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The Ministry of Corporate Affair (MCA) has approved vide circular Dated 10th April, 2015, Secretarial Standards (SS) on Board and General Meetings which was  been notified in official Gazette on 23rd April, 2015. Secretarial standards are applicable on Companies from 1st July, 2015.

The Secretarial Standards do not form parallel /conflicting regulatory framework relating to holding of Board Meeting /General Meeting, but they ensure smooth compliance of extant regulatory framework. However if any time there is any amendment into Companies Act, 2013 (the Act) and such changes or any provisions of Companies Act, 2013 are contradictory to the Secretarial Standard than “Provisions of Companies Act will prevail over Secretarial Standard”.

Secretarial Standards – Impact on India Inc.:

The Secretarial Standards are applicable to the Board of Directors meetings & General Meetings of all Companies (private cos., unlisted public cos. and listed public cos.) incorporated under the company law. SS have laid down strict rules for compliance of procedures for conducting board meeting & general meeting which will assist in strengthening the corporate governance practices, corporate disclosures, transparency and reducing non-compliances. It strengthens Board processes, prevents oppression and mismanagement and  benefits Auditors, Trustees and Others .

Secretarial Standards – Impact on the Company Secretaries:

Company secretaries (both, in practice and employment) are bestowed with enormous responsibility. Company Secretary in employment has to ensure the compliance of Secretarial Standards as it is one of the prescribed statutory functions under Sec. 205 of the Companies Act, 2013 (relating to ‘Functions of company secretary’). Company Secretary in practice has to ensure compliance of the Secretarial Standards for its clients. Company Secretary in practice, who has been appointed as Secretarial Auditor, is under an obligation to report in the Secretarial Audit Report about the compliance of Secretarial Standards by the company

Provisions of Law:

i. Section 118(10) the Act provides that Every Company shall observe secretarial standards with respect to General & Board Meetings specified by The Institute of Company Secretaries of India constituted  under section 3 of the Company Secretaries Act 1980 and approved as such by the Central Government .

ii. Section 205(1)(b) of the Act provides : The Function of Company Secretary  shall include – To ensure that the Company complies with the applicable secretarial standards.

iii. Section 118 is binding on all Companies and section 205 is binding on all Company Secretaries.

iv. Only Standards in respect of Board Meetings (SS-I) and General meetings (SS-2) are mandatory.

v. Form MR-3 pursuant to section 204(1)  and Rule 9 of  The (Companies( Appointment and Remuneration of Managerial Personnel)Rules 2014 , the format of Secretarial Audit Report requires the Secretarial Auditor of the Company to examine compliance by the Company with the applicable clauses of the Secretarial Standards issued by ICSI  and certify compliance or non-compliance thereof.

Scope and Applicability

Section 118(10) covers standards on Board & General Meetings .However SS-1 also sets standards on passing of Resolution by Circulation. Similarly SS-2 sets standards on Postal Ballot which is an alternative to holding of meetings.SS-2 also applies to meetings of debenture holders and creditors.

SS-I is applicable to all Companies except One Person Company (OPC). SS-2 is also applicable to all Companies except OPC and Exempted Companies, if any. SS-2 is also applicable to meetings conducted under the directions of CLB/NCLT or any other prescribed Authority.

Secretarial Standard-I  ( Meetings of Board of Directors)

Coverage :

Convening a Meeting

Frequency of Meeting

Quorum

Attendance at Meeting

Chairman

Passing of Resolutions by Circulation

Minutes

Preservation of Minutes and Other records

Convening a Meeting

Who will Convene the Meeting:

Any Director of the Company may and the Company Secretary on the requisition of a Director shall convene a meeting of the Board. He convening of the meeting by the aforesaid persons shall unless Articles provide otherwise  be in consultation with the Chairman or in his absence MD or in his absence WTD where there is any.

Where there are warring sets of Directors this will become a major irritant. Since it is subject to provision in the Articles, the Articles need to be suitably drafted

Adjournment of Meetings:

The Chairman may adjourn the meeting at any stage unless dissented to or objected by majority.

Serial Number:

Every meeting to have a Serial number .

