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Revision of Secretarial Standards What are Secretarial Standards?
Secretarial Standards means the “Secretarial Standards” as issued by the Institute
of Company Secretaries of India constituted under section 3 of the Company
Secretaries Act, 1980 and approved by the Central Government. Where the Law is
not clear or needs explicit spirit of the law, Secretarial Standards, provide clarity
on them. Secretarial Standards only provide clarity on the respective subjects but
it doesn’t mean that the Secretarial Standards are alternative to the original Laws.
Introduction
Companies have to follow various legal requirements as applicable to them,
including The Companies Act 2013. THE INSTITUTE OF COMPANY SECRETARIES
OF INDIA has constituted the Secretarial Standards Board (S.S.B.) for formulating
the Secretarial Standards. Earlier in the companies Act 1956 the Secretarial
Standards were “re commendatory” in nature but after notification of the
Companies Act 2013 Secretarial Standards are “mandatory” in nature. The S.S.B.
with its council members determined the subjects / topics in which Secretarial
Standards are to be developed.
Recognition
The standards gained final recognition with the introduction of Companies Act, 2013
(Section 118(10)). And since then they have become of the “mandatory” nature. As
per Sub Section (1) of Section 204 of Companies Act 2013 every listed company and
other class of companies as may be prescribed shall “annex the secretarial audit report
with its Board reports made in terms of sub section (3) of Section 134 of Companies
Act 2013”. And such secretarial audit report as to be issued by company secretaries in
practice under Section 204 of Companies act 2013 he / she has to ensure that company
has complied with the applicable secretarial standards.
In Short - Secretarial Standards are issued by ICSI to facilitate the corporate world
and respective professionals, by providing clear interpretation and proper
explanation where Law is ambiguous. According to the President of the NCLT, the
disputed regarding procedural matters have shown a drastic fall after the
introduction of the standards.
Need for Revision
Long back when the Accounting Standards were introduced for the sake for harmony
and uniformity in the procedure of preparation of financial statements and other
accounting treatments, the practicing professionals as well as the businessman found it
some complications which needed to be tackled. But later after true revisions made it
smooth for everyone to adopt them and apply them.
In the same manner the Secretarial Standards were introduced in order to bring
uniformity and regularity in the common and repeated practices taking place in daily
routines of the company. They were first issued in 2015 when CS Atul Mehta was the
President of ICSI. But the members, practicing professionals, stakeholders,
businessman found issues in adoption of these standards. The technical issues, non co-
relate able requirements made it a need of time to make a proper revision in the
standards with the help of the informed issues, suggestions, etc. This was the reason ,
the guidance notes issued by ICSI promptly brought t notice that these standards do
not over ride the original law and will not prevail in case of any controversy in the Act
and the standards.
Thus the need for revision was considered by the Institute of Company Secretaries of
India.
10 Major changes that the revision has brought :
Secretarial Standard 1 : Meetings of the board
I. Scope :
1. Section 8 companies need to comply with the applicable provisions of the Act relating to Board Meetings.
As a result they need not follow the SS 1.
II. Definition :
1. Committee – means a committee of Directors mandatorily required to be constituted by the Board under the Act.
This new definition requires the committees to follow the SS 1 only when they are
constituted by the Board of directors. As a result, other committees not constituted
by the Board are kept out from the view of the standard and hence provides
relaxation.
2. Secretarial Auditor – “Secretarial Auditor” means a Company Secretary in Practice or a firm of Company Secretary(ies) in Practice appointed in pursuance of the Act to conduct the secretarial audit of the company.
The new definition has covered the Firms which is a great clarification for the sake of
Secretarial Audit !
III. Convening a meeting :
1. Para 1.2.2 of SS 1 provides that a Meeting may be convened at any time and place, on any day.
This amendment can be stated as in conformity with the provisions of the Act. It can
be learned that a meeting can be now held on a national holiday too. However, an
adjourned meeting still can also be held on a national holiday now as the restricting
para is not present in the new SS 1.
2. Para 2.1 of the SS 1 provides that The company shall hold at least four Meetings
of its Board in each Calendar Year with a maximum interval of one hundred and
twenty days between any two consecutive Meetings. The company shall hold first Meeting of its Board within thirty days of the date of
incorporation. It shall be sufficient if subsequent Meetings are held with a maximum
interval of one hundred and twenty days between any two consecutive Meetings.
This amendment too can be stated as in conformity with the provisions of the Act.
