Ease of Doing Business- Secretarial Standard
Ease of
Doing Business- Secretarial Standard
As we
all know that the Institute of Chartered Accountants of India (ICAI) has listed
out numerous accounting principles and rules which are to be followed by the
auditor fraternity while auditing the organizations they are appointed to audit
for ICAI has also introduced the Accounting Standards, most popularly called as
“AS” which are supplementary to the accounting rules and norms. Likewise, The
Institute Of Company Secretaries Of India( ICSI) has also long back introduced
some set of rules and norms, which are supplementary to the Companies act,1956,
called as ‘ Secretarial Standards’ and popularly termed as ‘SS’
We have
Companies Act, rules and regulation for conducting of Meetings from last 6
decades, but since beginning we don’t have process for conducting of Meetings.
There are many provisions which are not clear to the Corporates and
professionals from decades regarding process of holding of Meetings of Board
and shareholders.
Secretarial
Standard giving a democratic and transparent consultative process paves the way
for effective implementation of legal mandate. Secretarial Standards will bring
a huge change in the corporate practices which will certainly become benchmark
for counterparts to follow.
Presently
we are living in era when government attempts to improve the ease of doing
business to improve the ranking of our country in the world. Like; Ministry of
Corporate Affairs have prescribed the faster way of incorporation of Company in
India and ministry have suggested alteration in Companies Act also in
prospective of ease of doing business.
These secretarial standards set out
the explanations, procedures, interpretations and practical aspects in
connection with holding of Meetings. Earlier these were not available with the
Corporates and professionals, therefore now SS will help to conduct the meeting
with available process and interpretations.
Let’s discuss how the Secretarial
Standard will help in ‘ease of doing business’
Harmonization & Standardization:
The ICSI over a period
of time while regulating the profession of Company Secretary noticed about the
divergent Secretarial Practices and felt the need of integration, harmonization
and standardization of divergent Secretarial Practices and constituted the
Secretarial Standard Board.
ICSI
has been the first professional body in the world to start the concept
of setting Secretarial Standards for integration harmonization
and standardization of corporate
practices.
When
standards were not available with us everyone used to follow different practices
for the following purposes i.e. preparation of Notice, agenda, notes to agenda,
draft Resolution, circulation of minutes, modes of circulation of notice,
signing of minutes etc.
Before SS there was no clarity for many
questions like: to whom notice is to be sent, how notice is to be sent, what all
documents are to be sent along with notice, By whom minutes are to be prepared,
what all is to be mentioned in agenda.
But SS provides the clarity of the questions
and the way to conduct the meetings by the interpretations of laws and process.
SS provides us the clarification on the various points. Some of these are:
v
Modes
of sending of notice (As per clause 1.3.1),
Notice, Agenda and Notes to Agenda in writing of
every Meeting shall be given to EVERY DIRECTOR by following ways:
·
By hand or By Speed Post or by Registered Post
or
·
By Courier or By facsimile or By Email or by any
other electronic mode.
v
By
whom notice is to be issued (As per clause 1.3.2),
·
Notice,
Agenda and Notes to Agenda shall be issued by the Company Secretary or
·
Where
there is no Company Secretary, any Director or any other person authorized by
the Board for the purpose.
·
Proof of sending of Notice and its delivery shall
be maintained by the Company
Note:
Secretarial Standards are needed to be integrated,
harmonized, standardized and for streamlining various practices followed by the
Company. Therefore, wherever divergent practices are being followed they will
now cease to exist.
Strengthening
the Board Processes: SS brings
more clarity as board processes are now documented. The information to be
placed before the Board are to be duly codified. As the agendas would be
circulated well in advance, Board members will come prepared in board meetings,
engage in constructive debates, and take the well informed decisions on that
basis. This will help in ease of taking business decision. It also helps to
provide clarity of agenda and purpose of such business in the meeting.
It will also ensure the observance of uniform
practices across the Board, while strengthening the Board processes, protecting
the individual directors, preventing oppression & mismanagement.
Reduces
ambiguity Secretarial Standards intend to reduce ambiguity in law and ensures
the adoption of best practices of the Industry which has been followed over
decades conventionally. They do not seek to substitute or supplant any existing
laws or the rules and regulations framed there under but, in fact, seek to
supplement such laws, rules and regulations
Secretarial Standards would help in achieving
the national agenda of ease of doing business, improved governance norms, building
of confidence in the minds of investors, improved compliance level ultimately
leading to flow of capital in India and achieving the objective of Make in
India.
Secretarial Standards plays the role of
assisting / supplementing (and not supplanting) the extant company law
regulation. Wherever there are issues in practically implementing the provisions,
i.e. where there is no appropriate solution in Companies Act & Rules, the
SS provides an adequate guidance to the corporates and professionals – for
ensuring compliance of the Companies Act, 2013.
