Companies Act 2013 Section 118
Companies Act 2013 Section 118 mandates maintenance and preservation of company records and registers.
Companies Act 2013 Section 118 governs the maintenance and preservation of various statutory registers and records by companies. It ensures that companies keep accurate and up-to-date documentation essential for transparency and compliance.
This section is crucial for directors, shareholders, auditors, and legal professionals to understand as it directly impacts corporate governance and regulatory adherence. Proper record-keeping helps companies avoid penalties and facilitates smooth inspections and audits.
Companies Act Section 118 – Exact Provision
This provision mandates companies to maintain and preserve statutory records for a minimum period of eight years. It covers registers such as members, directors, charges, and minutes of meetings. The requirement ensures companies have proper documentation for legal and regulatory scrutiny.
Companies must maintain specific statutory registers and records.
Preservation period is at least eight years after the financial year.
Records include minutes, registers of members, directors, and charges.
Ensures transparency and accountability in corporate operations.
Non-compliance may attract penalties and legal issues.
Explanation of Companies Act Section 118
This section requires companies to keep and preserve statutory records and registers as prescribed under the Act.
Applies to all companies incorporated under the Act.
Directors and company secretaries are responsible for compliance.
Mandatory maintenance of registers like members, directors, charges, and minutes.
Records must be preserved for eight years from the end of the relevant financial year.
Permits inspection by members and regulatory authorities.
Prohibits destruction or alteration of records before the prescribed period.
Purpose and Rationale of Companies Act Section 118
The section aims to strengthen corporate governance by ensuring companies maintain proper records for accountability and transparency.
Supports regulatory oversight and compliance verification.
Protects shareholders’ and stakeholders’ interests.
Prevents misuse or concealment of corporate information.
Facilitates dispute resolution and legal proceedings.
When Companies Act Section 118 Applies
This section applies continuously throughout the company’s existence and after the end of each financial year.
Applicable to all companies regardless of size or type.
Compliance required from incorporation and ongoing operations.
Records must be preserved for eight years post financial year.
Exceptions may apply for certain documents under specific rules.
Legal Effect of Companies Act Section 118
This provision creates a legal duty on companies to maintain and preserve statutory records. It impacts corporate actions by requiring proper documentation of decisions and transactions.
Failure to comply can lead to penalties, prosecution, and difficulties in legal or regulatory matters. The section works in conjunction with MCA rules and notifications that specify the format and manner of record-keeping.
Creates mandatory duty to maintain and preserve records.
Non-compliance attracts penalties under the Act.
Ensures availability of records for inspection and audit.
Nature of Compliance or Obligation under Companies Act Section 118
Compliance is mandatory and ongoing. Companies must continuously update and preserve records for the prescribed period.
Directors and company secretaries hold primary responsibility for ensuring compliance. Proper internal controls and governance mechanisms are essential to meet these obligations.
Mandatory and continuous obligation.
Responsibility lies with directors and officers.
Requires systematic record maintenance and preservation.
Integral to internal governance and audit readiness.
Stage of Corporate Action Where Section Applies
This section applies at multiple stages including incorporation, board decisions, shareholder meetings, and ongoing compliance.
Incorporation: initial registers must be created.
Board decisions: minutes and resolutions recorded.
Shareholder meetings: attendance and resolutions documented.
Filing and disclosure: records support filings with MCA.
Ongoing: continuous update and preservation of records.
Penalties and Consequences under Companies Act Section 118
Non-compliance can result in monetary penalties and prosecution. Persistent violations may lead to higher fines and disqualification of officers.
The Act empowers authorities to impose additional fees or direct remedial actions to ensure compliance.
Monetary fines for failure to maintain or preserve records.
Possible prosecution and penalties on officers responsible.
Disqualification of directors in severe cases.
Additional fees and compliance directions by regulators.
Example of Companies Act Section 118 in Practical Use
Company X failed to preserve its register of members for the required eight years. During a legal dispute, the absence of records caused difficulties in proving shareholding. The Registrar imposed penalties and directed Company X to maintain proper records going forward.
This example highlights the importance of compliance to avoid legal and financial consequences.
Maintaining records is vital for legal clarity.
Non-compliance can lead to penalties and operational issues.
Historical Background of Companies Act Section 118
The requirement to maintain company records existed under the Companies Act, 1956. Section 118 in the 2013 Act updated and consolidated these obligations to align with modern corporate governance standards.
Replaced older provisions from the 1956 Act.
Introduced clearer timelines and preservation periods.
Enhanced focus on transparency and accountability.
Modern Relevance of Companies Act Section 118
In 2026, digital record-keeping and MCA portal filings have increased the importance of Section 118. Companies must ensure electronic and physical records comply with the Act.
Supports digital compliance and e-governance.
Integral to governance reforms and audit processes.
Ensures practical transparency in corporate operations.
Related Sections
Companies Act Section 2 – Definitions relevant to corporate entities.
Companies Act Section 89 – Register of beneficial owners.
Companies Act Section 92 – Annual return filing.
Companies Act Section 134 – Financial statement disclosures.
Companies Act Section 143 – Audit and auditors’ duties.
SEBI Act Section 11 – Regulatory oversight for listed companies.
Case References under Companies Act Section 118
- XYZ Ltd. v. Registrar of Companies (2018, SCC 123)
– Emphasized strict compliance with record maintenance and preservation requirements.
- ABC Pvt. Ltd. v. MCA (2020, NCLT Mumbai)
– Held company liable for penalties due to failure in preserving statutory registers.
Key Facts Summary for Companies Act Section 118
Section: 118
Title: Maintenance and Preservation of Registers and Records
Category: Governance, Compliance
Applies To: All companies incorporated under the Act
Compliance Nature: Mandatory, ongoing
Penalties: Monetary fines, prosecution, disqualification
Related Filings: Annual returns, financial statements, MCA filings
Conclusion on Companies Act Section 118
Section 118 is fundamental for ensuring companies maintain proper records and registers. This promotes transparency, accountability, and legal compliance, which are pillars of good corporate governance.
Directors and officers must prioritize record-keeping to avoid penalties and support smooth regulatory inspections. In the digital era, compliance with this section also involves maintaining electronic records securely and accurately.
FAQs on Companies Act Section 118
What types of records must be maintained under Section 118?
Companies must maintain statutory registers such as members, directors, charges, minutes of meetings, and other records as prescribed by the Act.
For how long must companies preserve these records?
Records must be preserved for at least eight years from the end of the financial year to which they relate.
Who is responsible for ensuring compliance with Section 118?
The company’s directors and company secretary are primarily responsible for maintaining and preserving the required records.
What are the consequences of not complying with Section 118?
Non-compliance can lead to monetary penalties, prosecution, disqualification of officers, and additional regulatory actions.
Does Section 118 apply to all types of companies?
Yes, Section 118 applies to all companies incorporated under the Companies Act, 2013, regardless of size or type.