CS Divesh Goyal

SHORT SUMMARY:

In this Flash editorial, the author referring amendment i.e. Secretarial Standard -1 (here after referred as “SS-1”) issued on July, 1st, 2015 (here after referred as “Old SS”) and Revised version of SS-1 effective from 1st October, 2017 issued by issued by Institute of Company Secretary of India (“ICSI”) dated 30th August, 2017.

Introduction:

Revised Secretarial Standard shall be effective w.e.f. 1st October, 2017. There are some alterations made in the revised SS-1 in comparison to former SS-1.This Standard prescribes a set of principles for convening and conducting Meetings of the Board of Directors and matters related thereto.

AMENDMENT

1. Scope of SS-1: The standard shall not applicable on the followings:

  • One Person Company in which there is only one Directors on its Board
  • Company licensed under Section 8 of the CA, 2013 or Corresponding provisions of any previous enactment thereof.

Outcome: Old SS-1 was applicable on the Section 8 Companies also. However, revised SS exempt on the Section 8 Companies.

II. Meaning of Committee: As per Revised SS- 1:

As per Old SS As per Revised SS
Committee means a committee of Directors constituted by the Board Committee means a Committee of Directors mandatorily required to be constituted by the Board under the Act.

 

 Note: SS shall be applicable only on the committee of the Board Mandatory to constituted under the Act i.e.

  • Audit Committee
  • Nomination & Remuneration Committee
  • Stakeholder relationship Committee
  • CSR Committee

III. Day of Meeting:

As per Old SS As per Revised SS
A Meeting may be convened at any time and place on any day, excluding National Holiday. A Meeting may be convened at any time and place on any day.

Outcome: According to revised SS-1 a Board Meeting can be held on “National Holiday”.

IV. Day of Adjourned Meeting:

As per Old SS As per Revised SS
A Meeting adjourned for want of Quorum shall also not be held on a National Holiday. A Meeting adjourned for want of Quorum shall also not be held on a National Holiday.

Outcome: According to revised SS-1 a Adjourned Board Meeting can be held on “National Holiday”.

V. Notice of the Meeting:

As per Old SS As per Revised SS
Notice of the Meeting, wherein the facility of participation through Electronic Mode is provided, shall clearly mention a venue, whether registered office or otherwise, to be the venue of the Meeting and it shall be the place where all the recordings of the proceedings at the Meeting would be made. Notice of the Meeting shall clearly mention a venue, whether registered office or otherwise, to be the venue of the Meeting and all the recordings of the proceedings of the Meeting, if conducted through Electronic Mode, shall be deemed to be made at such place.

Outcome: Mandatory to mention the Venue of the meeting in each and every notice of the meeting whether through electronic facility of participation through electronic mode provided or not.

VI. Participation through Electronic Means:

As per Old SS As per Revised SS
Directors shall not participate through Electronic Mode in the discussion on certain restricted items, unless expressly permitted by the Chairman. Such restricted items of business include approval of the annual financial statement, Board’s report, prospectus and matters relating to amalgamation, merger, demerger, acquisition and takeover. Similarly, participation in the discussion through Electronic Mode shall not be allowed in Meetings of the Audit Committee for consideration of annual financial statement including consolidated financial statement, if any, to be approved by the Board , unless expressly permitted by the Chairman Directors shall not participate through Electronic Mode in the discussion on certain restricted items, Such restricted items of business include approval of the annual financial statement, Board’s report, prospectus and matters relating to amalgamation, merger, demerger, acquisition and takeover. Similarly, participation in the discussion through Electronic Mode shall not be allowed in Meetings of the Audit Committee for consideration of annual financial statement including consolidated financial statement, if any, to be approved by the Board.
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 The Notice shall inform the Directors about the availability of such facility, and provide them necessary information to avail such facility
  Director may intimate his intention of participation through Electronic Mode at the beginning of the Calendar Year also, which shall be valid for such assumed that he will attend the Meeting physically.

 Outcome: No power of permission with the Chairman. Amendment to align with the provisions of the Act.

VII. Mode of Sending of Notice:

As per Old SS As per Revised SS
Notice in writing of every Meeting shall be given to every 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 Notice in writing of every Meeting shall be given to every Director by hand or by speed post or by registered post or by facsimile or by e-mail or by any other electronic means
Where a Director specifies a particular means of delivery of Notice, the Notice shall be given to him by such means Where a Director specifies a particular means of delivery of Notice, the Notice shall be given to him by such means. However, in case of a Meeting conducted at a shorter Notice, the company may choose an expedient mode of sending Notice.
In case the company sends the Notice by speed post or by registered post or by courier, an additional two days shall be added for the service of Notice In case the company sends the Notice by speed post or by registered post an additional two days shall be added for the service of Notice

Outcome: Notice of the Meeting can’t send by the “Courier”.

