04 Secretarial Standards Adding Value to Law

8/16/2019 04 Secretarial Standards Adding Value to Law

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Secretarial Standards: Adding

Value to LawToday, companies are not to be seen as an isolated entity, but as a part of InterconnectedChain of Various stakeholders. They have crossed the borders and have presence in manycountries. In such scenario, there is definitely a need of universally acceptable governancstandard to be followed by each organization or firm. The Secretarial Standards are anattempt in this regard.

Ahalada Rao V*, FCS VSSR Murthy Eranki, ACSAhalada Rao V and Associates

Company SecretariesHyderabad

Practising Company Secretary

Hyderabad

[email protected] [email protected]

“JRD Tata had a friend who used to say that he misplaces and losses his pen often. He will use only cheap pe

so that he need not worry about losing them. He was worried about carelessness habit. JRD suggested him

buy the costliest pen he could afford and see what happens. He did that and purchased a 22 carat gold peAfter nearly six months JRD met him and asked him if he continues to misplace his pen. His friend said thhe is very careful about his costly pen and he is surprised how he has changed! JRD explained to him that t

value of the pen made difference and there was nothing wrong with him as a person.”

T he Companies Act,2013 is a landmark statute which

includes comprehensive provisions to govern all listed

and unlisted companies in the country which has far-

reaching implications that change the manner in whichcorporates operate in India. The Institute of Company

Secretaries of India has notied Secretarial Standard-1

&Secretarial Standard-2. Having been approved by

the Central Government, adherence by a company to

these Secretarial Standards is now mandatory, as per

the provisions of the Companies Act, 2013.

These Secretarial Standards make an attempt to ll those gaps

which the Companies Act has left untouched, by providing those

Clauses which make an attempt to bring uniformity in the conduct

of Board Meetings and General Meetings of Corporates, which

were divergent. Thus, without encroaching upon the provisions of

Companies Act, the Standards add value to the existing provisions

*Central Council Member and also Member SSB of ICSI, 2015.

Secretarial Standards: Adding Value to Law

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check the compliance of the Secretarial Standards by the company

as non compliance of these Standards means violation of the law.

The following passages give a brief overview of the utility of these

Standards to various Stake Holders.

SECRETARIAL STANDARDS ANDSTAKEHOLDERS

SECRETARIAL STANDARD-1: “MEETINGSOF THE BOARD OF DIRECTORS”This Standard prescribes a set of principles for convening and

conducting Meetings of the Board of Directors and matters related

thereto. The principles enunciated in this Standard for Meetings ofthe Board of Directors are also applicable to Meetings of Committee

(s) of the Board, unless otherwise stated herein or stipulated by

any other applicable Guidelines, Rules or Regulations. “Invitee"means a person, other than a Director and Company Secretary,

who attends a particular Meeting by invitation. Thus, in dening

the Word “Invitee” to include any Person other than a Director and

Company Secretary, it has brought such other people like Statutory

Auditors, Nominees of Financial Institutions, Nominees of CG and

the like under its Ambit.

1.3.1 Notice in Writing of Every Meeting

Shall be Given to Every Director by Hand orby Speed Post or by Registered Post or by

Courier or by Facsimile or by E-Mail or byany other electronic means.The Notice shall be sent to the postal address or e-mail address,registered by the Director with the company or in the absence

of such details or any change thereto, any of such addresses

appearing in the Director Identication Number (DIN) registration

of the Director. Where a Director species a particular means of

delivery of Notice, the Notice shall be given to him by such means.

With the operation of this clause, the ambiguity of Delivery of Notice

to the Directors has been Resolved to a larger extent.

1.3.2 Notice shall be issued by the Company

Secretary or where there is no CompanySecretary, any Director or any other person

authorised by the Board for

The purpose.The notice of board meeting can be given by company secretary

or a director or any other person authorized by the Board for the

purpose. The words any authorized person implies that such

authorized person can be any ofcer of the company but also any

other person who is not an ofcer of the company.

