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SECRETARIAL STANDARD 1- A BIRD’S VIEW

Companies follow diverse secretarial practices and, consequently, there was a need to put together, harmonize and standardize such practices so as to uphold uniformity and stability. The Secretarial Standards Board formulates Secretarial Standards taking into consideration the applicable laws, usages, business environment, practical applicability and the best secretarial practices prevalent. Secretarial Standards are developed:

1. In a transparent manner;
2. After extensive debate, analysis and  research; and
3. After taking views of corporate, regulators and the public at large.

The Secretarial Standards do not seek to substitute and replace any existing laws or the rules and regulations framed there under but, in fact, seek to enhance such laws, rules and regulations. Secretarial Standards that are issued will be in conformity with the provisions of the applicable laws. However, if, due to subsequent changes in the law, a particular Standard or any part thereof becomes inconsistent with such law, the provisions of the said law shall prevail.

The council of The Institute of Company Secretaries of India issued Secretarial Standards-I and Secretarial Standards-II which deals with “Meetings of the Board of Directors” and “General Meetings” and it was approved by central government and became effective on 1st July, 2015.

Section 118 (10) of The Companies Act, 2013 specifically provides for compulsory adherence of Secretarial Standards by all companies except one person company in which there is only one director. Here if one person company is having more than one director then in such case one person company is also obliged by the provisions of Secretarial Standards.

Secretarial Standard on Meetings of the board of director is also applicable to meetings of committees.

CONVENING A MEETING

This head of standard covers matter relating to “Authority”, “Time, Place and Date” and “Notice” of the meeting.

AUTHORITY: - According to SS-1 the word ‘Authority’ has been used threefold i.e. Authority to call a meeting, Authority to convene a meeting and Authority to adjourn meeting.

AUTHORITY TO CALL MEETING:- Any director of company on his own or upon requisition of any director can call upon a meeting of board.

AUTHORITY TO CONVENE MEETING:- However, power to convene such meeting has been conferred upon the company secretary and where there is no company secretary any other person so authorized by the board. But this authority is not absolute. Company secretary has to convene such meeting in consultation with either chairman or managing director or whole time director.

AUTHORITY TO ADJOURN MEETING:- The chairman may, at any time during the meeting, adjourn the meeting for any reason.  This power of chairman is subject to objections raised by the majority of directors present at a meeting, provided adequate quorum is present. Thus, chairman is not obliged to objection raised by directors in respect to adjournment of a meeting in which quorum is not adequate.

TIME PLACE MODE AND DATE OF MEETING: - A meeting can be called at any time, place on any day except National Holiday. The same principal is also applicable to adjourned meeting also i.e. an adjourned meeting can not be held on National Holiday.

The term ‘National Holiday’ is defined in the definition part of secretarial standards as “National holiday includes Republic Day i.e. 26th January, Independence Day i.e. 15th August, Gandhi Jayanti i.e. 2nd October and other day as may be declared as National Holiday. The definition provided in the Secretarial Standards is more specific than what is provided in The Companies Act, 2013. 

The standard clearly states that every meeting of board should be serially numbered and should plainly indicate the facility to attend the meeting through electronic mode, if company provides such facility. It is also clearly evident that facility if available is not applicable to some kind of businesses for example approval of financial statements, approval of board’s report etc.

NOTICE: - The secretarial standard provides thorough guidelines for issuing a notice of board meeting encompassing mode of delivery, authorized signatory who will issue notice and particulars of notice.

MODE: - The standard provides that every notice should be in writing. Company can send such notice of board meeting by either of the following ways:

• By hand;
• By speed post;
• By registered post;
• By courier;
• By facsimile;
• By e-mail;
• By any other mode.

But where director specifies any particular method of receiving such notice, then notice should be provided in the said manner. Notice of board meeting should be delivered to address registered with the company and in absence of such address, it should be delivered at the address provided in DIN.

AUTHORIZED SIGNATORY:- Every such notice should be delivered by company secretary or any person authorized by the board, as the case may be, at least seven days before the date of meeting. It can be delivered at a shorter period where such notice contains price sensitive information. Notice of board meeting should be given even if meetings are held on pre-determined dates or at pre-determined intervals. In case of a meeting which was adjourned because of want of quorum, notice shall be to all those directors who fail to attend the first original meeting.

PARTICULARS:- Notice of board meeting should undoubtedly contain serial number, day, date, time and venue of the meeting. The notice should specifically state the facility to attend such meeting through electronic mode and last date to give intimation regarding director’s intention to attend meeting through such medium.

It should accompany agenda along with notes on agenda providing details of proposal, relevant facts which enables director to understand meaning, scope and implication of such proposal. It should also contain a draft of resolution proposed to be passed. Any thing not specified in agenda can be taken up for consideration provided consent of chairman and majority of directors is obtained.

