CS Chandni Gupta

CS Chandni GuptaThe Ministry of Corporate Affairs (MCA) approved the Secretarial Standards issued by ICSI on Board and General meetings vide circular dated 10th April, 2015, which has been notified in the official gazette on 23rd April, 2015 and are applicable w.e.f. 1st July, 2015.

Secretarial Standards have been introduced in India and they seek to harmonize, incorporate and standardize diverse secretarial practices followed by Companies throughout the Country.

India is the first country to issue Secretarial Standards. India is the pioneer in having Secretarial Standards as no other country in the world has yet adopted the Secretarial Standards. Therefore, it is a proud achievement for our Country.

Applicability:

SS-1 is applicable to all companies incorporated under the Act except OPC, when there is only one director.

Section 118(10) of the CA 2013 prescribes that 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 (56 of 1980), and approved as such by the Central Government.

The term “Act” has been defined in SS-1 to mean the Companies Act, 2013 or any previous enactment thereof, or any statutory modification thereto or re-enactment thereof and includes any Rules and regulations framed thereunder. Hence, if due to subsequent change in the Rules, a particular standard or any part thereof becomes inconsistent with the Act/Rules, the provisions of the Act/Rules shall prevail.

Role of CS in Implementation of SS:

The Standards recognize the need of dynamism in the Boardroom. The contemporary Company Secretary is much more than a “note taker” at the board meeting, but is “the Key Managerial personnel of the company”. The specialized role of modern Company Secretary has emerged as the “Key Managerial Personnel” and “Compliance Officer” within the organization. “Company Secretary is the Right Hand Man of the Board” and has immense responsibility to Implement the SS with its true letter and spirit.

In this Article I will be Analyzing Provisions of Secretarial Standard- 1 with the Provisions of the Companies Act, 2013 – Comparatively.

Sr. No.ParticularsSection/Rule of Companies Act, 2013ApplicabilityCompanies Act, 2013SS-1
1Convening of MeetingAllCompanies Act, 2013 does not prescribe any provisions for convening of meeting of the Board of Directors.SS-1 has prescribed certain standards for convening the meeting, which are as enumerated:

1. Any Director of the Company may, at any time, summon a meeting of the board and the Company Secretary or where there is no Company Secretary;

Ø Any person authorized by the board in this behalf, on the requisition of a director, in consultation with the Chairman; or

Ø In absence of Chairman in consultation with the MD or in his absence, the WTD, where there is any, unless otherwise provided in the Articles.

2. Every meeting shall have a serial number (For Ex-“01/2015-16” or 01/2015), in any case the Company should follow a uniform and consistent system.

3. A meeting may be convened at any time and place, on any day, excluding a National Holiday.

National Holiday: It includes Republic day, Independence day, Gandhi Jayanti and such other day as may be declared by the Central Government.

2Notice173 (3)AllAt least 7 days notice shall be given in writing to every director at his address registered with the company to call a board meeting and such notice shall be sent by hand delivery or by post or by electronic means.At least 7 days notice shall be given along with Agenda setting out the business to be transacted at the meeting, unless the Articles prescribe a longer period in writing:

• to every director at his postal address or email address, registered with the company; or in absence of such details or any change thereto, any of the addresses appearing in DIN registration of director;

• by hand or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means.

Shorter Notice

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proviso clause

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

All

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A meeting of the Board of directors may be called at shorter notice to transact urgent business subject to the condition that at least one independent director, if any, shall be present at the meeting.

 

Further in case of absence of independent director from such a meeting of board:

• decisions taken at such a meeting shall be circulated to all the directors and;

• it shall be final only on ratification by at least one independent director, if any.

Explanation: In case the company does not have an independent director, the decision shall be final only on ratification thereof by majority directors of the company, unless such decisions were approved at the meeting itself by a majority of directors of the Company.

 

* for better practice written consent shall be taken from all directors to hold board meeting at shorter notice, If possible.

 

Some other important points prescribed by the Companies (Meetings of Board and its Powers) Rules, 2014 regarding Notice are as enumerated:

 

Ø The notice of the meeting shall inform the directors regarding the option available to them to participate through video conferencing mode or other audio visual means, and shall provide all the necessary information to enable the directors to participate through video conferencing mode or other audio visual means.

