THIRD YEAR HOPING SUCCESS
We are happy to enter into the third year of starting ZappyNews. We hope that we are giving you valid updates on our industry trends which helps you in some way or the other. In this edition we are going to see the amendments in Secretarial Standard which is coming to effect from October 1, 2017. Along with the article, our Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST follows.
Saranya Deivasigamani,
CEO
SECRETARIAL STANDARD AMENDMENTS
The Institute of Company Secretaries of India (ICSI) has revised the existing two Secretarial Standards on ‘Meetings of the Board of Directors’ (SS-1) and ‘General Meetings’ (SS-2). The revised standards are to come into effect from October 1, 2017. The Secretarial Standards are formulated by the Institute of Company Secretaries of India (hereinafter referred to as “ICSI”) which was constituted under Section 3 of the Company Secretaries Act, 1980. The Secretarial Standards once formulated are then approved by the Central Government through the Ministry of Corporate Affairs.Relevant Provisions of the Companies Act, 2013
Section 118 of Companies Act, 2013 (10) Every company shall observe secretarial standards with respect to general and 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. Section 205 of Companies Act, 2013 (1) The functions of the company secretary shall include: (b) to ensure that the company complies with the applicable secretarial standards; Explanation- For the purpose of this section, “secretarial standards” means secretarial standards 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.Secretarial Standards on Meetings of the Board of Directors (SS-1)
This Standard prescribes a set of principles for convening and conducting Meetings of the Board of Directors and matters connected to the convening and conduct of the Meetings. This Standard is also applicable on Meetings of the Committees of a Company’s Board, unless stipulated otherwise. The Standard is applicable to all Companies incorporated under the Companies Act, 2013 except One Person Company in which there is only one Director on its Board.| Para No | Changes as per revised SS-1 | Analysis |
| – | Scope has been amended to exempt Section 8 companies as well along with OPCs, from the applicability of the Standard. | Section 8 Companies were already exempted from the applicability of Secretarial Standards vide MCA’s notification dated June 5, 2015, wherein the companies have been exempted from the applicability of Section of the Act, which deals with Secretarial Standards. |
| – | Definition of Secretarial Auditor now also includes a firm of Company Secretary(ies) in Practice. | This has been inserted to provide clarity. |
| 1.2 | Earlier only Time, Place, Mode and Serial Number of Meeting was to be mentioned in the notice of the meeting now the Day has been specifically provided as per the Act | This is a clarificatory change. |
| 1.2.2 | The restriction of not holding a Board Meeting on a National Holiday specifically has gone away with. | The same is in contradiction with the requirement of Act, which prohibits BM to be held on a National Holiday. |
| 1.2.3 | Any Director may participate through Electronic Mode in a Meeting unless the Act or any other law specifically prohibits such participation through Electronic Mode in respect of any item of business. The provision with respect to the option of the company to provide video-conferencing facility has been done away with. | Now the Chairman has no authority to allow a Director to participate by electronic mode on restricted items. This has been done to align the same with the Act. Because, no such power was given to the Chairman in Act. The existing language was conflicting with the provisions of the Companies Act, 2013 and hence, been deleted. |
| 1.3 | In case of the Meeting is conducted at a shorter Notice, the company may choose an expedient mode of sending Notice and Agenda. | No mode of sending notice at a shorter notice was provided in the standards previously, with this amendment it is further clarified that any faster mode of sending the Notice. |
| 1.3 | The proof of sending of Notice has to be maintained for such period as decided by the Board, which shall not be less than 3 years from the date of Meeting. | This will increase compliance burden for the companies. |
| 1.3.4 | The Notice shall inform the Directors about the option available to them to participate through Electronic Mode and provide them all the necessary information. Further, the director may intimate his intention of participation through Electronic Mode at the beginning of the Calendar Year, which shall be valid for such Calendar Year. | This mandates every company to provide the option of participation through electronic mode, to the directors in every meeting. This will be a one-time compliance annually in a calendar year. |
| 1.3.6, 1.3.7 | Sending notices, agenda, agenda notes and other documents by courier has been restricted. | Only speed post and registered post are now accepted. |