This can be explained with the help of an illustration as follow

1. The notice of the board meeting of a subsidiary company c

be issued by any authorized or Responsible person of hold

company.

2. The notice of a holding company’s Board Meeting can

issued by any responsible ofcer of the Holding compa

authorized in this behalf.

The word ‘responsible officer’ has been defined und

Companies act,1956 to be read with rules. But in t

Companies Act, 2013, it was nowhere dened, leaving it

the wisdom of the Directors to decide the Competent Of

for the purpose.

Thus, this clause on the one hand gives exibility to corporate

their conduct of meetings and on other hand shows the importan

of Notices with respect to directors and ofcers of the compan

1.3.5 The Notice of a Meeting shall be giveneven if Meetings are held on Predetermined

dates or at pre-determined intervals.It is of late, a common practice among corporates to decide w

in advance the date of Board meetings keeping in view the bu

Sshedules of the Directors. However, there may be deviations fr

the date of meetings owing to certain circumstances, in which ca

the Chairman or M.D. tend to deviate without notice or cons

of other directors. Further, the above clause ensures that all

companies follow a denite and uniform system of Board Meetprocedures regardless of pre determined understandings of

Company.

1.3.7 The Agenda, setting out the business


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to be transacted at the Meeting, and Noteson Agenda shall be given to the Directors

at least seven days before the date of the

Meeting, unless the Articles prescribe alonger period.Where a Director species a particular means of delivery of Agenda

and Notes on Agenda,these papers shall be sent to him by such

means. Proof of sending Agenda and Notes on Agenda and their

delivery shall be maintained by the company.

There is no express provision on agenda though the notice period

is specied as seven days. The Standard insists on a seven days

notice along with notice and at the same time gives cushion for

specifying longer period in the Articles . A company may circulatethe agenda of meeting well in advance without mentioning the

date of notice, in which case as subsequent notice may issued by

mentioning the date of board meeting with in the limits of law. Thisis a healthy practice as it avoids last minute screening of agenda.

this laws is benecial for all the directors of the company.

1.3.11 To transact urgent business, the

Notice, Agenda and Notes on Agenda may

be given at shorter period of time than

stated above, if at least one IndependentDirector, if any, shall be present at such

Meeting. If no Independent Director is

present, decisions taken at such a Meetingshall be circulated to all the Directors and

shall be nal only on ratication thereof byat least one Independent Director, if any.

In case the company does not have anIndependent Director, the decisions shall

be nal only on ratication thereof by a

majority of the Directors of the company,unless such decisions were approved at the

Meeting itself by a majority of Directors ofthe company.In view of the above clause, the Company Secretary conductingthe Secretarial Audit or assisting the company has to ensure that

all the above requirements w.r.t. shorter notice has been complied

with. The above Standard is a solution for companies especially

for transacting urgent business. This Standard also helps the

companies in the following two situations:

1. Where appointment of Independent director is mandatory, but

not appointed and where appointed but there is a vacation in

the ofce.

2. Where appointment of Independent director is not mandato

In the Act, it is said that,in case of an emergency situatio

the decision taken shall be valid only after ratication by o

Independent Director. However, this Standard lls the gap whthere is no Independent Director by specifying the raticationmajority Members on Board. This gives a clarity in and enab

the Board to transact the business exibly.

2.1 Meetings of the Board

The Board shall meet at least once in every

calendar quarter, with a maximum intervalof one hundred and twenty days between

any two consecutive Meetings of the Boardsuch that at least four Meetings are held in

each Calendar Year.

4.1.5 The attendance register is open for

inspection by the Directors.The Company Secretary in Practice appointed by the company

the Secretarial Auditor or the Statutory Auditor of the company c

also inspect the attendance register as he may consider necess

for the performance of his duties. A member of the company is

entitled to inspect the attendance register. Therefore, the Compa

Secretary in Practice appointed by the company or the Secreta

Auditor in his capacity as such can inspect the attendance regis

The Companies Act, 1956 mandated quarterly Board Meeting, the Companies Act 2013 mandates a Board Meeting every 1

days and 4 times in a year in such a way that it prevents the cond

of all Board Meetings continuously and possibility of skippinBoard Meeting in one quarter. This Standard benets the Invest


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of Listed Companies so as to keep a track on the declaration of

Quarterly Results and in the case of unlisted companies by way of

inculcating a sense of discipline with time phased Board Meetings.

