The Companies Act, 2013 was introduced in India to modernize corporate governance, protect investor interests, and ensure corporate transparency. One of the important provisions initially introduced under this legislation was Section 93, which dealt with the disclosure of changes in the shareholding patterns of promoters and the top ten shareholders of a company. While this section was subsequently omitted from the Act through an amendment in 2017, it played a critical role in enhancing transparency and accountability during its enforcement.

What is Section 93 of the Companies Act, 2013?

Section 93 of the Companies Act, 2013, required companies to file a return with the Registrar of Companies (ROC) whenever there was any change in the shareholding position of promoters or the top ten shareholders of the company. These returns had to be submitted within a specified period and reflected changes that occurred between two consecutive filings. The purpose of this provision was to keep the public and stakeholders informed about significant shifts in ownership that could impact control over the company.

Purpose of Section 93

The primary purpose of Section 93 was to ensure transparency in the ownership structure of companies. By requiring companies to disclose changes in shareholding, the section aimed to:

1. Provide Transparency: Investors, shareholders, and regulatory authorities could monitor significant changes in shareholding, thereby preventing any opaque practices in the management of company shares.


2. Prevent Insider Manipulation: The regular filing of shareholding changes acted as a deterrent to unfair practices such as insider trading or attempts to manipulate the control structure of a company without public knowledge.


3. Improve Corporate Governance: The provision promoted better corporate governance by making the ownership and control dynamics of the company more visible, ensuring accountability on the part of the promoters and large shareholders.


4. Boost Stakeholder Confidence: Stakeholders, especially minority shareholders, could have greater confidence in the company’s governance knowing that significant changes in ownership would be promptly disclosed.



Filing Requirements under Section 93

Under this section, the company was required to file a return in Form MGT-10 with the ROC. This return was mandatory if there was any change in the shareholding position of:

Promoters: The individuals or entities who have a significant influence on the management of the company.

Top Ten Shareholders: The ten largest shareholders of the company, as listed in the company’s shareholding register.


These changes were to be reported within a specific period, usually 15 days from the date of the change. Any delay in filing or non-compliance could lead to penalties, including fines for both the company and its officers.

Omission of Section 93

In 2017, the Companies (Amendment) Act was introduced, which made several changes to the Companies Act, 2013. One of these changes was the omission of Section 93. The rationale behind this decision was likely driven by the need to reduce the compliance burden on companies. Requiring companies to file returns for each change in shareholding was seen as cumbersome, especially for large companies with dynamic shareholding structures. With other provisions already in place to safeguard against issues such as insider trading, the redundancy of Section 93 led to its removal.

Impact of Omitting Section 93

With the omission of Section 93, companies were no longer required to file returns detailing every change in shareholding of promoters or the top ten shareholders. While this reduced the compliance burden on companies, it also removed a layer of transparency regarding the ownership structure of companies. That said, other provisions in the Companies Act and regulations issued by the Securities and Exchange Board of India (SEBI) continue to ensure that significant changes in shareholding, especially those affecting control of the company, are still disclosed to the public and stakeholders.

Conclusion

Although Section 93 of the Companies Act, 2013, was a useful tool for promoting transparency and better corporate governance, its omission highlights the evolving nature of regulatory frameworks in India. By balancing the need for transparency with the practicalities of corporate compliance, the removal of this section aimed to simplify procedures while still maintaining checks and balances through other regulatory measures. The legacy of Section 93, however, remains as a reminder of the importance of openness and accountability in corporate ownership.
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