Ø A director intending to participate through video conferencing or audio visual means shall give prior intimation to the Chairperson or the company secretary of the company.

Ø The director, may intimate his intention of participation through electronic mode at the beginning of the calendar year and such declaration shall be valid for one calendar year.

Ø In absence of any intimation above, it shall be assumed that the director shall attend the meeting in person.

Ø At the commencement of the meeting, a roll call shall be taken by the chairperson where any director participating through video conferencing or other audio visual means.

 

Explanation: A director participating in a meeting through video conferencing or other audio visual means shall be counted for the purpose of quorum, unless excluded for any items of business under any provisions of the Act or the rules.

 

Every officer of the company whose duty is to give notice under section 173 and who fails to do so shall be liable to a penalty of Rs.25000/- under section 173(4).

Shorter Notice is same as defined in Companies Act, 2013. Some other important points prescribed by the standards regarding Notice are as enumerated:

 

ü Notice shall be issued by the Company Secretary or where there is no C.S., any director or any other person authorized by the board.

ü The notice shall specify the serial number (like 01/15-16, 02/15-16 or 2015/01, 2015/02), day, date, time and full address of the venue of the meeting.

ü The fact that the meeting is being held at a shorter notice shall be stated in the notice.

ü Proof of sending notice shall be maintained by the company.

ü In case the facility of participation through electronic mode is being made available, the notice shall inform the directors about the availability of such facility, and provide them necessary information to avail such facility.

ü Where electronic mode facility is provided, the notice shall seek advance confirmation from directors as to whether they will participate through electronic mode in the meeting.

ü Notice shall also contain the contact number or email address(es) of chairman or C.S. or any authorized person, to whom director shall confirm, about how they will attend the meeting, physically or by electronic means. if any, electronic mode facility is granted by the company.

ü Notice shall be given even if meetings are held on pre-determined dates or at pre-determined intervals.

ü Each item of business to be taken up at the meeting shall be serially numbered.

ü If notice sends by speed post or by registered post or by courier, an additional two days shall be added for the service of notice.

ü Notice of adjourned meeting shall also be given to all directors at least 7 days before the meeting, including those who did not attend the meeting.

ü The Notice, Agenda and notes on agenda shall be sent to the Original director even if sent to Alternate director.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Frequency of meetings

 

 

 

 

 

 

 

 

 

 

173(1)

 

 

 

 

 

 

 

 

 

175 (5)

All

 

 

 

 

 

 

 

 

 

OPC/ Small Company/ Dormant Company

Minimum number of four board meetings every year and the gap shall not exceed 120 days between two consecutive meetings of the board.

 

1st meeting: Every company shall hold the first meeting of BOD within 30 days from the date of its incorporation.

 

Exemptions: A One Person Company, small company and dormant company shall be deemed to have complied with the provisions of section 173 (1) if at least one meeting of BOD has been conducted in each half of a calendar year and the gap between two meetings is at least 90 days.

 

Note: In case of OPC, only with one director, the provisions contained in section 173 & 174 shall not apply,.i.e., no requirement for quorum and holding of meeting.

The board shall meet at least once in every calendar quarter with a maximum gap of 120 days between any two consecutive meetings of the board. And;

At least four meetings are held in each calendar year.

 

1st meeting same as Companies Act.

 

 

 

 

Exemption same as Companies Act, 2013

Explanation (Combination of both Act and Standards): As per SS-1 there must be one board meeting in every quarter.

Further It shall be sufficient if one meeting is held in each of the calendar quarters, subject to a maximum interval of 120 days between any two consecutive meetings of the Board.

For Example: Suppose 1st meeting of F.Y. held on 30/06/2015 then the next meeting of Board must be held till 30/09/2015.

In the above case the Company can hold its 02nd meeting till 28/10/2015 as per Companies Act, 2013 but after the effectiveness of SS-1, meeting must be till 30/09/2015 to comply the provisions of Secretarial Standards.

Note: 1) An adjourned meeting being a continuation of the original meeting, the interval period in such a case, shall counted from the date of the original Meeting.