5. Chairman

5.1 Meetings of the Board

5.1.1 The Chairman of the company shall bethe Chairman of the Board. If the company

does not have a Chairman, the Directors

may elect one of themselves to be the

Chairman of the Board.5.1.2 The Chairman of the Board shallconduct the Meetings of the Board. If no

Chairman is elected or if the Chairman isunable to attend the Meeting, the Directors

present at the Meeting shall elect oneof themselves to chair and conduct the

Meeting, unless otherwise provided in the

Articles.It would be the duty of the Chairman to check, with the assistance

of Company Secretary, that the Meeting is duly convened and

constituted in accordance with the Act or any other applicableguidelines, Rules and Regulations before proceeding to transact

business. The Chairman shall then conduct the Meeting. The

Chairman shall encourage deliberations and debate and assessthe sense of the Meeting. If the Chairman is interested in any item

of business, he shall, with the consent of the members present,

entrust the conduct of the proceedings in respect of such item to

any Disinterested Director and resume the Chair after that item

of business has been transacted. The Chairman also shall not

present at the Meeting during discussions on such items. In ca

some of the Directors participate through Electronic Mode,

Chairman and the Company Secretary shall safeguard the integ

of the Meeting by ensuring sufcient security and identicatprocedures. No person other than the Director concerned shal

allowed access to the proceedings of the Meeting where Direc

(s) participate through Electronic Mode, except a Director who

differently abled, provided such Director requests the Board

allow a person to accompany him and ensures that such pers

maintains condentiality of the matters discussed at the Meeti

Unless otherwise provided in the Articles, in case of an equality

votes, the Chairman shall have a second or casting vote.

Therefore, this Standard provides a solution where there is

tie . Where there is a tie in the opinion of the Board, then su

a deadlock can be resolved by the Chairman by a casting vo

However, as the above clause provides, this shall be authoriz

by The Articles of Association.

6.3.2 The Resolution, if passed, shall bedeemed to have been passed on the last

date specied for signifying assent ordissent by the Directors or the date on

which assent from more than two-third ofthe Directors has been received, whichever

is earlier, and shall be effective from that

date, if no other effective date is specied such Resolution.

If the approval of the majority of Directors entitled to vote is received by the last date specied for receipt of such approv

the Resolution shall be considered as not passed.

7.2.1.3 Minutes shall contain a record of all

appointments made at the Meeting.Where the Minutes have been kept in accordance with the

and all appointments have been recorded, then until the contr

is proved, all appointments of Directors, First Auditors, K

Managerial Personnel, Secretarial Auditors, Internal Auditors a

Cost Auditors, shall be deemed to have been duly approved by

Board. All appointments made one level below Key Manage

Personnel shall be noted by the Board.

This provision ensures that all the appointments have been main accordance with statutes applicable and shall act as a che

against the arbitrary appointments by the companies. Furth

the Standard distinguishes three categories of people pres

in the Meeting, who have to be duly recorded in the attendan

Register namely (1)Members who are present; (2) Invitees an

3). Attendants.

SS-2 seeks to prescribe a set of principles

for the convening and conducting of

General Meetings and matters relatedthereto. This Standard also deals with

conduct of e-voting and postal ballot.

This Standard is applicable to all types

of General Meetings of all companies

incorporated under the Act except One

Person Company (OPC) and class or

classes of companies which are exempted

by the Central Government through

notification.


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Attendants are the deemed Members present in the Meeting like

Company Secretary, CFO of the company, etc, Invitees are those

members invited in the meeting like statutory auditor. “Invitee"

means a person, other than a Director and Company Secretary,

who attends a particular Meeting by invitation.”