It is not clear how to start a serial number. What happens in case of existing Companies? It may be year wise serial number 2015/01, 2015/02, 2015/03….etc. This clause was inserted with the idea to put a check on back-dating or insertion of meetings

Time Place & Date of meetings :

A meeting may be convened at any time and place  on any day excluding a National Holiday. Meeting adjourned for want of Quorum shall also not be a national holiday. National Holiday includes Republic Day, Independence Day, Gandhi Jayanti, and any other day  so declared by the Central government.

Participation through Electronic Mode

A Director may participate a meeting through electronic mode if the company provides such facility. In such a case the Notice of the Meeting shall clearly mention a venue and it shall be the place where all recordings of proceedings at the meeting would be made. Directors shall not participate through Electronic mode on restricted items unless expressly permitted by the Chairman. Participation  through Electronic mode not allowed at Audit Committee meetings where Financial Statements are to be approved. The Notice convening the meeting should inform the directors of availability of such facility. Notice should seek advance confirmation from directors regarding participation through Electronic mode. Notice should contain  contact number, e-mail address of Chairman  or CS or other Authorised person   to whom confirmation  is to be sent

The Companies Act,2013 permits such option of confirmation to Chairperson or CS only

Notice :

  • in writing shall be given to every Director by hand or speed post or by registered post or by courier or facsimile  or by e-mail or any other electronic means.
  • Notice to be sent  to Postal address or e-mail address registered with the company  or to address appearing in DIN registration of director
  • Proof of sending notice and deliver shall be maintained by the Company
  • Notice shall be given by CS or any other person authorized by the Board
  • Notice to specify the serial number , date, day ,time  and full address  of the venue of the meeting
  • Notice to be given even if meetings are held on predetermined dates or at predetermined intervals
  • Notice shall be given at least 7 days before the meeting In case of notice sent by post or courier, additional two days to be added.
  • Notice of adjourned meeting shall be given at least 7 days before the meeting
  • Notice may be of shorter period if at least one Independent Director is present at the meeting. If no Independent Director (ID) is present decisions at the meeting would be final if ratified by one ID or majority directors, where there is no ID. 

Agenda and Notes on Agenda:

  • To be given to directors at least 7 days before the date of the  meeting unless AOA prescribes  a longer period 
  • To be send by hand or by speed post or by registered post or by courier or by e-mail or by any other electronic means
  • Proof of sending to be maintained by the Company
  • To be sent to Original Director even if sent to Alternate Director 
  • Supplementary notes on any Agenda item may be circulated at or prior to the meeting  but shall be taken up with the permission of the Chairman and with the consent of the majority directors present , which shall include at least one ID
  • Any item of business  not included in Agenda may be taken up with the permission of the Chairman and with the consent of Majority directors present which shall include  at least one ID
  • Each item of business shall be serially numbered

Agenda in case of Unpublished Price Sensitive information (UPSI)

Notes on items of business which are in the nature of Unpublished Price Sensitive Information may be given at a shorter period of time than stated above, with the consent of a majority of the Directors, which shall include at least one Independent Director, if any.

(such consent many be obtained at the beginning of financial year)]

Fact of consent having been taken shall be recorded in the minutes

Frequency of Meetings

a. Meetings must held in each calendar quarter with a maximum gap of 120 days between two consecutive meetings

b. At least 4 meetings are to be held in each calendar year. In case of adjourn met interval shall be counted from the date of the original meeting.

c. Committee meetings to be held as often as necessary  and the frequency to be stipulated by the Board or as prescribed by any law or authority

Independent Directors should meet once in a calendar year . Company Secretary to facilitate holding of such meeting if so desired by IDs.( (Section 205 of the Companies Act,2013 also prescribes duties of CS to include facilitate convening Board or Committee Meetings)

In case the company is incorporate in between a year – The board shall hold its first Meeting within thirty days of the date of incorporation of the company. It shall be sufficient if one Meeting is held in each of the remaining calendar quarters, subject to a maximum interval of one hundred and twenty days between any two consecutive Meetings of the Board, after the first Meeting.

Quorum

Should be present thorough out the meeting .Quorum is 1/3 of total strength or 2 directors whichever is higher. Company to adhere to higher requirements as per Articles of Association. Total Strength shall not include directors  whose places are vacant.