| 1.3.7 | In case of alternate directorship, notice is given to both alternate and original director, however, the mode of sending Notice, Agenda and Notes on Agenda to the original director shall be decided by the company. | It is clarified that the alternate director will receive notice and agenda as per the mode prescribed by the director, if any, however, the mode of sending the notice to the original director is on company’s discretion. |
| 1.3.7 | Proof of sending Agenda and Notes on Agenda and their delivery shall be maintained by the company for such period as decided by the Board, which shall not be less than three years from the date of the Meeting. | Companies will have to ensure such additional requirement. |
| 1.3.10 | Any item not included in the Agenda may be taken up for consideration with the permission of the Chairman and with the consent of a majority of the Directors present in the Meeting only, i.e., the requirement of consent of Independent Director has gone away with. | This will provide ease in tabling urgent business matters at the meeting. |
| 2.1 | The company can 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 without holding meeting in every quarter. | The strict requirement of holding board meeting in every quarter has gone away with. However, for listed companies such relaxation may be redundant because of the periodical filing requirements with the stock exchange. |
| 3.2 | In case of a private company, a Director shall be entitled to participate in respect of such item after disclosure of his interest. Further, If the item of business is a related party transaction, then he shall not be present at the Meeting, whether physically or through Electronic Mode, during discussions and voting on such item. | The amendment seems to create confusion as it has mixed intent of both Section 184 and Section 188 of the Act. Going by the language of the revision, the related party will not be able to vote at the meeting on any transaction (the scope goes much beyond the transactions specified in Section 188). This will be very difficult for companies, especially private companies which are mostly closely held and even otherwise. |
| 4.1. | The mode of presence should be mentioned in attendance register also. If an attendance register is maintained in loose-leaf form, it should be bound periodically, atleast once in every three years. Further, where there is no CS, the attendance register must be authenticated by the Chairman or by any other Director authorised by the Chairman and the fact of such participation is must be recorded in the Minutes as well. Even after a person ceases to be a Director, he shall be entitled to inspect the attendance register of the Meetings held during the period of his Directorship. | This will impose additional compliance burden on the companies which is not required as the minutes will already contain mode of presence and will also be preserved permanently. Earlier the power of authentication was with the CS of the Company, however, such power has also been extended any other director who has been authorised in this regard. This additional has provided an additional option for the directors to inspect the attendance register of the Meetings held during the period of his Directorship. |
| 4.1.6 | The attendance register shall be preserved for a period of at least eight financial years from the date of last entry made therein and may be destroyed thereafter with the approval of the Board. | Clarity regarding the tenure has been provided. |
| 4.2 | Leave of absence shall be granted to a Director only when a request for such leave has been communicated to the CS or Chairman or to any other person authorised by the Board to issue Notice of the Meeting. | Now, leave of absence can also be communicated to any person duly authorised by the Board to issue notice of the Meeting. |
| 5.1.2 | In case of a private company, the Chairman may continue to chair and participate in the Meeting after disclosure of his interest. If the item of business is a related party transaction, the Chairman shall not be present at the Meeting, whether physically or through Electronic Mode, during discussions and voting on such item. | The insertion seems to bring further ambiguities as the first insertion provides that the Chairman may continue to chair and participate in the Meeting after disclosure of his interest. However, in case of RPTs, the chairman shall not be present in the Meeting. The intent of Section 184 and Section 188 has been mingled resulting into practical difficulties for companies. |
| 5.1.2 | The Chairman shall ensure that the required Quorum is present throughout the Meeting and at the end of discussion on each agenda item the Chairman shall announce the summary of the decision taken thereon. | This brings additional responsibilities on the Chairman. |