Under revised SS many placed word “courier” has removed like;

  • Proof of Sending of Agenda & Notes to Agenda

In case of Holding of Meeting on shorter Notice Company can send the notice of Meeting as per convenient mode.

VIII. Maintenance of Proof of sending of Notice:

As per Old SS As per Revised SS
Proof of sending Notice and its delivery shall be maintained by the company. Proof of sending Notice and its delivery shall be maintained by the company for such period as decided by the Board, which shall not be less than 3 years from the date of the Meeting.

Outcome: Board of Director has to decide the time period for maintenance of proof of sending of Notice of Board Meeting. This time period should not be less than 3 year from the date of Meeting. Therefore, it is mandatory for all the Companies to maintain copy of proof of sending of Notice at least for 3 years from the date of meeting.

Under revised SS many placed word “Time period of maintenance of documents has been prescribed” has removed like;

  • Proof of Sending of Agenda & Notes to Agenda,
  • Attendance Register
  • Proof of Sending of Draft Minutes

IX. Taken Up any other Agenda not including in Agenda Items:

As per Old SS As per Revised SS
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, which shall include at least one Independent Director, if any 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.
The decision taken in respect of any other item shall be final only on its ratification by a majority of the Directors of the Company, unless such item was approved at the Meeting itself by a majority of Directors of the Company.

Outcome: In case of taken up any matter which is not included in the Agenda item “no mandatory need of approval of Independent Director”.

However, Extra Agenda item can be taken up with the approval of Majority Director whether including Independent Director or not.

X. Frequency of Meeting:

As per Old SS As per Revised SS
The Board shall meet atleast once in every calendar quarter, with a maximum interval of one hundred and twenty days between any two consecutive Meetings of the Board, such that at least four meeting are held in each calendar year. The Company shall 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

Outcome: This is a major change.

There is no need to hold Board Meeting in each Calendar Quarter. It is in alignment with the Act.  Effect of this provision shall be same on each point of the SS stating about holding of Board Meeting in each quarter.

XI. Quorum:

As per Old SS As per Revised SS
Director shall not be reckoned 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. Director shall not be reckoned for Quorum in respect of an item in which he is interested.

However, in case of a private company, a Director shall be entitled to participate in respect of such item after disclosure of his interest.

Leave of absence shall be granted to a Director only when a request for such leave has been received by the Company Secretary or by the Chairman.

Outcome: This change is to give effect of Exemption notifications to Private Limited Company by Notification dated 5th June, 2015.

XII. Interested Director for the purpose of Quorum:

As per Old SS As per Revised SS
For this purpose, 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)

(C_)

For this purpose, a Director shall be treated as interested in a contract or arrangement entered into or proposed to be entered into by the company:

(a)

(b)

New insertion:

If the item of business is related party transaction, then he shall not be present at the Meeting, whether physically or through Electronic Mode, during discussions and voting of such item.

 Outcome: If Company entered into contract or arrangement with Director or his relative shall not treat as interested Directors.

In case of related party transaction he shall not participate.

XIII. Attendance Register:

As per Old SS As per Revised SS
If an attendance register is maintained in loose-leaf form, it shall be bound periodically depending on the size and volume If an attendance register is maintained in loose-leaf form, it shall be bound periodically, at least in every three year
The attendance register shall be deemed to have been signed by the Directors participating through Electronic Mode, if their attendance is recorded by the Chairman or the Company Secretary in the Attendance Register and the Minutes of the Meeting.

 

The attendance register shall be deemed to have been signed by the Directors participating through Electronic Mode, if their attendance is recorded in attendance registered and authenticated by the Company Secretary or where there is no Company Secretary, by the Chairman or by any other Director present at the Meeting, if so authorized by Chairman and the fact of such participation is also recorded in the Minutes.
Authentication of Register:

Entries in the attendance register shall be authenticated by the Company Secretary or where there is no Company Secretary by the Chairman by appending his signature to each page.

This close is removed.
Custody of Register:

 

Where there is no Company Secretary, the attendance register shall be in the custody of any director authorized by the Board of this purpose.

Where there is no Company Secretary, the attendance register shall be in the custody of any other person authenticated by the Board of this purpose.

