioned below. The register of members and the register of
debenture holders are usually closed for one or more of the following purposes like:-
a) Payment of final or interim dividend;
b) Payment of interest
c) Issue of shares or debentures on right basis
d) Offering shares,debentures or other instruments on preferential basis
e) Issue of bonus shares
f) Issue of shares to the share holders of the transferor company consequent upon
amalgamation of the company
g) Conversion of preference shares or debentures into equity shares
h) Allotment of shares in exchange for tradable warrants
i) Conversion of shares into stock
j) Reorganization of share capital including reduction
k) Redemption of preference shares or debentures
l) Public offer for substantial acquisition of shares under the SEBI Regulations
m) Buy back of shares.
n) Any company may close its register of members or registure of debenture holders.The
Articles of Association of the company need not contain a provision empowering the
company to close the register.This is a statutory power under section 154 of the
Companies Act.

1.2 Who can decide closure?
Section 154 does not indicate as to who can decide the closure of register of members/register of
deventure holders. It is however, advisable that the board takes this decision by its resolution
passed at a meeting or by curricular resolution. Alternatively, by its resolution the Board may
delegate that power to a committee of directors or managing/whole-time director, company
secretary or any other director or an officer of the company.
1.3 Notice of closure
A notice of atleast seven clear days before the date on which the closure is to commence, must
be given for closing the register of members or Register of debenture holders. This means that
there must be a gap of at least seven days between the date on which the notice is published and
the date on which the closure is to commence.

The notice must be given in at least one newspaper published in any language but circulating in
the district in which the registered office of the company is situated.
If a company has kept a foreign register of members or debenture holders, a notice of closure
shall be published in some newspaper circulating in the district in which the register is kept.
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1.4 Length of closure
The register of members and the register of debenture holders must not be closed for more than
30 days at any one time and not more than 45 days in any one year. But a listed company must
comply with the Listing Agreement requirement.

1.5 Requirements under Listing Agreement regarding closure
In the case of a listed company, the requirements of section 154 are applicable as regards closure
of register of members and register of debenture holders in the same way as they apply to
another company. However, in addition a listed company must comply with the requirements of
Clause 16 of the Listing Agreement as regards closure of Transfer Books in respect of shares or
debentures.

1
Section 158(2)
1.6 Difference between book closure and record date
According to clause 16 of the Listing Agreement,(i) a listed company can close the register of
transfers at least once a year at the time of the annual general meeting. On other occasions, the
company may fix a record date. A record date is a date fixed by the company up to which
transfer/transmission documents must be lodged with the company or its share transfer agents.
When a record date is fixed, the register of members is not closed and the company is free to
register transfers/transmissions in the register. The transfer/transmission documents lodged with
the company/share transfer agents are recorded as and when they are received and a list of
members is drawn up on the record date to determine the members eligible to receive the benefit
of the corporate action for which the record date was fixed. The Companies Act does not contain
any provision concerning a record date and Section 154 is not applicable to the record date.
2. Object and scope
This section empowers a company to close its register of member of a certain period,and is
therefore an enabling one.There is nothing in the section or any other law to compel a company
to close its register of members. If a company wants to close the register of members, it must
comply with the requirements of this section. The requirements are firstly, not less than seven
day notice has to be given by advertisement in some newspaper, and secondly, the register
should not be closed in the aggregate for more than 45 days in each year and for not more than
30 days at any one time.
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This enabling provision has been made with a view to making it
administratively convenient for the company to prepare a list of its members on a particular date
for the purpose of either distributing dividend to them or issuing bonus shares or some such other
purpose. If the companies were not permitted to close register of members, then till the last day
of taking a particular action, the company would have to go on registering the transfer of shares
and that would have cause a lot of inconvenience. But there is a limit on the period during which
the register of members can be kept so closed, namely not more than 30 days at any one time and
in the aggregate, not exceeding 45 days in each year. Similarly, the manner in which the register
of members shall be closed is also prescribed; namely that not less than 7 days previous notice
by advertisement in some newspaper circulating in the district in which the registered office of
the company is situated must be given for the closing of register of members. If these

2
Killick Nixion Ltd. v. Dhanraj Mills Pvt. Ltd. (1983) 54 Comp Css 432 (Bom).
requirements are not complied with, then the closure of register of members will not be deemed
to be a closure in accordance with law.
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The requirement of the seven days notice is, however, mandatory, and in this sense, the section
is not an enabling one. Any closure of the register of members without complying with the
provisions of the section would be bad and cannot restrict the time for presenting the transfer
documents to the company under section 108.
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Where an application for the transmission of shares was rejected on the ground that the transfer
books of the company were closed, but no notice of the closure as required by this section had
given, it was held that the attempt on the part of the company to close the books was illegal and,
therefore it was clear that the company had no intention of registering shares. Although there was
no delay, the company had committed default within the meaning of section 155(1)(b) in
entering the applicants name on the register and she was therefore entitled to have the register
rectified.
5
The enablement to close the register is to facilitate the company to bring its register up
to date whenever it chooses to do so. It is left to the company to close its registers at its
discretion, subject to the period mentioned in the section and if it chooses to do so, then it is
obligatory on its part to carry out the mandatory requirements mentioned therein. If it fails to
comply with any of these requirements, then the penal provision, as found in section 154(2),will
be attracted.
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3. Inspection of register during closure
Although the provisions of section 163(2) of the Act states that during the period that the
company closes its book under section 154,the member, that is, the shareholders or the debenture
holders or other persons are not entitled to an inspection of the same, there is nothing either in
section 163(2) or section 154 or for that matter any other provision of that Act, which prevents
the company from keeping the said register and books open for inspection even during the said
period of closure, if it desires to do so. Neither in section 154 nor in any other provisions of the

3
Joseph v. Talyar Tea Co. Ltd. (1983) 2 Comp LJ 239 (CLB).
4
Talyar Tea co. Ltd. v. Union of India (1990) I Comp LJ 360 (Mad).
5
Nazamunnessa Begum v. Vidya Sagar Coton Mills Ltd. (1963) 33 Comp Cas 36 (Cal).
6
Joseph v. Talyar Tea Co. Ltd. (1983) 2 Comp LJ 239 (CLB).
Act is there any such bar against the company. It appears that the powers which have been given
to the company under the said sections 154 and 163(2) to close the register of members and to
disentitle the members and others to an inspection of the companys books during the particular
period have been given for the benefit and convenience of the company such as of bringing its
register of members up tp date for the purpose of calculating dividend, bonus etc.
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7
Killick Nixion Ltd. v. Dhanraj Mills Pvt. Ltd. (1983) 54 Comp Cas 432 (Bom).