Amitav Ganguly

Amitav GangulyBACKGROUND

In any company documents management, more particularly, preservation of documents is of critical importance. However it appears that generally in the corporate world in respect such preservation there is neither any laid down policy nor is preservation is done in any systematic manner. Hence Securities and Exchange Board of India has thought it fit to lay down, for the first time, provisions in this regard for companies whose securities are / shall be listed on the stock exchanges. Although non listed companies are not covered, it could be advisable, in future, to suitably provide under the new Companies Act 2013 for a comprehensive coverage.

LAW

Regulation 09 of SEBI {Listing Obligations & Disclosure Requirements} Regulations 2015 {W.E.F. 01-12-2015} has provided thus:-

“The Company shall have a policy for preservation of documents classifying them in at least two categories as follows:-

(a) documents whose preservation shall be permanent in nature;

(b) documents with preservation period of not less than eight years after completion of the relevant transactions.”

OBJECTIVES

Keeping in view the new law, a listed company needs to adopt the following objectives for preservation of its documents and making them a part of its Policy:-

  • Preservation of the existing/future documents permanently or for specified period/s.
  • Destruction of document/s after the period of preservation.
  • Documents shall cover those in physical mode as well as in electronic mode.
  • Ensure a systematic approach to maintenance and availability of documents in the records of a company as per the requirements of the applicable laws and elimination of documents which have outlived their utility.

FORMULATION OF A POLICY

A listed company shall have to formulate a Policy for preservation and destruction of its documents and get the same approved by its Board of directors. The responsibility of effective implementation of such Policy should be on specified senior officer/s. A regular feedback to the Board could be a good practice for control.

DEFINITION OF “DOCUMENT” UNDER COMPANIES ACT, 2013 & OTHERWISE

Since the the crux of the new law relates to “ document” it is important to understand its meaning statutorily as well as commercially and in a practical sense.

Under the new Companies Act 2013, “document” includes summons, notice, requisition, order, declaration, form and register, whether issued, sent or kept in pursuance of this Act or under any other law for the time being in force or otherwise, maintained on paper or in electronic form. ( Section 2 {36})

Documents may also include those which although not required to be preserved statutorily have been, are, or shall be created, maintained and preserved by a company from time to time, due to its business activities. Specifically such documents shall include those relating to dealings with the customers, suppliers, service providers, employees and other appointees of the company.

It is advisable for the company to prepare and maintain an indicative list of various documents required to be preserved under any law/s or otherwise. This list shall be updated from time to time. Such list could be a part of the Policy.

PRESERVATION OF DOCUMENTS

Various laws, as amended from time to time, applicable or which shall be applicable to a company shall be complied in respect of preservation of documents.

All documents of a company shall be required to be categorized into:

  1. those documents preservation of which shall be permanent in nature meaning thereby preservation as per applicable law/s or otherwise till the existence of the company, and,
  2. those documents although preservation for which there is no specific legal provision or not required to be preserved permanetly, shall be preserved for a period of not less than eight consecutive calendar years after the date of completion of the last relevant transaction/s.

PRESERVATION OF LITIGATION DOCUMENTS

Documents arising out of various litigation wherein a company is a party in any manner, shall need to be preserved as per the directions/orders of the court/s / tribunal/s/ judicial/ other authority/ies as may be applicable, in absence of which the documents shall be preserved for a period of not less than eight consecutive calendar years after conclusion of the litigation.

DESTRUCTION OF DOCUMENTS

Destruction of the documents after the preservation period shall be done under the authority, guidance and directions of preferably a committee consisting of senior officers who could be the Company Secretary {CS} and the Chief Financial Officer {CFO} together with any other officer/s as may be decided by the Board of directors.

A list of documents shall be required to be prepared before their destruction and actual destruction would be done before the presence of CS & CFO {including any other officer/s, if any} who shall need to sign such list. It shall have to be ensured that destruction shall be done in totality and not partially.

Thereafter such list along with a statement of destruction shall need to be placed before the Board for its noting.

EXISTING DOCUMENTS

All existing documents of a company shall need to be tabulated, and, be preserved and destroyed in terms of the Policy and the various applicable laws.

DEVIATION FROM THE POLICY

Any court/s / tribunal/s/ judicial/ other authority/ies shall have the power to direct a company to produce /preserve and/or destroy any document/s, however, if any document/s has/ have been destroyed pursuant to the Policy followed as per the SEBI Regulations, herein, it may not be possible for the company to produce such document/s, therefore, necessary permission to that effect has to be taken by the company and/ or a statement to that effect shall be given by the company from/to the relevant authorities. Any other action/s shall need to be taken as may be advised by these authorities.

REVIEW

The Board of directors of a company shall need to review the Policy, from time to time, to ensure its effectiveness.

DISCLOSURE

The Policy shall need to be disclosed in a company’s web site and in the Annual Report of that company and a web link provided in the said Report.

CONCLUSION

Undoubtedly the new law mandated under SEBI {Listing Obligations & Disclosure Requirements} Regulations 2015 for formulation of a Policy for preservation of documents of a listed company is a laudable step towards good corporate governance. This could be extended, in future, to non listed companies too through the new Companies Act 2013. Pertinently for any law to be really effective it is essential that companies comply with the provisions in letter and spirit. Hopefully in the years to come companies will realize that proper document management is also good for effective business processes.

(Author can be reached at gangulyamitav57@gmail.com)

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Category : Company Law (3483)
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Tags : Amitav Ganguly (26) Companies Act (1951) Companies Act 2013 (1723) SEBI (514)

0 responses to “New Law On Preservation Of Documents”

  1. S.Chandrasekaran says:

    This type of classification and preservation of documents/records is a mandatory requirement of ISO Quality Management system.
    Industries who have implemented ISO systems are already aware of this & its advantage.

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