It can be learnt that the new revised SS 1 has removed the requirement of holding one
meeting in every calendar quarter. So now there can be possibility of not having
meeting in a quarter.
As it clarified earlier , it still states that if the company is incorporated in between
the year then a meeting to be held within 30 days of incorporation and thereafter,
next meetings within interval of 120 days.
IV. Notice :
1. Para 1.3 of SS 1 provides Notice of the Meeting shall clearly mention a venue,
whether registered office or otherwise, to be the venue of the Meeting and all the
recordings of the proceedings of the Meeting, if conducted through Electronic
Mode, shall be deemed to be made at such place.
Mere change in the language is seen with respect to the requirement of the Act.
2. Para 1.3.1 of SS 1 provides Notice in writing of every Meeting shall be given to
every Director by hand or by speed post or by registered post or by facsimile or
by e-mail or by any other electronic means.
This amendment is in accordance with Section 173 of the Act. It makes an
interpretation that Courier mode is not allowed. However, additional two days to be
added while sending through post.
3. In the 1st sub Para of the Para (1.3.1) of SS 1 it is stated that Where a Director
specifies a particular means of delivery of Notice, the Notice shall be given to him
by such means. However, in case of a Meeting conducted at a shorter Notice,
the company may choose an expedient mode of sending Notice.
This change has provided an express relaxation in case of shorter notice. The company
may decide an expedient mode of sending the notice. However, it cannot be sent
through courier as this mode is not allowed as previously mentioned.
V. Agenda / Agenda Notes :
1. The 1st Sub Para under Para 1.3.7 of the SS 1 provides that Agenda and
Notes on Agenda shall be sent to all Directors by hand or by speed post or by
registered post or by e-mail or by any other electronic means.
This change is similar in line with the removal of courier mode as provided in Notice.
2. Sub Para 3 of Para 1.3.7 of SS 1 states Where a Director specifies a particular means of delivery of Agenda, Agenda Notes then such Agenda, Agenda Notes shall be given to him by such means. However, in case of a Meeting conducted at a shorter Notice, the company may choose an expedient mode of sending Agenda, Agenda Notes.
This revision makes a relaxation in case of shorter notice. The company may decide an
expedient mode of sending Agenda, Agenda Notes.
VI. Preservation of proof of sending Notice / Agenda / Agenda Notes / Minutes and their delivery :
1. Sub Para 3 of Para 1.3.1 of SS 1 provides Proof of sending Notice / Agenda / Agenda Notes / Minutes and its delivery shall be maintained by the company for such period as decided by the Board, which shall not be less than 3years from the date of the Meeting.
Earlier, SS1 was not clear on this issue. Now with this clarity, the Board can fix the
period of preservation for a period not lesser than 3 years.
VII. Quorum :
1. Para 3.2 of the SS 1 provides that Director shall not be reckoned for Quorum in respect of an item in which he is interested. However, in case of a private company, a Director shall be entitled to participate in respect of such item after disclosure of his interest. Leave of absence shall be granted to a Director only when a request for such leave has been received by the Company Secretary or by the Chairman.
The Old SS 1 required that a Director shall not be reckoned for Quorum in respect of
an item in which he is interested and he shall not be present, whether physically or
through Electronic Mode, during discussions and voting on such item.
VIII. Interested Director for the purpose of Quorum:
1. For this purpose, a Director shall be treated as interested in a contract or arrangement entered into or proposed to be entered into by the company: (New Insertion) If the item of business is related party transaction, then he shall not be present at the Meeting, whether physically or through Electronic Mode, during discussions and voting of such item.
Outcome: If Company entered into contract or arrangement with Director or his
relative shall not treat as interested Directors. In case of related party transaction
he shall not participate.
IX. Attendance Register:
1. According to Para 4.1.3 of SS 1 The attendance register shall be deemed to have been signed by the Directors participating through Electronic Mode, if their attendance is recorded in attendance registered and authenticated by the Company Secretary or where there is no Company Secretary, by the Chairman or by any other Director present at the Meeting, if so authorized by Chairman and the fact of such participation is also recorded in the Minutes.
The words “by the Chairman or the Company Secretary in the Attendance Register and
the Minutes of the Meeting” were substituted by the above text given modification to
the language of the previous SS 1.
2. Authentication of Register: Entries in the attendance register shall be authenticated by the Company Secretary or where there is no Company Secretary by the Chairman by appending his signature to each page.
