Dr.Sanjiv Agarwal
And now it is the turn of corporate India to go green and follow steps to ensure conserve nature and environment. Thanks to the green initiative taken by Ministry of Corporate Affairs (MCA) of Central Government recently whereby the age old system of serving of document by corporates to its shareholders by physical mode under posting certificate (UPC) has been relaxed. With such a non- mandatory directive from MCA, many companies, especially the big ones with large shareholders base and those who are good governance conscious have responded to this initiative positively by requesting their shareholders to agree for electronic documents such as annual report.
The Ministry of Corporate Affairs has taken a “Green Initiative in the Corporate Governance” by allowing paperless compliances by the companies after considering provisions of the information Technology Act, 2000 for legal validity of compliances under Companies Act through electronic mode. Companies Act, 1956 provides service of documents under ‘Certificate of posting’ as one of the accepted mode of service. Whereas the Department of posts has recently discontinued the postal facility under ‘Certificate of posting’ vide their letter dated 23.02.2011, the Information Technology Act, 2000 also permits service of documents etc., in electronic mode.
Based on the MCA Circulars towards green initiatives, companies can now send various notice/ documents (including notice calling annual general meeting, audited financial statements, directors report, auditor’s report etc) to their shareholders through electronic made (viz, email) at the registered email addresses of shareholders of the company. The full text of reports statements etc. will also be available to shareholders on company’s website and be sent to shareholders in physical form on request without any extra cost. Physical copies will also be available for inspection during office hours at registered office.
Thus, compliance will be deemed to have been done where service of documents has been made through electronic mode. In case where any member has not registered his email address with the company, the service of documents will have to be affected by other modes of service.
This is major step forward in India where companies can now use electronic mode. Recently, Government also announced such green initiatives in corporate governance by allowing paperless compliances for various filings. Also, for holding general meeting of shareholders, companies can use audio visual electronic communication with proper access. It will be an obligation on company to ensure proper video conference equipment or facilities, ensure that no one other than shareholders attends the meeting, prepare minutes and safeguard the integrity of the proceedings through video conference. Companies would provide for conference connectivity for general meetings atleast at five centers so that it covers top five cities. Similarly, board meetings could also be held by electronic mode.
Companies such as GTL, Reliance Industries, Hindustan Unilever, Shree Cement, Piramal Health, Godrej, etc. have already taken steps in this direction which will save lot of paper and costs. ‘Go Green initiatives’ offers win-win situation – reduction in printings, paper costs and postage expenses for companies and also help in keeping our planet earth green and cool. As an investor, let’s be a part of this green initiative and contribute towards social corporate responsibility.
In the garb of Green Initiative, the Govt. has succumbed to the coporate sector by making it compulsory for shareholders to receive various documents by e mail at the address registered with their depositories. Thousands of Rupees would be saved by the companies. However, I would warn shareholders to consider if they should succumb to this initiative. Please consider the following:
1. By receiving all documents by e mail, shareholders have to pay the cost of downloading to their ISPs, electricity cost, etc. Why should shareholders incur these additional costs?
2. Attendance slips and prioxy forms would also be sent by e mail. So shareholders have to print these at their own cost.
3. While there is a provision to ask for paper documents, experience has shown that companies do not respond many a times – just recall a corresponding provision when abridged documents were sent. Companies ignored requests for full report copies, for obvious reasons.
4. The e mail address registered with a DP is privileged information. How can the Govt. force such e mail address to be divulged to all companies in the demat account?
5. Does every shareholder have a printer to get proxy forms/attendance slips printed (at his cost)? I dont have a printer myself, though I have an e mail address. Many people check e mail at cybercafes as they have no computer at home.
I am not against ‘saving costs and environment’ but the above points would I hope initiate a few reforms.
1. Do not make it compulsory for the e mail address registered with a DP to be disclosed to the companies. Shareholders should be given the option to receive e mail documents by specifically naking a request to the companies individually.
2. Companies should be made to send proxy/attendance slips by post to all shareholders who have opted for e mail service of documents. The cost for this is minimal as the saving in printing and sending annual reports is enormous. Why should enormous savings accrue only to companies at the cost of shareholders, for a ‘national cost saving effort’?
3. Proxy forms need 15 paise stamps. These stamps are not printed any more and so re.1 revenus stamps are used.. Income from using Re.1/- revenue stamo on proxies is minimal and so the Govt. should exempt proxy forms from stamp duty altogether by amending the Stamp Act.
4. Those shareholders who agree to receive documents by e mail, should be allowed to send proxies/attendance slips by e mail from the same e mail address registered wth the companiues. Companies should act on these and allow proxies named in the e mail proxy forms, to attend meeting on verification of identity.
5. A part of he enormous saving in cost of printing and sending paper documents should be passed on in to shareholders who agree to receive such documents by e mail. Companies should credit a sum of say Rs. 50 to Rs.100 per ID by ECS to the bank a/c of the shareholders to compensate addiional cost of downloading the documents. Also, the Govt. should exempt such payment from income-tax, as this is a saving for all, and is a reimbursement for expenses incurred for a useful cause.
I think the foregoig points should be debated and brought to the notice of the Govt.
Till such time the foregoing are considered from the sharholders’ point of view, I would request all concerned shareholders to not agree to their e mail IDs to be disclosed by their DPs, to the comopanies whose shares they hold in demat accounts.
The Govt. should withdraw this compusory disclosure directive immediately.
Any initiative that brings down cost will be readily implemented by corporates no matter whether it is green or red!