XIV. Inspection of Attendance Register:

As per Old SS As per Revised SS
The attendance register is open for inspection by the Directors. The attendance register is open for inspection by the Directors. Even after a person cease to be a Director, he shall be entitled to inspect the attendance register of the Meeting held during the period of his Directorship.

Outcome: A Director after retirement can inspect the Attendance Register for the period of his Directorship.

XV. Leave of Absence:

As per Old SS As per Revised SS
Leave of absence shall be granted to a Director only when a request for such leave has been received by the Company Secretary or by the Chairman. Leave of absence shall be granted to a Director only when a request for such leave has been received by the Company Secretary or by the Chairman or to any other person authorized by the Board to issue Notice of the Meeting.

XVI. Passing of Resolution by Circulation:

As per Old SS As per Revised SS
Proof of sending and delivery of the draft of the Resolution and the necessary papers shall be maintained by the company 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.
An additional two days shall 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.
For this purpose, 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)

(C_)

For this purpose, a Director shall be treated as interested in a contract or arrangement entered into or proposed to be entered into by the company:

(a)

(b)

 

Minutes shall also record the fact that interested Director did not vote on the Resolution. Removed

Outcome:

  • Papers shall be sent through Courier in this case.
  • Proof of Sending of Notice shall be maintained by the Company for such period as decided by the Board, which shall not be lass then 3 year from the date of Meeting.
  • 2 addition days shall be added for the services of the draft resolution, in case the same has been sent by the Company by Speed Post or by register post or by courier.

XVII. A record of all appointments made at the Meeting:

As per Old SS As per Revised SS
Where the Minutes have been kept in accordance with the Act and all appointments have been recorded, then until the contrary is proved, all appointments of Directors, First Auditors, Key Managerial Personnel, Secretarial Auditors, Internal Auditors and Cost Auditors, shall be deemed to have been duly approved by the Board. All appointments made one level below Key Managerial Personnel shall be noted by the Board. Where the Minutes have been kept in accordance with the Act and all appointments have been recorded, then until the contrary is proved, all appointments of Directors, First Auditors, Key Managerial Personnel, Secretarial Auditors, Internal Auditors and Cost Auditors, shall be deemed to have been duly approved by the Board. All appointments made one level below Key Managerial Personnel shall be noted by the Board.

 

Outcome:

Appointment made one level below KMP is no longer required to be noted by the Board. [Subsequent Amendment dated 18th March 2015 to the Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014.

XVIII. Recording of Minutes:

As per Old SS As per Revised SS
Any unsigned document, including report or notes placed before the Board and referred to in the Minutes shall be identified by initialing of such document, report or notes by the Company Secretary or the Chairman.

Wherever any approval of the Board is taken on the basis of certain papers laid before the Board, proper identification shall be made by initialing of such papers  by the Company Secretary or the Chairman and a reference thereto shall be made in the Minutes

Wherever the decision of the Board is based on any unsigned documents including reports or notes or presentations tabled or presented at the Meeting, which were not part of the Notes on Agenda and are referred to in the Minutes, shall be identified by initialing of such documents by the Company Secretary or the Chairman.

 Outcome:

Appointment Only unsigned documents placed before the Board, in respect of items requiring decision of the Board, need to be so initialed. Thus, certain papers placed for noting and/or papers which have been already signed by the Chairman, Director or any other official of the company need not be initialed again.

XIX. Finalization of Minutes:

As per Old SS As per Revised SS
If the draft Minutes are sent by speed post or by registered post or by courier, an additional two days may be added for delivery of the draft Minutes. This point is removed
Proof of sending draft Minutes and its delivery shall be maintained by the company 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 year from the date of the Meeting.

XX. DISCLOSURE:

As per Old SS As per Revised SS
The Annual Report and Annual Return of a company shall disclose the number and dates of Meetings of the Board and Committees held during the financial year indicating the number of Meetings attended by each Director The Report of the Board of Directors shall include a statement on compliances of applicable Secretarial Standards.

Outcome:

This is Major Change.

Board of Directors has to mention a statement in its Directors’ Report that “Company is in compliances with applicable Secretarial Standards”.

As the revised SS shall be effective from 1st October, 2017 therefore this clause shall affect the Directors Report for the [1]Financial Year 2017-18.

Conclusion:

After elaborate deliberations, the Institute of Company Secretaries of India (ICSI) has amend the Secretarial Standard – 1. Amendments are made for better compliance of the law.

Compliance with the strict rules — that would help strengthen corporate governance practices and help curb corporate misdoings — would be ensured by company secretaries.

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

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