This above text is not present in the revised SS 1 (omitted) . Hence , this requirement
need not be complied now. 3. Custody: Para 4.1.7 of SS 1 says that Where there is no Company Secretary,
the attendance register shall be in the custody of any other person authenticated by the Board of this purpose.
The old SS required that in case where there is no Company Secretary, a Director as
authorized by the board shall keep the custody of the registers. But now the words
“director” has been substituted by “any other person”.
X. Inspection of Attendance Register:
1. According to Para 7.7.1 of SS 1 The attendance register is open for inspection by the Directors. Even after a person cease to be a Director, he shall be entitled to inspect the attendance register of the Meeting held during the period of his Directorship.
In the old SS 1, the inspection was possible only by directors but now the new SS 1
allows a person to inspect even though he / she is not a director any more .
Conclusion:
After elaborate deliberations, the Institute Of Company Secretaries (ICSI) has amend the Secretarial Standard – 1. Amendments are made for better compliance of the law.
Compliance with the strict rules — that would help strengthen corporate governance practices and help curb corporate misdoings — would be ensured by company secretaries.
Article by :
Ruturaj Arvind Jadhav ,
Executive Progamme ,
Reg. no. : 440616398/08/2017
Email ID : [email protected]
Contact no. : +919923552675
A STEP TOWARDS REVEALING THE REAL OWNERSHIP
For greater financial transparency and to target the benami entities the government has decided to make it mandatory for unlisted corporate to dematerialize the shares starting it with the Public Companies as dematerializing shares of all the Companies won‟t be an easy step
In this drive the Ministry of Corporate Affairs came out with a notification dated: 13th
June 2018 in which it recommended for the new rules in this area called as the
Companies (Significant Beneficial Owners) Rules, 2018.
The MCA in these rules provides for significant beneficial ownership aimed at
tracking the real beneficiaries of shares as often benami holdings are found in shell
companies.
The definition of “significant Beneficial Ownership” says:
“Significant Beneficial Ownership” means an individual referred in sub-section (1) of
section 90 (holding ultimate beneficial interest of not less than ten per cent) read
with the sub section(10) of section 89 , but whose name is not entered in the
registrar of the a company as the holder of such shares ,and the term „ significant
beneficial ownership‟ shall be construed accordingly;
The law provides for mandatory disclosure within a stipulated period and once the
rules are notified there will be a rush of filings as shares in most companies are not
widely held. A failure to disclose beneficial ownership can result in a fine of up to Rs
50,000 with a daily penalty of Rs 1,000, if the failure to comply with the rules
continues. The Companies Act also allows the Centre to investigate cases of
beneficial ownership.
Disclosure of beneficial ownership in a company
Simply understood, beneficial owners are those persons who ultimately gain from
the ownership of securities, even if they are legally held in someone else‟s name.
Every significant beneficial owner has to file a declaration in Form no. BEN-1 to the
company in which he holds the significant ownership on the date of commencement
of these rules within 90 days from such commencement and within 30 days in case
of any change in his significant beneficial ownership.
Every individual who after the commencement of these rules acquires significant
beneficial ownership then he needs to file Form. No. BEN-1 to the company within
30 days from the date of such acquisition.
And within 30 days from the date of receiving the declaration by the company, it
needs to file a return with the registrar in Form no. BEN-2 along with the fees as
prescribed in Companies( Registration offices and fees) Rules, 2014.
All companies in India will need to maintain a “register of beneficial owners” in Form
no. BEN-3.
Dematerializing shares a “tracking test” for tax authorities
The demat shares are easily tracked by tax authorities and so they can now track
shareholders as well as the real beneficiaries of shares.
An investor seeking to dematerialize shares needs to open a demat account with the
Depository Participant (DP). A DP is the market intermediary through which
investors can avail depository services, such as banks, brokers, custodians, and
financial institutions.
The legal loop has given a space for many investors in unlisted public companies to
retain their shares in physical form, evading tax and financial scrutiny.
Further, any move by the government mandating the conversion of shares will be an
ambitious task, impacting over 55 million shareholders.
Shweta Dhadwal
Reg no: 240158740/09/2013
Professional passed student
WHISTLE BLOWING PROVISIONS IN THE CORPORATE SECTOR
The term “whistle-blowing”
originates from the practice of
British policemen who blew their
whistles whenever they observed
commission of a crime. Whistle
blowing means calling the attention
of the top management to some
wrongdoing occurring within an
organization. A whistleblower may
be an employee, former employee
or member of an organisation, a
government agency, who have
willingness to take corrective action
on the misconduct.