2) The Chairman may, adjourn the meeting for any reason, at any stage of the meeting, at which a quorum is present, unless dissented or objected by the majority of directors.

 

 

4Quorum174(1)AllQuorum shall be:

Ø 1/3 of its Total strength; OR

Ø 2 directors

(whichever is higher)

Explanation: 1) any fraction contained in the above 1/3 shall be rounded off as one.

2) “Total strength” shall not include directors whose places are vacant.

Same as Companies Act, 2013
174(2)AllIf the number of directors reduced below the Quorum fixed by the Act for a meeting of the board, the continuing directors may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company and for no other purpose.

 

Same as Companies Act, 2013
174(3)AllWhere at any time, No. of interested director exceeds; OR

is equal to 2/3 of the total strength of BOD; then

The No. of disinterested directors present at the meeting, being not less than two, shall be the quorum (means at least 2 non interested director shall be present).

 

Explanation: 1. “interested director” means a director within the meaning of sub-section (2) of Section 184.

2. Any fraction contained shall be rounded off as one.

Amendment in Section 184(2): Interested director may participate in the meeting after disclosure of his interest as per MCA vide notification dated 05th June 2015, applicable only to Private Companies.

Note: He can’t be counted in quorum.

Calculation of interested director Same as Companies Act, 2013.

 

A Director shall not be counted 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.

A director shall be treated as interested in a contract or arrangement entered into or proposed to be entered into by the company:

a. with the director himself or his relative; or

b. with any body corporate, if such director, along with other directors holds more than 2% of the paid-up share capital of that body corporate, or he is a promoter, or manager or CEO of that body corporate; or

c. with a firm or other entity, if such director or his relative is a partner, owner or member, as the case maybe, of that firm or other entity.

174(4)

 

 

 

 

 

 

 

Companies (Meetings of Board and its Powers) Rules, 2014

All

 

 

 

 

 

 

 

 

 

Sub rule 5(b) under Rule 3

If a meeting of the board could not be held for want of quorum, then, unless the articles of the company otherwise provide, the meeting shall automatically stand adjourned to the same day at the same time and place in the next week or if that day is a national holiday, till the next succeeding day, which is not a national holiday, at the same time and place.

 

The chairman shall ensure that required quorum is present throughout the meeting.

Some other extra points prescribed by the standards, which are as under:

Ø If there is no quorum at the adjourned meeting also, the meeting shall stand cancelled.

Ø A meeting adjourned for want of quorum shall not be held on a National Holiday.

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

 

 

5Resolution by Circulation175(1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proviso Clause

 

 

 

 

 

 

 

175(2)

 

 

 

 

Companies (Meetings of Board and its Powers) Rules, 2014

All

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rule 5

No resolution shall be deemed to have been duly passed by the Board or by the committee thereof by circulation, unless:

Ø The resolution has been circulated in draft, together with the necessary papers, if any, to all directors or members of the committee;

Ø At their addresses registered with the company in india;

Ø By hand delivery or by post or by courier, or through such electronic means as may be prescribed; and

Ø Has been approved by a majority of directors or members, who are entitled to vote on the resolution.

 

If at least 1/3 of total number of directors requires that any resolution under circulation must be decided at the meeting, then the chairperson shall put the resolution to be decided at a meeting of the board.

 

A resolution under sub-section (1) of section 175 shall be noted at a subsequent meeting of the board or the committee thereof, and made part of the minutes of such meeting.

 

 

A resolution in draft form may be circulated to the directors together with the necessary papers for seeking their approval, by electronic means which may include E-mail or Fax.

Procedure for sending the draft resolution is Same as companies Act, 2013. However, SS-1 prescribed a bit of standards regarding passing of resolution by circulation, which are as listed below:

 

ü The Chairman of the board or in his absence, the MD or in his absence, the WTD and where there is none, any director other than an interested director, shall decide, whether the approval of board for a particular business shall be obtained by means of resolution by circulation, before the draft resolution is circulated to all the directors.

ü Interested directors shall not be excluded for the purpose of determining the 1/3 of the total number of directors, which requires resolution to be decided at the meeting, not by circulation.