Appointments of all KMPs, Statutory Auditors, Internal Auditors

are to be approved by the Board and all appointments made one

level below Key Managerial Personnel shall be noted by the Board.

7.5.2 The date of entry of the Minutes in the

Minutes Book shall be recorded by

the Company Secretary.Where there is no Company Secretary, it shall be entered by any

other person duly authorised by the Board or by the Chairman.

The person so authorized by the Board for the purpose shall be

a competent person and need not necessarily be an ofcer of the

company.

SECRETARIAL STANDARD-2: GENERALMEETINGSSS-2 seeks to prescribe a set of principles for the convening and

conducting of General Meetings and matters related thereto. This

Standard also deals with conduct of e-voting and postal ballot.

This Standard is applicable to all types of General Meetings of

all companies incorporated under the Act except One Person

Company (OPC) and class or classes of companies which are

exempted by the Central Government through notication. The

principles enunciated in this Standard for General Meetings

of Members are applicable mutatis-mutandis to Meetings ofdebenture-holders and creditors.

A Meeting of the Members or class of Members or debenture

holders or creditors of a company under the directions of the

Court or the Company Law Board (CLB) or the National Compa

Law Tribunal (NCLT) or any other prescribed authority sh

be governed by this Standard without prejudice to any rul

regulations and directions prescribed for and orders of, such cou

judicial forums and other authorities with respect to the condof such Meetings.

"Timestamp” means the current time of an event that is record

by a Secured Computer System and is used to describe the ti

that is printed to a le or other location to help keep track of wh

data is added, removed, sent or received.”

The Time Stamp, helps the Regulators to assess, track a

authenticate the events that have taken place in the Gene

Meetings of the company.

1.2.1 Notice in writing of every Meeting shabe given to every Member of the company.

Such Notice shall also be given to theDirectors and Auditors of the company,to the Secretarial Auditor, to Debenture

Trustees, if any, and, wherever applicable oso required, to other specied persons.In the case of Members, Notice shall be given at the addreregistered with the Company or depository. In the case of sha

or other securities held jointly by two or more persons, the Not

shall be given to the person whose name appears rst as

records of the Company or the depository, as the case may

In the case of any other person who is entitled to receive Noti

the same shall be given to such person at the address provid

by him. Where the company has received intimation of death oMember, the Notice of Meeting shall be sent as under:

(a) Where securities are held singly, to the Nominee of the sin

holder;

(b) Where securities are held by more than one person jointly aany joint holder dies, to the surviving rst joint holder;

(c) Where securities are held by more than one person joi

and all the joint holders die,to the Nominee appointed by

the joint holders;

In the absence of a nominee, the Notice shall be sent to the le

representative of the deceased Member. In case of insolvency

a Member, the Notice shall be sent to the assignee of the insolvMember. In case the Member is a company or body corpor

which is being wound up, Notice shall be sent to the liquidato

Earlier, only Shareholders, Statutory Auditors, Debenture Hold

were given Notice of General Meetings, without any referencethe Directors of the Company as it was considered not necess

keeping in view the fact that it is the Board itself which approv


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the Notice. Interestingly enough, this Standard requires the Notice

to be sent to the Board of Directors in order to address non receipt

of Approved Notice by the Directors owing to technical difculties.

Further, this Standard benets the Shareholders, by providinga cushion to send the Notice to the legal representatives of

the Shareholders in case where no nominee is appointed. The

requirement of Succession certificate was also done away

with. This Standard was included keeping in view the various

disputes before the Company Law Board, thereby addressing the

Grievances of Nominees and Legal Representatives and avoiding

unnecessary time consuming process.

4.1.2 Directors who attend General Meetings

of the company and the Company Secretaryshall be seated with the Chairman.Interestingly, by including the above Standard, the Board of

Directors were recognized collectively as a single Body andwas intended to work as a whole being accountable to the

Shareholders. Further, this Standard has also recognized the

competence of Company Secretaries in the Conduct of Board

Meeting and its procedures.