FREQUENCY OF MEETING

The secretarial standard deals with frequency of meetings of board, meetings of committee and meetings of independent directors. The provisions dealing with frequency of board meeting is complimentary to the provisions provided in The Companies Act, 2013. It provides that at least four board meetings should be held in a calendar year with at least one board meeting in calendar quarter and maximum gap of not more than 120 days. 

With respect to committee meetings and meetings of independent director, company can hold such number of meetings as often as necessary subject to minimum number as stipulated by board or as prescribed by any law.

QUORUM

The quorum of the board meeting shall not be less than one third of total strength or two directors which ever is higher at any point of time during entire meeting.

A director who is attending meeting through video conferencing is also including while calculating quorum, however director present in the meeting but is interested in matter to be transacted is not included in the quorum.

Where interested director exceeds two third of total strength then remaining directors will be the quorum. In this case number of director to form a quorum still cannot be less than two directors.

Where quorum is not present on the adjourned meeting also, then the meeting shall stand dissolved. This provision is no where provided in The Companies Act, 2013.

With respect to meetings of committee every member of the committee shall be the quorum.

ATTENDANCE

Every company is obliged to maintain attendance record of the directors and invitees present at the meeting of board of directors. Following standards needs to be adhered with:

• There should be separate register for board meetings and committee meetings;

• Pages of register should be serially numbered;

• Must have serial number of the meeting, name of meeting, day, date, time, place, name of directors and their signatures, name of company secretary and their signatures and person attending meeting upon invitation;

• Register must be signed by every director, invitee and company secretary;

• Such registered should be maintained at registered office of the company;

• Normally placed under the custody of company secretary;

• Shall be preserved for eight years;

• Such register is open for inspection by any director, however not open for inspection to any member of the company.

This part of the secretarial standards also deals with ‘leave of absence’. Leave of absence shall be granted upon request to chairman or company secretary. Office of director shall become vacant where such director absents himself from all meetings of board held during a period of 12 month with or without seeking leave of absence.

CHAIRMAN

Chairman of meeting of board

Chairman of meeting of committee

Normally chairman of company is the chairman of the meeting.

Where there is no chairman, members can elect any one member to be the chairman.

A member of committee appointed by board or elected by committee shall be the chairman of the meeting.

If chairman is interested in any item to be transacted at such meeting then he shall entrust the conduct of the proceeding to any dis-interested director and resume the chair after that item of business has been transacted.    

PASSING OF RESOLUTION BY CIRCULATION

Businesses that require urgent decision can be approved by means of resolution by circulation. Following points carved out are as follow:

• Authority
• Procedure
• Approval
• Recording
• Validity

AUTHORITY:- Passing of resolution by circulation can be done only upon specified matters. A draft resolution is to be circulated to all the directors of the company. Before circulating resolution, director shall place such resolution for consideration where consent of not less than one third of total number of directors is obtained.

PROCEDURE:- Proposed draft resolution shall be sent together with necessary papers to all the directors. Such draft should accompany sufficient explanation that enables director to understand meaning scope and implication of proposed resolution.

APPROVAL:- The resolution is deemed to be passed when it is approved by majority of directors. Such resolution shall be deemed to have been passed on the last date or date on which two third of directors assented to.

RECORDING:- such resolution shall be noted at next meeting and text thereof shall be recorded in minutes book.

VALIDITY:- passing of resolution by circulation shall be considered valid as if it had been passed at a duly convened meeting of the board.                                                                                    

MINUTES

Heart of this rule is:

• Maintenance of minutes in minutes book;

• Can be maintained in electronic mode;

• Pages of the book should be serially numbered;

• Such minutes book shall be kept at registered office of the company;

• Minutes shall state serial number of meeting, type, name of the company, day, date, venue and time of commencement and time of conclusion.

• Minutes shall contain a fair and correct summary of the proceeding of the meeting.

• Minutes shall be circulated within 15 days of meeting.

• Directors can communicate any kind of comment on the minutes within a period of 7 days.

• Minutes shall be finally entered in the minute’s book within 30 days.

• Date of entry in book to be recorded by company secretary along with time of entry.

• Such minutes shall be signed and dated by chairman of the meeting. Each page of minutes should be initialed by the chairman.

• Copy of signed minutes should be circulated within a period of 15 days.

• Any director of the company can inspect the minutes; however inspection is not open to members of the company.

DISCLOSURE

Number and dates of board meeting and that of committee meeting held during financial year should be properly included in Annual Report and Annual Return. This should also indicate the number of meetings attended by particular director.

CONCLUSION

The matters enumerated in The Companies Act, 2013 is furthered and clarified by means of Secretarial Standards. The standards provide clear and crisp image of compliances to be followed by the companies with respect to holding of board meetings. These standards are complimentary in nature and are no where superior to the provisions provided in the act. The standards also touches those parts which are not apparently provided in the act.

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