 

ü Each business proposed to be passed by way of resolution by circulation shall be explained 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.

 

ü The note shall indicate how a director shall signify assent or dissent to the resolution proposed and the date by which the director shall respond.

 

ü Each resolution shall be separately explained and the decision of the directors shall be sought for each resolution separately.

 

ü Maximum seven days time from the date of circulation of the draft resolution shall be given to the directors to respond.

 

ü Every resolution shall carry a serial number.

 

ü Directors shall signify their assent or dissent by signing the resolution to be passed by circulation or by e-mail or any other electronic means.

 

ü Directors shall append the date on which they have signed the resolution. In case a director does not append a date, the date of receipt by the company of signed resolution shall be taken as the date of signing.

 

ü In case the director does not respond on or before the last date specified for signifying assent or dissent, it shall be presumed that the director has abstained from voting.

 

ü If the approval of majority directors entitled to vote is not received by the last date specified for receipt of such approval, the resolution shall be considered as not passed.

 

ü In case at least 1/3 of directors wish the matter to be discussed and decided at a meeting, each of concerned directors shall communicate the same before the last date specified for the response.

 

ü Minutes shall also record the fact that the interested director did not vote on the resolution.

 

ü Resolution passed by circulation shall be noted at the next meeting of the board.

 

 

6Minutes118 (1) & Rule 25 of Companies (Management & Administration) Rules, 2014All

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

118 (11)

 

 

118 (12)

The provisions prescribed for maintaining of minutes by Companies Act, 2013 and there rules are as listed:

 

Ø The Minutes of proceedings of meeting shall be entered within 30 days from the date of conclusion of the meeting along with the date of such entry.

Ø Each page of the minutes book shall be initialed or signed.

Ø The last page of the record of proceedings of minutes shall be dated and signed.

Ø The minutes of board meeting shall be signed by the chairman of the said meeting or the chairman of the Next succeeding meeting.

Ø The minute book of board meetings shall be kept at the registered office of the Company or such other place as Board may decide.

Ø The minute book of board meetings shall be kept permanently.

Ø The minute book of board meetings shall be kept in the custody of Company Secretary of the Company or any director authorized by the board for this purpose.

 

Penalty for not complying the provisions:

For Company: 25000/-

Every Officer in default: 5000/-

 

If a person found guilty of tampering with the minutes of the proceedings of meeting, he shall be punishable with:

• Imprisonment maximum 2 years; and

• Fine minimum 5000/- but maximum to 100000/-

 

Apart from having similar provisions of Companies Act, 2013, SS-1 prescribed some additional standards which are enlighted as under:

 

Maintenance of Minutes

 

1. A company may maintain its Minutes in physical or in electronic form. Minutes in electronic form shall be maintained with Timestamp.

2. The pages of the Minutes Books shall be consecutively numbered.

3. In the event any page or part thereof in the Minutes Book is left blank, it shall be scored out and initialed by the Chairman who signs the Minutes.

 

Contents of Minutes

 

I. Minutes shall state, at the beginning the serial number and type of the Meeting, name of the company, day, date, venue and time of commencement and conclusion of the Meeting.

II. In case a Meeting is adjourned, the Minutes shall be entered in respect of the original Meeting as well as the adjourned Meeting.

III. Minutes shall record the names of the Directors present physically or through Electronic Mode, the Company Secretary who is in attendance at the Meeting and Invitees, if any, including Invitees for specific items.

IV. The names of the Directors shall be listed in alphabetical order or in any other logical manner, but in either case starting with the name of the person in the Chair.

 

Specific Contents

 

a) Record of election, if any, of the Chairman of the Meeting.

b) Record of presence of Quorum.

c) The names of Directors who sought and were granted leave of absence.

d) The mode of attendance of every Director whether physically or through Electronic Mode.

e) In case of a Director participating through Electronic Mode, his particulars, the location from where and the Agenda items in which he participated.

f) The name of Company Secretary who is in attendance and Invitees, if any, for specific items and mode of their attendance if through Electronic Mode.

g) Noting of the Minutes of the preceding Meeting.

h) The text of the Resolution(s) passed by circulation since the last Meeting, including dissent or abstention, if any.

i) The fact of the dissent and the name of the Director who dissented from the Resolution or abstained from voting thereon.

j) If any Director has participated only for a part of the Meeting, the Agenda items in which he did not participate.

k) Ratification by Independent Director or majority of Directors, as the case may be, in case of Meetings held at a shorter Notice and the transacting of any item other than those included in the Agenda.