Interested director (as provided in section 189) not to reckoned for quorum  in respect of item in which he is interested and shall not be present either physically or by electronic mode during discussion and voting.   Directors participating through Electronic mode to be counted for quorum unless excluded under the provisions of the Act  or other law.

Participation on restricted item with permission of the Chair-not to be counted for quorum or allowed to vote. Quorum for committee meetings entails presence of all members unless otherwise  stated in the Act or other law or Articles or by Board.

Attendance at Meeting

Separate Attendance Registers have to be maintained for Board and Committee Meetings.The Register should be bound and pages should be serially numbered. Content should include Serial number, date of meeting, name of committee, place, time, names of directors , signatures of Directors present, Name and signature of CS and that of Invitees.

Chairman should confirm the attendance of Directors participating through Electronic Mode. The attendance of such directors to be recorded in the Register by Chairman or CS. This would then deemed to have been signed. Attendance Register is maintained at the Registered Office or such other place as Board approves. Attendance Register can be inspected by Statutory Auditor and Secretarial Auditors but not by the shareholders. The Attendance Registers shall have to be preserved for 8 years under the custody of CS or Director. They may be destroyed thereafter with the approval of the Board. 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. Leave of Absence shall be granted to a Director only when a request for such leave is received by the CS or Chairman. The office of a Director shall become vacant in case the director absents himself from all meetings of the Board held during the period of 12 months with or without seeking Letter of absence.

Chairman

Chairman of the Company shall be the Chairman of the Board. If there is no Chairman the directors elect one of themselves as the chairman, who conducts the meetings of the Board. If Chairman is interested in any Business or item he shall hand over the proceedings to any disinterested director and shall not be present at the meeting during such item. Subject to Articles in case of equality the Chairman shall have a second or casting vote.Chairman of Committees: A Committee member appointed by the Chairman of the Board  or Resolution by Circulation: 

Taking of Resolution by Circulation shall be decided by the Chairman, or Managing Director or Whole Time Director or any Disinterested Director.

If one-third or more members require the resolution to be passed at the Board Meeting ,it cannot be passed by circulation

Procedure

 

a. To be sent in draft , along with necessary papers to all director

b. By hand, speed Post, Registered Post , courier or e-mail

c. Explanatory note giving specified details to be given

d. Note also to specify the manner in which assent or dissent is to be signified

e. Note to specify the date by which Directors have to respond

f. Response time is not more than 7 days from date of circulation of the draft

g. Every resolution should carry a serial number

a. Passed when approved by the majority

b. Shall be in compliance with the entrenchment Articles

c. Interested directors shall not be entitled to vote

d. Resolution deemed to have been passed on the last date specified for receiving assent or dissent

e. If two thirds have given approval earlier then resolution shall be deemed to have been passed  on such earlier date

f. Directors to sign and append a date , if no date appended , date of receipt is to be taken

g. Silence is regarded as abstainment 

• Resolution by circulation shall be noted at the next Board meeting and text of resolution shall be recorded in the minutes of such meeting

• Dissent or abstention is to be noted

• Non-participation of interested director should be recorded

• Passing of Resolution by Circulation  is to be considered valid as if it has been passed  at a Board Meeting

• This shall not dispense with the requirement for the Board to meet at specified frequency.

Minutes

a. Minutes should be recorded in the Minute books kept for that purpose.

b. There should be separate Minute Books for Board Meetings and Committee meetings

c. Pages of Minute Books should be consecutively numbered

d. Blank pages should be scored out and initialed by the chairman

e. Minutes shall not be attached or pasted in the Minute Books

f. If maintained in loose-leaf, the Minutes should be bound periodically

g. The Minute Books should be kept at Registered office of the Company or at such other place duly authorized by the Board

h. The Minutes may be maintained in Electronic Form, in such manner as prescribed in the Act and as decided by the board. It shall be maintained with “Timestamp”. Electronic Minute Book pages should be serially numbered

General Contents

Specific contents

As provided in Clause 7.2.2 of the Standard

• Shall state serial number and type of meeting


• Name of the Company, day ,date venue and time of commencement and conclusion of the meeting
 

• Names of directors present physically or electronically
 

• Shall record names of company Secretaries and invitees
 

• To contain the record of all appointments made at the meeting

Apart from General or specific contents:

• Minutes to mention background of all proposals


• Summarize the deliberations
 

• Rational of major decisions also to be mentioned
 

• Decisions to be recorded in the form of resolutions where required by law  otherwise may be recorded in narrative form

• Resolution passed through casting vote to be recorded
 

• Minutes to contain fair and correct proceeding of the meeting
 

• Company secretary to record proceeding
 

• Chairman may exclude matters which he thinks as defamatory ,irrelevant or detrimental to the interest of the Company
 

• Minutes to be written in clear, concise and plain language
 

• To be written in third person and past tense
 

• CS or Chairman to initial the document referred to in the resolution for the purpose of identification

Finalization of minutes

Time of Circulation of Draft Minutes -15 days from the meeting

Draft to be circulated to all directors whether he has or has not attended the meeting

Time for comments of the Directors- 7 days from the date of circulation of draft

If the Director does not give his comments he shall be deemed to have been given approval for the minutes. If the comments are recived after 7 days the Chairman has the discretion to consider such comments

Entry in the Minute Books

• within 30 days from the date of the Meeting

• The date of entry in the Minutes to be recorded by the CS

• Minutes once entered cannot be altered

• Any alteration to be done only with the approval of the Board at the subsequent meeting

Signing and Dating

• By the Chairman of the meeting or the Chairman of the next meeting

• Blank space between pages and signing by the Chairman to be scored out

• If maintained in electronic form should be signed by Chairman digitally

• Signed  minutes certified by CS to be circulated to all directors within 15 days of signing

Inspection and Preservation

Inspection & Extracts

Minutes can be inspected by Directors and not by members

• Entitled to inspect minutes before the period of his directorship

• Minutes of meeting held during his period after he ceases to be a director

• Minutes may be inspected by Company Secretary in Practice appointed  by Company, Secretarial Auditor, Statutory Auditor, Cost Auditor and Internal Auditor for the performance of his duties

• Extract of Minutes can be given only after they have been enetered in the Minute Books

• However certified copy of resolution can be given earlier if the resolution has been placed before the meeting

• Director entitle to receive copy of minutes even if he ceases to be a director

Preservation

• Minutes should be preserved permanently in electronic form with Time stamp

• Office copies of Agenda, Notes to Agenda to be preserved as long as they remain current or for 8 years

• Minutes to be kept in custody of Company Secretary

Where no CS in the custody of Director duly authorized by the Board

SECRETARIAL STANDARDS ON GENERAL MEETINGS (SS2)

Coverage:

  1. Convening a Meeting
  2. Frequency of Meetings
  3. Quorum
  4. Presence of Directors and Auditors
  5. Chairman
  1. Proxies
  2. Voting
  3. Conducting e-Voting, Poll, Postal Ballot
  4. Withdrawl, Rescinding& modification
  5. Minutes

New Insertions/Critical Points:

• Secretarial Standard provides the facility of sending the notice of general meeting through hand delivery or ordinary post for the companies which does not provide e-voting facility and postal ballot option .

• It is mandatory to host notice in the Website of the Company, if any available.

• A system has to be maintained for confirmation of the total number of recipients e-mailed and a record of each recipient to whom the Notice has been sent and copy of such record and any Notices of any failed transmissions and subsequent resending shall be retained by or on behalf of the company as ‘‘proof of sending’’.

• Notice shall contain complete particulars of the venue of the Meeting including route map and prominent land mark for easy location. In case of companies having a website, the route map shall be hosted along with the Notice on the website.

• If any proposed resolution contains any reference to document, contract, agreement, the Memorandum of Association or Articles of Association, the relevant explanatory statement shall state that such documents are available for inspection and such documents shall be so made available for inspection in physical or in electronic form during specified business hours at the Registered Office of the company and copies thereof shall also be made available for inspection in physical or electronic form at the Head Office as well as Corporate Office of the company, if any, if such office is situated elsewhere, and also at the Meeting.

• In case of appointment of Independent Directors, the justification for choosing the appointees for appointment as Independent Directors shall be disclosed and in case of re-appointment of Independent Directors, performance evaluation report of such Director or summary thereof shall be included in the explanatory statement.

• Quorum shall be present not only at the time of commencement of the Meeting but also while transacting business.