4.3 Secretarial Auditor

The Secretarial Auditor, unless exemptedby the company shall, either by himself

or through his authorized representative,attend the Annual General Meeting and shall

have the right to be heard at such Meeting

on that part of the business which concernshim as Secretarial Auditor.

The Chairman may invite the Secretarial Auditor or his authoriz

representative to attend any other General Meeting, if he consid

it necessary. The authorized representative who attends

General Meeting of the company shall also be qualied to b

Secretarial Auditor. Therefore, it is incumbent on the CompaSecretary to be well equipped with the Agenda governing

meeting.

6.1 Right to Appoint

A Member entitled to attend and vote is

entitled to appoint a Proxy, or where that isallowed, one or more proxies, to attend and

vote instead of himself and a Proxy need nbe a Member.A proxy shall be a Member in case of companies with charitaobjects etc. and not for prot registered under the speci

provisions of the Act.A Proxy can act on behalf of Members

exceeding fty and holding in the aggregate not more than

percent of the total share capital of the company carrying Vot

Rights.

However, a Member holding more than ten percent of the to

share capital of the company carrying Voting Rights may appoin

single person as Proxy for his entire shareholding and such pers

shall not act as a Proxy for another person or shareholder.

Proxy is appointed for more than fty Members, he shall choo

any fty Members and conrm the same to the company bef

the commencement of specied period for inspection. In case, Proxy fails to do so, the company shall consider only the rst

proxies received as valid.

8.4 Board Approval

The Board shall appoint one or more

scrutinisers for e-voting or the ballotprocess.The scrutinizer (s) may be a Company Secretary in Practice

Chartered Accountant in Practice, a Cost Accountant in Pract

or an Advocate or any other person of repute who is not in t

employment of the company and who can, in the opinion of

Board,scrutinize the e-voting process or the ballot process, as

case may be, in a fair and transparent manner. The scrutini

(s) so appointed may take assistance of a person who is no

employment of the company and who is well-versed with e-voting system.

The scrutinizer so appointed shall be required to be a person w

is not in the employment of the company. This will ensure that

Scrutinizer acts independently and impartially in the processscrutinizing the ballot process.


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8.7 Custody of scrutinizers’ register, reportand other related papers The scrutinizers’

register, report and other related papers

received from the scrutinizer(s) shall be keptin the custody of the Company Secretary orany other person authorized by the Board

for this purpose.

9.4 Appointment of scrutinisers

The Chairman shall appoint such number

of scrutinizers, as he deems necessary,who may include a Company Secretary

in Practice, a Chartered Accountant inPractice, a Cost Accountant in Practice, an

Advocate or any other person of repute whois not in the employment of the company,

to ensure that the scrutiny of the votes cast

on a poll is done in a fair and transparentmanner.At least one of the scrutinizers shall be a Member who is present

at the Meeting, provided such a Member is available and willing

to be appointed.

13.2 The qualications, observations

or comments or other remarks if any,

mentioned in the Secretarial Audit Reportissued by the Company Secretary in

Practice, shall be read at the AnnualGeneral Meeting and attention of Members

present shall be drawn to the explanations /comments given by the Board of Directors in

their report.

17.4.2 The date of entry of the Minutes in

the Minutes Book shall be recorded by the

Company Secretary.Where there is no Company Secretary, it shall be entered by any

other person authorised by the Board or the Chairman.

17.6. Inspection and Extracts of Minutes

17.6.1 Directors and Members are entitled to

inspect the Minutes of all General Meetings

including Resolutions passed by postal

ballot.Minutes of all General Meetings shall be open for inspect

by any Member during business hours of the company, with

charge, subject to such reasonable restrictions as the compamay, by its Articles or in General Meeting, impose, so, howev

that not less than two hours in each business day are allowed

inspection. The Company Secretary in Practice appointed by company, the Secretarial Auditor, the Statutory Auditor, the C

Auditor or the Internal Auditor of the company can inspect

Minutes as he may consider necessary for the performance of

duties. Inspection of Minutes Book may be provided in physi

or in electronic form. While allowing inspection of Minutes Bo

the Company Secretary or the ofcial of the company authoriz

by the Company Secretary to facilitate inspection shall take

precautions to ensure that the Minutes Book is not mutilated o

any way tampered with by the person inspecting.

