Many penalty provisions in the Companies Act, 2013 say "the company and every officer who is in default shall be punishable...". This definition tells us who exactly gets hit — it is the gateway between a corporate default and personal liability (fine / imprisonment).
## Persons covered (7 categories)
#
Person
Trigger / Condition
(i)
Whole-time Director (WTD)
Always covered — by virtue of office.
(ii)
Key Managerial Personnel (KMP)
Always covered.
(iii)
Director specified by Board(only where there is no KMP)
The Board specifies such director(s) and they give written consent. If no director is so specified → all directors are officers in default.
(iv)
Person under immediate authority of Board/KMP charged with responsibility (maintenance, filing, distribution of accounts/records)
Must have either authorised, actively participated in, knowingly permitted, OR knowingly failed to take active steps to prevent the default.
(v)
Shadow Director — a person on whose advice/directions/instructions the Board is accustomed to act
Excludes a person giving advice in a professional capacity (e.g., the company's CA, lawyer).
(vi)
Every director aware of contravention
Awareness arises from receipt of Board proceedings or participation in Board meeting without objecting, OR contravention took place with his consent or connivance.
(vii)
For issue/transfer of shares — Share Transfer Agents, Registrars, Merchant Bankers to the issue
Only in the context of share issue/transfer defaults.
## Quick memory map
Always in default: WTD + KMP.
If no KMP: Board-specified directors (with consent), else all directors.
Operational staff: only if they actively participated / knowingly permitted.
Shadow controller: caught — unless he is just a professional adviser.
Passive directors: caught if they sat through the Board meeting without objecting.
Share-issue defaults: also catches STA, Registrar, Merchant Banker.
Worked example
### Example 1
Example 1 — Passive director. Director D attends a Board meeting where the Board approves a related-party transaction that violates Sec 188. D says nothing. Later the company is prosecuted. Is D an officer in default? Yes — under sub-clause (vi): he was aware (by participation) and did not object.
### Example 2
Example 2 — No KMP appointed. Z Pvt Ltd has 4 directors and no KMP. The Board has not specified any director under clause (iii). The company fails to file annual return. Who is in default? All 4 directors — because where no director is specifically named, ALL directors are deemed officers in default.
### Example 3
Example 3 — Professional adviser. The company's lawyer advises the Board on a legal interpretation that later turns out to violate the Act. Is the lawyer an officer in default under (v)? No — the proviso excludes persons giving advice in a professional capacity.
⚠️ Common exam mistakes
Assuming every director is automatically an officer in default — only WTD and KMP are automatic. Other directors are caught only in specific situations (no KMP + Board specification, aware of contravention, etc.).
Forgetting the 'professional capacity' carve-out under clause (v) — lawyers, CAs, CS giving professional advice are NOT officers in default merely because the Board acted on their advice.
Missing the 'objection requirement' under clause (vi) — a director who silently sits through a Board meeting is treated as having consented; he must place his objection on record.
Overlooking clause (vii) — students often confine the definition to insiders and forget that Share Transfer Agents, Registrars and Merchant Bankers are also officers in default for share issue/transfer defaults.
Bare-Act text Section 2(60) · Companies Act, 2013 · click to expand
Officer who is in default, for the purpose of any provision in this Act which enacts that an officer of the company who is in default shall be liable to any penalty or punishment by way of imprisonment, fine or otherwise, means any of the following officers of a company, namely:
(i) Whole-time director;
(ii) KMP;
(iii) where there is no KMP, such director(s) as specified by the Board in this behalf and who has or have given his consent in writing to the Board to such specification, or all the directors, if no director is so specified;
(iv) any person who, under the immediate authority of Board/KMP, is charged with any responsibility including maintenance, filing or distribution of accounts or records, authorises, actively participates in, knowingly permits, or knowingly fails to take active steps to prevent, any default;
(v) any person in accordance with whose advice, directions or instructions the Board of directors of company is accustomed to act, other than a person who gives advice to Board of directors in a professional capacity;
(vi) every director, in respect of a contravention of any of the provisions of this Act, who is aware of such contravention by virtue of the receipt by him of any proceedings of the Board or participation in such proceedings without objecting to the same, or where such contravention had taken place with his consent or connivance;
(vii) in respect of the issue or transfer of any shares of a company, the share transfer agents, registrars and merchant bankers to the issue or transfer.