Secretarial Standards not only help in the
implementation of law by bringing in clarity wherever needed but also advocates
good corporate governance practices in certain areas where definite law is not
feasible or where divergent practices are being followed.
Increase
in Confidence of Investors:
Secretarial Standards will bring enormous
confidence in minds of investors particularly fund managers and overseas
investors as these investors are more concerned about good corporate governance
practices and sound procedures. Consequently, this will lead to more flow of
capital into India, new projects, more modernization and expansion.
While talking about the stakeholders’
expectations on the governance issues such as transparency disclosures, timely
dissemination of information, uniformity in practices etc., the Secretarial
Standards would act as one of the benchmarks in stakeholders’ assessment of
companies.
The Secretarial Standards would benefit the
industry and the regulators and would help to repose more confidence in the
institutional investors for the adoption of robust board processes and systems
in companies.
It would definitely result in better corporate
accountability and disclosures leading to better value enhancement for
stakeholders including shareholders, regulators and international.
Corporate
Governance:
The Secretarial Standards are applicable to
the Meetings of Board of Directors meetings & General Meetings of all
companies incorporated under the company law. Therefore, a company – where
husband & wife are directors and shareholders or a listed company with a
paid up share capital of Rs. 500 crores – all companies are under obligation to
ensure the compliance of Secretarial Standards.
SS have laid down strict rules for compliance
of procedures for conducting the board meeting & general meeting and such
compliance will assist in strengthening the corporate governance practices and
will also help in curbing corporate misdoings.
Transparency:
The Secretarial Standards aim to protect the
interest of individual directors including independent directors by enabling them
to make proper and adequate disclosures in a transparent manner thereby
reducing the areas of dispute and managing the risks associated, especially in
the light of the increased accountability of the Independent Directors.
As SS mandates the circulation of draft
minutes and signed minutes of the Meeting to all the directors whether they
were present in the meeting or not will also increase the transparency of
information and decisions.
Synchronization of conducting of the Board Meeting
SS provide the synchronized
process for conducting of Board Meeting
by providing the steps for the calling and conducting of Board Meeting.
Steps are as follow:
1. Notice of Board Meeting along with agenda,
notes to agenda and draft resolution will be sent at least 7 days before the
date of Board Meeting.
2. Notice shall be issued by the Company
Secretary or where there is no Company Secretary, by any Director or any other
person authorised by the Board for the purpose.
3. Each item of business requiring approval at
the Meeting shall be supported by a note setting out the details of the
proposal, relevant material facts that enable the Directors to understand the
meaning, scope and implications of the proposal and the nature of concern or
interest, if any, of any Director in the proposal, which the Director had
earlier disclosed.
4. Quorum shall be present throughout the
Meeting.
5. The Chairman of the company shall be the
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.
6. Minutes shall be recorded in books maintained
for that purpose.
7. The pages of the Minutes Books shall be
consecutively numbered.
8. Minutes of the Board Meeting shall be kept at
the Registered Office of the company or at such other place as may be approved
by the Board.
9. Minutes shall contain a fair and correct
summary of the proceedings of the Meeting.
10. Within fifteen days from the date of the
conclusion of the Meeting of the Board or the Committee, the draft Minutes
thereof shall be circulated by hand or by speed post or by registered post or
by courier or by e-mail or by any other recognised electronic means to all the
members of the board or the Committee for their comments.
11. Minutes of the Meeting of the Board shall be
signed and dated by the Chairman of the Meeting or by the Chairman of the next
Meeting.
Reliable
board process: Complying
with the SS-1 ensures reliability in the Board processes. As SS helps in
strengthening the Board Process of meetings, reduced ambiguity, increase in Corporate
Governance and transparency will help to rely on board processes.
Reduction
of non-compliances:
The
Act also introduced a new provision "functions of Company Secretary"
under Section 205 of the Companies Act, 2013 and one of his functions is to
ensure the compliance of secretarial standards within the organization. It is
the responsibility of the Company Secretary to keep a close watch on the
compliance of provisions relating to board and general meetings as provided in
the secretarial standards.
Responsibility is also entrusted to the
Secretarial Auditor to examine the compliance by the company with the
applicable clauses of the Secretarial Standards and to include in his
secretarial audit report the status of compliance.
It will help in better monitoring of
compliances, thereby achieving the common goal of better corporate governance.
To resolve the issues where the law is subject to
multiple interpretations;
At many places in the law interpretations are
not clear, thereby having multiple interpretations. i.e. Preparation of agenda,
signing of notice, signing of minutes, circulation of minutes, address of
directors on which notice is to served, persons who has the right to receive
the notice on various other matters. On these matters there were various interpretations and these
interpretations were being used under Companies Act, 2013. SS provided the
clarity on the issues where there were
no clear interpretations available.
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