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Section 191 of the Companies Act 2013: Payment to Director for Loss of Office, etc., in connection with Transfer of Undertaking, Property or Shares

SECTION-191 (Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares) under CHAPTER-XII (Meeting of Board and its Powers) of the Companies Act, 2013

(1) No director of a company shall, in connection with—
(a) the transfer of the whole or any part of any undertaking or property of the company; or
(b) the transfer to any person of all or any of the shares in a company being a transfer resulting from—
(i) an offer made to the general body of shareholders;
(ii) an offer made by or on behalf of some other body corporate with a view to a company becoming a subsidiary company of such body corporate or a subsidiary company of its holding company;
(iii) an offer made by or on behalf of an individual with a view to his obtaining the right to exercise, or control the exercise of, not less than one-third of the total voting power at any general meeting of the company; or
(iv) any other offer which is conditional on acceptance to a given extent, receive any payment by way of compensation for loss of office or as consideration for retirement from office, or in connection with such loss or retirement from such company or from the transferee of such undertaking or property, or from the transferees of shares or from any other person, not being such company, unless particulars as may be prescribed with respect to the payment proposed to be made by such transferee or person, including the amount thereof, have been disclosed to the members of the company and the proposal has been approved by the company in general meeting.
(2) Nothing in sub-section (1) shall affect any payment made by a company to a managing director or whole-time director or manager of the company by way of compensation for loss of office or as consideration for retirement from office or in connection with such loss or retirement subject to limits or priorities, as may be prescribed.

(3) If the payment under sub-section (1) or sub-section (2) is not approved for want of quorum either in a meeting or an adjourned meeting, the proposal shall not be deemed to have been approved.

(4) Where a director of a company receives payment of any amount in contravention of sub-section (1) or the proposed payment is made before it is approved in the meeting, the amount so received by the director shall be deemed to have been received by him in trust for the company.

(5) If a director of the company contravenes the provisions of this section, such director shall be punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to one lakh rupees.

(6) Nothing in this section shall be taken to prejudice the operation of any law requiring disclosure to be made with respect to any payment received under this section or such other like payments made to a director.





Extra Notes for Readers

(1) The Companies Act, 2013 received the assent of the President on the 29th August, 2013 (Published in the Gazette of India, Extraordinary, Part II - Section 1 by Ministry of Law and Justice, Legislative Department on 30th August, 2013) - link


(2) Section 191 of the Companies Act 2013 was notified by MCA Notification S.O. 902(E) dated 26th March 2014 (w.e.f. 1st April, 2014) - link

(3) Relevant rule(s) of the Companies (Meeting of Board and its PowersRules, 2014 (w.e.f. 1st April, 2014) - link
  • Rule 17 - Payment to director for loss of office, etc. in connection with transfer of undertaking, property or shares
[Also check amendments, if any, to the Companies (Meeting of Board and its Powers) Rules, 2014]







This page was last updated on 13th April, 2017.

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