 

Recording of Minutes

Ø The Company Secretary shall record the proceedings of the Meetings. Where there is no Company Secretary, any other person duly authorized by the Board or by the Chairman in this behalf shall record the proceedings.

 

Ø Where any earlier Resolution (s) or decision is superseded or modified, Minutes shall contain a reference to such earlier Resolution (s) or decision.

 

Finalisation of Minutes

 

A. 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 recognized electronic means ;

• to all the members of the Board or the Committee for their comments.

 

B. The Directors, whether present at the Meeting or not, shall communicate their comments, if any, in writing on the draft Minutes within seven days from the date of circulation thereof.

C. In the event a Director does not comment on the draft Minutes, the draft Minutes shall be deemed to have been approved by such Director.

D. If any Director communicates his comments after the expiry of the said period of seven days, the Chairman shall have the discretion to consider such comments.

 

Entry in the Minutes Book

Minutes shall be entered in the Minutes Book within thirty days from the date of conclusion of the Meeting along with date of entry shall be recorded by CS or any director authorized by board, if no CS.

 

Signing and Dating of Minutes:

ü Minutes of the previous Meeting may be signed either by the Chairman of such Meeting at any time before the next Meeting is held or by the Chairman of the next Meeting at the next Meeting.

ü Any blank space in a page between the conclusion of the Minutes and signature of the Chairman shall be scored out.

ü If the Minutes are maintained in electronic form, the Chairman shall sign the Minutes digitally.

ü A copy of the signed Minutes certified by the Company Secretary or where there is no Company Secretary, by any Director authorized by the Board shall be circulated to all Directors within fifteen days after these are signed.

 

Explanation: The 30 days time limit is for entering the minutes not for signing. Minutes shall be signed before holding next meeting.

Some other points need to be highlighted, combination of Companies Act, 2013 along with Rules and SS-1 to remove the ambiguity enumerated as under:

  • Participation of a Director in a meeting cannot be done telephonically or through tele-conferencing. As because this will not be considered participation through electronic mode.
  • “Electronic Mode” in relation to Meetings means Meetings through video conferencing or other audio-visual means. “Video conferencing or other audio-visual means” means audio-visual electronic communication facility employed which enables all the persons participating in a Meeting to communicate concurrently with each other without an intermediary and to participate effectively in the Meeting.
  • A Board meeting may be held at any place, in India or abroad.
  • In case companies are unable to count and give continuous numbering from their incorporation, they may start giving serial numbers from meetings held on or after 01st July, 2015.
  • The presence of physical quorum shall be necessary during consideration of any of the restricted items of business.
  • If the date of adjourned meeting is decided at the original meeting, then also notice should be given. If the date of adjourned meeting is not decided at the original meeting, the adjourned meeting should be held only after minimum 7 days fresh notice.
  • Any item not included in the Agenda can be taken up at the meeting for consideration with the permission of the chairman and with the consent of a majority of the directors present in the meeting, which shall include at least one independent director, if any.
  • Request for leave of absence by the director may be oral or written. Any such request received should be mentioned at the meeting by the chairman of the meeting or the CS and should be recorded in the minutes.
  • Any director duly authorized by the board, can certify the Board Resolution, irrespective of whether he attended the relevant board meeting or not.

Matters not to be dealt with in a meeting through video conferencing or other audio visual means prescribed by Companies (Meetings of Board & its Powers) Rules, 2014 are as enumerated:

i. The approval of Annual Financial Statements;

ii. The approval of the Board’s Report;

iii. The approval of the prospectus;

iv. The Audit Committee Meetings for consideration of accounts; and

v. The approval of matter relating to amalgamation, merger demerger, acquisition and takeover.

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