17.6.2 Extract of the Minutes shall be givenonly after the Minutes have been dulysigned. However, any Resolution passed

at a Meeting may be issued even pendingsigning of the Minutes, provided the same

certied by the Chairman or any Director othe Company Secretary.When a Member requests in writing for a copy of any Minut

which he is entitled to inspect,the company shall furnish


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same within seven working days of receipt of his request, subject

to payment of such fee as may be specied in the Articles of the

company. In case a Member requests for the copy of the Minutes

in electronic form, in respect of any previous General Meetings

held during a period immediately preceding three nancial years,the company shall furnish the same on payment of such fee as

prescribed under the Act. Copies of the Minutes or the extracts

thereof as requisitioned by the Member, duly certied by the

Company Secretary or where there is no Company Secretary, an

ofcer duly authorised by the Board in this behalf, may be provided

in physical or electronic form.

18.3 Minutes Books shall be kept in the

custody of the Company Secretary.Where there is no Company Secretary, Minutes shall be kept in

the custody of any Director duly authorized for the purpose by the

Board. The person so authorized by the Board shall be person of

integrity and competence to handle the custody of Minutes Books.

CONCLUSIONNow, that these Standards have been approved and notied by the

Central Government it shall be the Duty of the Companies to adapt

themselves to the Changes in the Law and that of the Professionals

to assist and guide the Management of the companies in doingso. The Secretarial standards Board had made a great attempt in

codifying these standards so as to t them in the present legal and

corporate scenario of the country. The benets arising from these

two approved Standards can be summarized thus:

1. Recognising the practices prevalent in the Companies in the

conduct of Board and General Meetings and supporting themby addressing legal provisions and thereby enhancing the

importance of Board and General Meetings.

2. Ensuring that the Rights of Investors are protected by providing

protective measures which cannot be ignored or overridden

by the Management.

3. Allowing the Professionals to perform their duties fairly

and independently and preference to their knowledge and

expertise has been given.

4. Supporting Regulators to ensure that the Companies are

functioning in a Fair and Transparent manner which avoids

the violation of Law and protecting the Rights of Investors.

• This is what happens in our life. We are careful with things

which we value most.

• If we value our health, we will be careful about what and how

we eat;

• If we value our friends, we will treat them with respect;• If we value money, we will be careful while spending;

• If we value our time, we will not waste it.

• If we value relationship we will not break it.

• Carefulness is a basic trait all of us have, we know when

be careful!

• Carelessness only shows what we don’t value……

• (an excerpt from JRD Tata’s Life)• From the above story, we can learn that-• if we understand the Law , we follow it with Heart!!

• if we value money, we will be careful while spending it!!

• if we value our time, we will not waste it!!

• if we value our relationships, we will not break it!!

• Likewise, if we can value the Standards, we ensure Go

Governace!!

Companies must be adept to cope up with the ever-chang

environment. Certain combinations of Statutes may work for cert

periods of time. Change, however, will inevitably occur. Whe

does, how well a country’ scorporate governance system adapt

its changed environment, not how well it adheres to any particu

model, will determine its success. The two approved SecretaStandards make it evident that they denitely add value to Law a

are benecial to various Stakeholders viz., Investors, Corporat

Professionals, Regulators, Investors, Financial Institutions

providing a win-win situation to all.

REQUIREDQualified Company

Secretary for a

Bhavnagar based

manufacturing Company

0-1 year experience, salary

negotiable, apply to:Mr. Girish Shah

Aquagel Chemicals [Bhavnagar] Pvt. Ltd.

Plot No. 147, GIDC Estate, Vartej, Bhavnagar -

364060

Ap p o i nt me nt


38May 2015

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04 Secretarial Standards Adding Value to Law