| 6.1.1 | Any Director other than an Interested Director, shall decide, before the draft Resolution is circulated to all the Directors, regarding the approval of the Board for a particular business shall be obtained by means of a Resolution by circulation. | The whole-time director has been changed to any director, providing ease in compliance to the companies. |
| 6.2.2 | Proof of sending and delivery of the draft of the Resolution and the necessary papers shall be maintained by the company for such period as decided by the Board, which shall not be less than three years from the date of the Meeting. | Earlier no time limit was specified this will impose additional compliance burden on companies. |
| 6.2.3 | An additional two days should be added for the service of the draft Resolution, in case the same has been sent by the company by speed post or by registered post or by courier, while computing the date of circulation of the draft of the Resolution given to the Directors to respond in case of Resolution by Circulation. | This additional two days have been given in order to provide sufficient time for the directors to decide, post receiving the draft. |
| 6.3.2 | The Resolution by circulation, if passed, shall be deemed to have been passed on the earlier of: (a) the last date specified for signifying assent or dissent by the Directors, or (b) the date on which assent has been received from the required majority, provided that on that date the number of Directors, who have not yet responded on the resolution under circulation, along with the Directors who have expressed their desire that the resolution under circulation be decided at a Meeting of the Board, shall not be one third or more of the total number of Directors; and shall be effective from that date, if no other effective date is specified in such Resolution. | This has been aligned with the Act. However, SS also includes those directors who have not responded along with those who have expressed their desire that the resolution under circulation be decided at a Meeting of the Board. The same will cause practical difficulties to the companies. |
| 7.2.1.3 | The requirement of noting all appointments made one level below the Key Managerial Personnel by the Board has been done away with. | This will reduce minuting requirements. |
| 7.2.2.1 (o) | Consideration of any item other than those included in the Agenda with the consent of majority of the Directors present at the Meeting and ratification of the decision taken in respect of such item by a majority of Directors of the company. | Now the additional agendas taken at the meeting, the decision of which will have to be ratified even by the majority of the directors. |
| 7.3.4 | Reference to the earlier resolution to be mentioned in Minutes if a resolution is passed in supersession of it. | This is a new insertion, which will provide complete facts and details. |
| 7.4 | Proof of sending draft Minutes and its delivery shall be maintained by the company for such period as decided by the Board, which shall not be less than three years from the date of the Meeting. | Earlier no time period was provided for maintenance of these registers this will impose additional compliance burden on companies. |
| 7.5.3 | The alteration of Minutes entered shall be made only by way of express approval of the Board at its subsequent Meeting at which the Minutes are noted by the Board and the fact of such alteration shall be recorded in the Minutes of such subsequent Meeting. | This has been added to in order to provide complete and correct data in the minutes. No such provision was there earlier. |
| 7.6.4 | Company needs to maintain the proof of sending the certified copy of signed minutes to the directors for 3 years. | Like other documents, this has also to be maintained for three years. |
| 9 | The Report of the Board of Directors shall include a statement on compliances of applicable Secretarial Standards. | This amendment will require the companies to specify in the Board’s Report, the fact that the Company is complying with the provisions of Secretarial Standards 1 and 2. No such specific disclosure was required earlier in Boards Report. |
Legal Terms
Inchoate
ad. (of an offence, such as incitement or conspiracy) anticipating or preparatory to a further criminal act.
MCA Updates
- Form SPICe, DIR-12, DIR-6 and INC-24 were recently revised on MCA21.
- Delegation of powers to RDs under section 458 of CA 2013 dt 06.09.2017
- Designation of Special Court.
- Commencement of sub-sections (8) to (10) of section 212 of CA 2013.
- Companies (Arrests in connection with investigation by SFIO) Rules 2017.
SEBI Updates
- No important notifications.
RBI Updates
- Inclusion of “Emirates NBD Bank (P.J.S.C)”, “Qatar National Bank SAQ” and “Ujjivan Small Finance Bank Limited” in the Second Schedule to the Reserve Bank of India Act, 1934 .
- Eligible Credit Rating Agencies- Rating of Fixed Deposits by Infomerics Valuation and Rating Private Limited (IVRPL).
Income Tax Updates
- Amendments made in DTAA between India and Viet Nam.
GST Updates
- No important notifications.
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