• One person can be an authorised representative of more than one body corporate. In such a case, he is treated as more than one Member present in person for the purpose of Quorum. However, to constitute a Meeting, at least two individuals shall be present in person.

• Secretarial Auditors or authorized representative of Secretarial Auditors to attend the meeting

• All Proxies received by the company shall be recorded chronologically in a register kept for that purpose.

• Every Resolution shall be proposed by a Member and seconded by another Member.

• Every company, which has provided e-voting facility to its Members, shall also put every Resolution to vote through a ballot process at the Meeting. A Proxy can vote in the ballot process.

• Based on the scrutinizer’s report received on Remote e-voting and voting at the Meeting, the Chairman or any other Director so authorised shall countersign the scrutinizer’s report and declare the result of the voting forthwith with details of the number of votes cast for and against the Resolution, invalid votes and whether the Resolution has been carried or not.

• The qualifications, observations or comments or other remarks on the financial transactions or matters which have any adverse effect on the functioning of the company, if any, mentioned in the Auditor’s Report shall be read at the Annual General Meeting and attention of the Members present shall be drawn to the explanations / comments given by the Board of Directors in their report.

• The qualifications, observations or comments or other remarks if any, mentioned in the Secretarial Audit Report issued by the Company Secretary in Practice, shall be read at the Annual General Meeting and attention of Members present shall be drawn to the explanations / comments given by the Board of Directors in their report.

• No gifts, gift coupons, or cash in lieu of gifts shall be distributed to Members at or in connection with the Meeting.

• A company may maintain its Minutes in physical or in electronic form with Timestamp. Every company shall, however, follow a uniform and consistent form of maintaining the Minutes. Any deviation in such form of maintenance shall be authorised by the Board.

• Minutes shall state, at the beginning of the Meeting, name of the company, day, date, venue and time of commencement and conclusion of the Meeting.

• Minutes shall record the names of the Directors and the Company Secretary present at the Meeting.

Specific Contents to form part of the Minutes of General Meeting as per SS- 2:

• Election of Chairman, if any shall be recorded.

• The fact that certain registers, documents, the Auditor’s Report and Secretarial Audit Report, as prescribed under the Act were available for inspection.

•  Presence of Quorum

•  Number of Members present in the meeting including the representative.

• The number of proxies and the number of shares represented by them.

• The presence of the Chairmen of the Audit Committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee or their authorized representatives.

• The presence if any, of the Secretarial Auditor, the Auditors, or their authorised representatives, the Court/Tribunal appointed observers or scrutinizers.

• Summary of the opening remarks of the Chairman.

• Reading of qualifications, observations or comments or other remarks on the financial transactions or matters which have any adverse effect on the functioning of the company, as mentioned in the report of the Auditors.

• Reading of qualifications, observations or comments or other remarks as mentioned in the report of the Secretarial Auditor.

• Summary of the clarifications provided on various Agenda Items.

• In respect of each Resolution, the type of the Resolution, the names of the persons who proposed and seconded and the majority with which such Resolution was passed.

• In the case of poll, the names of scrutinizers appointed and the number of votes cast in favour and against the Resolution and invalid votes.

• If the Chairman vacates the Chair in respect of any specific item, the fact that he did so and in his place some other Director or Member took the Chair.

• The time of commencement and conclusion of the Meeting.

• In respect of Resolutions passed by e-voting or postal ballot, a brief report on the e-voting or postal ballot conducted including the Resolution proposed, the result of the voting thereon and the summary of the scrutinizer’s report shall be recorded in the Minutes Book and signed by the Chairman or in the event of death or inability of the Chairman, by any Director duly authorised by the Board for the purpose, within thirty days from the date of passing of Resolution by e-voting or postal ballot.

Conclusion:

The Legislature requires the Companies to observe Secretarial Standards thereby adopting uniform practices in conducting Board & general meetings, matter pertaining to placing agenda, finalisation of minutes etc.  Compliance with the strict rules would help strengthen the corporate governance practices and help curb corporate misdoings .These Secretarial Standards shall help in building investor confidence, particularly the fund’s managers and overseas investors.

By CS Suhita Mukhopadhyay
Practicing Company Secretary

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