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CS Executive · Capital Market and Securities Laws · Prohibition of Insider Trading

Rohan, a key managerial personnel of a listed firm, asks whether Section 194 of the Companies Act, 2013 (forward dealings in company securities by directors or KMP) still restricts him. What is the position per the official text?

Section 194, which prohibited forward dealings in company securities by directors or key managerial personnel, was omitted by the Companies (Amendment) Act, 2017 with effect from 9 February 2018, so it no longer operates as a restriction.

  1. ASection 194 was omitted by the Companies (Amendment) Act, 2017 with effect from 9 February 2018Correct
  2. BSection 194 applies only to directors and not to KMP
  3. CSection 194 was amended to impose a penalty of Rs 25 crore
  4. DSection 194 applies only to One Person Companies

Explanation

The text states Section 194 was omitted by the Companies (Amendment) Act, 2017 (1 of 2018), s. 64, w.e.f. 9-2-2018. So the option claiming it is operative, limited to directors, or carries a Rs 25 crore penalty is wrong. The Rs 25 crore figure belongs to SEBI Act Section 15G.

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