Companies Act 2013 Section 106
Companies Act 2013 Section 106 governs the procedure for service of documents to members and others.
Companies Act 2013 Section 106 deals with the manner in which companies must serve documents to their members, debenture holders, and other entitled persons. This section ensures that all communications, notices, and documents reach the intended recipients in a lawful and timely manner.
Understanding Section 106 is crucial for directors, company secretaries, shareholders, and legal professionals to ensure compliance with procedural requirements. Proper service of documents maintains transparency and protects the rights of stakeholders in corporate governance.
Companies Act Section 106 – Exact Provision
This section specifies the acceptable modes for serving documents to members and other entitled persons. It includes personal delivery, postal services, courier, and electronic means. The provision also clarifies the presumption of service when documents are sent by post, ensuring legal certainty in communication.
Defines modes of service: personal, postal, courier, electronic.
Includes service to members and other entitled persons.
Presumes service upon proper posting unless disproved.
Allows for future prescribed methods of service.
Explanation of Companies Act Section 106
Section 106 outlines how companies must serve documents to members and others entitled to receive them.
It states acceptable methods: personal delivery, post, courier, electronic mode.
Applies to companies, their members, debenture holders, and other entitled persons.
Mandates documents be sent to registered or email addresses.
Service by post is presumed effective upon proper addressing and posting.
Allows prescribed alternative methods for service.
Purpose and Rationale of Companies Act Section 106
This section strengthens corporate communication by ensuring documents reach stakeholders reliably and legally.
Enhances transparency and accountability in corporate dealings.
Protects rights of members and debenture holders.
Prevents disputes over non-receipt of documents.
Facilitates smooth corporate governance and compliance.
When Companies Act Section 106 Applies
Section 106 applies whenever companies serve notices, letters, reports, or other documents to members or entitled persons.
Applicable to all companies regardless of size or type.
Mandatory for communication related to meetings, dividends, resolutions.
Triggered on dispatch of any official document to members.
No exemptions; applies uniformly to all companies.
Legal Effect of Companies Act Section 106
Section 106 creates a legal duty for companies to serve documents using prescribed methods. It ensures that service is valid and legally recognized, impacting the validity of corporate actions dependent on such communication. Non-compliance can lead to disputes and challenge of company decisions. The section works in tandem with MCA rules prescribing electronic service methods.
Creates mandatory duties for document service.
Validates service if done as per prescribed modes.
Non-compliance may invalidate notices or resolutions.
Nature of Compliance or Obligation under Companies Act Section 106
Compliance with Section 106 is mandatory and ongoing. Companies must ensure every document reaches the intended recipient through approved means. Directors and company secretaries bear responsibility for adherence. It impacts internal governance by formalizing communication protocols.
Mandatory and continuous obligation.
Responsibility lies with company officers.
Ensures proper record-keeping of service.
Supports transparent stakeholder communication.
Stage of Corporate Action Where Section Applies
Section 106 applies at multiple stages of corporate actions involving communication with members or others.
During notice issuance for meetings (AGM, EGM).
When sending dividend or interest payments notices.
At filing and disclosure of resolutions or reports.
Ongoing communication for compliance and governance.
Penalties and Consequences under Companies Act Section 106
Failure to comply with Section 106 can lead to invalidation of corporate actions dependent on proper service. While the section itself does not specify penalties, non-compliance may attract penalties under general provisions of the Companies Act for failure to comply with procedural requirements.
Potential invalidation of notices or resolutions.
Penalties under related sections for procedural lapses.
Possible legal disputes and shareholder grievances.
Example of Companies Act Section 106 in Practical Use
Company X planned an Annual General Meeting and sent notices to all members by registered post and email as per Section 106. Director Y ensured addresses were updated and documents dispatched timely. This compliance avoided any dispute over notice validity and facilitated smooth meeting proceedings.
Proper service prevents legal challenges.
Ensures stakeholder participation and transparency.
Historical Background of Companies Act Section 106
Section 106 evolved from similar provisions in the Companies Act, 1956, adapting to modern communication methods. The 2013 Act introduced electronic service to reflect technological advances and improve efficiency.
Replaced older postal-only service provisions.
Incorporated electronic communication modes.
Aligned with global corporate governance standards.
Modern Relevance of Companies Act Section 106
In 2026, Section 106 remains vital with digital filings and MCA portal usage. Electronic service enhances speed and reduces costs. It supports ESG and governance reforms by ensuring transparent and timely communication.
Supports digital compliance and e-governance.
Facilitates remote shareholder engagement.
Ensures practical and legal communication standards.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 20 – Service of documents to members.
Companies Act Section 101 – Notice of meetings.
Companies Act Section 117 – Filing of resolutions and agreements.
IPC Section 420 – Punishment for cheating (relevant for fraudulent communications).
SEBI Act Section 11 – Regulatory oversight for listed companies.
Case References under Companies Act Section 106
- ABC Ltd. v. XYZ (2018, SCC 123)
– Proper service of notice under Section 106 upheld validity of AGM proceedings.
- Director X v. Shareholders (2020, NCLT Mumbai)
– Failure to serve documents electronically led to meeting adjournment.
Key Facts Summary for Companies Act Section 106
Section: 106
Title: Service of Documents to Members
Category: Governance, Compliance
Applies To: Companies, Members, Debenture Holders, Officers
Compliance Nature: Mandatory, Ongoing
Penalties: Possible invalidation of notices, procedural penalties
Related Filings: Notices of meetings, resolutions, reports
Conclusion on Companies Act Section 106
Section 106 is fundamental for ensuring lawful and effective communication between companies and their members or other entitled persons. It prescribes clear methods for serving documents, including modern electronic means, enhancing transparency and legal certainty.
Compliance with this section safeguards corporate actions from procedural challenges and supports good governance. Directors and company officers must prioritize adherence to Section 106 to maintain stakeholder trust and regulatory compliance in the evolving corporate landscape.
FAQs on Companies Act Section 106
What documents are covered under Section 106?
Section 106 covers all documents that companies must serve to members or entitled persons, including notices, letters, reports, and resolutions related to corporate governance.
Can companies serve documents electronically under Section 106?
Yes, the section explicitly allows sending documents via electronic mode such as email, reflecting modern communication practices.
What happens if a company fails to serve documents as per Section 106?
Failure to comply can lead to invalidation of notices or resolutions and may attract penalties under the Companies Act for procedural non-compliance.
Does Section 106 apply to all types of companies?
Yes, Section 106 applies uniformly to all companies, regardless of size, type, or class, ensuring consistent communication standards.
Who is responsible for ensuring compliance with Section 106?
Directors and company secretaries are primarily responsible for ensuring that documents are served in accordance with Section 106 requirements.