“Whistle Blower” – The Directors/employees of the Company making the
disclosure under this policy. The Whistle Blower’s role is that of a reporting party.
Whistleblowers are not investigators or finders of the facts; neither can they
determine the appropriate corrective or remedial action that may be warranted.
SARBANES-OXLEY ACT, 2002(SOX)
An Act enacted by U.S. congress in 2002 to protect investors by improving the
accuracy and reliability of corporate disclosures made pursuant to the securities
laws, and for other purposes. It is a set of standards that all U.S public companies
and public accounting firms must comply and adhere with good quality reporting.
APPLICABILITY OF SARBANES-OXLEY ACT, 2002(SOX)
Whether SOX is applicable in India? Yes, all companies, including Indian, which are
listed on US stock exchanges, are required to comply with the requirements of the
Act.
PROVISIONS OF SOX FOR WHISTLE-BLOWERS:
i. Make it illegal to "discharge, demote, suspend, threaten, harass or in any manner
discriminate against" whistleblowers
ii. Establish criminal penalties of up to 10 years for executives who retaliate against
whistleblowers
iii. Require board audit committees to establish procedures for hearing
whistleblower complaints
iv. Allow the secretary of labour to order a company to rehire a terminated employee
with no court hearing.
v. Give a whistleblower the right to a jury trial, bypassing months or years of
administrative hearings.
The Companies Act, 2013 has mandated certain companies to establish
Vigil/Whistle-blowing mechanism to report any unethical behavior or other concerns
to the management.
Section 177(9) of the Companies Act, 2013 and Rule 7 of the Companies (Meetings
of Board and its Powers) Rules, 2014 requires every listed company, companies
which accept deposits from the public and companies which have borrowed money
from banks and public financial institutions in excess of fifty crore rupees to establish
a vigil mechanism for Directors and Employees to report their genuine concerns
about on unethical behavior / misconduct / actual or suspended frauds / violation of
code conduct.
In view of this, the Company has establish a secured system to enable our Director
& Employees to report their genuine concerns, generally impacting / affecting
business of our Company, including but not limited to improper or unethical behavior
/ misconduct / actual or suspended frauds / violation of code of conduct.
Any Director or employee can directly email his/her concern or complaint to email id
as mentioned in the Whistle Blower & Vigil Mechanism policy. The Company will
take appropriate action for its resolution. Anonymous communications will not
normally be entertained.
All the Directors and Employees are assured that this mechanism provides adequate
safeguard against victimization of the concerned Director / Employee. In case of
repeated frivolous complaints being filed by a Director or an employee suitable
action will be taken against the concerned Director or Employee
APPLICABILITY WHISTLE BLOWER POLICY
Listed Companies and
Companies which accept deposit from public or have borrowed money from
banks and PFI’s in excess of Rs. 50 Crore.
OBJECTIVE
The Vigil (Whistle Blower) Mechanism is to ensure highest ethical, moral and
business standards in the course of functioning and to build a lasting and
strong culture of Corporate Governance within the Company. In terms of
Policy, an internal mechanism is established for Directors and employees to
report to the management, concerns about unethical behavior, actual or
suspected fraud or violation of Company’s code of conduct. The policy is
intended to encourage all Directors and employees of the Company to report
suspected or actual occurrence of illegal, unethical or inappropriate actions,
behaviors or practices by Directors/employees without fear of retribution. The
Directors/ employees can voice their concerns on irregularities, malpractices
and other misdemeanors through this Policy.
It also provides necessary safeguards and protection to the
Directors/employees who disclose the instances of unethical practices/
behavior observed in the Company. The mechanism also provides for direct
access to the Chairman of the Audit Committee in exceptional cases.
COVERAGE
All Directors/ employees of the Company are covered under this policy. The policy
covers malpractices and events which have taken place/ suspected to have taken
place in the Company involving:
Corruption
Frauds
Misuse/ abuse of official position,
Manipulation of data/ documents,
Any other act which affects the interest of the Company adversely and has
the potential to cause financial or reputational loss to the Company.
Conclusion
Some of the companies already have a Whistle-Blower policy as a good corporate
governance practice and now most of the companies start to frame this policy to
comply with section 177 of the Companies Act 2013 & Corresponding Rules.
AKHIL GULATI
Registration No. 240507957/11/2016
Executive Doing Student