secretarial standards 1& 2 - vinod kothari consultants –...
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Secretarial Standards
1& 2
Vinod Kothari & Company
1006-1009 Krishna Building224 AJC Bose RoadKolkata – 700017Phone 033-22811276/ 22813742/7715
E-mail – [email protected]
601-C, Neelkanth98 Marine Drive
Mumbai 400002Phone 022-22817427
E-mail: [email protected]
www.vinodkothari.comEmail: [email protected]
Copyright
• The presentation is a property of VinodKothari & Company. No part of it can becopied, reproduced or distributed in anymanner, without explicit priorpermission.
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• and full link
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About Us• Vinod Kothari &
Company,▫ Based in Kolkata, Mumbai
• We are a team ofconsultants, advisors &qualified professionalshaving recentlycompleted 25 years ofpractice.
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Our Organization’s Credo:
Focus on capabilities; opportunities follow
Provisions of Law
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Scope of Applicability
• Section 118 (10) of the Companies Act, 2013
• 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
Company Secretaries Act, 1980 (56 of 1980).
• Section 205 (1) of the Companies Act, 2013
• The functions of the Company Secretary shall include,-
(b) To ensure that the Company complies with all secretarial
standards.
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Scope of applicability -analysis• Is it applicable to all companies?
▫ As per sec 118 (10), yes• ICSI proposes several standards – are all the standards mandatory?
▫ Looking at sec. 118 (10), mandatory force has been given to only SS forboard and general meetings. Other standards, when issued, may bind theCS only
• Are they applicable to all meetings?▫ As per clear language of sec 118 (10), only the standards applicable to
board and general meetings have statutory force▫ SS1 pertains to committee meetings as well; SS2 pertains to class
meetings, court-convened meetings; meetings of debentureholders.• The caption of sec 118 is pertaining to minutes. Are the standards to
be limited to minutes only in terms of their statutory force?▫ Marginal note or caption does not control the language of the section.
The section makes SS pertaining to board and general meetingsmandatory in entirety
• The Standards deal with matters such as postal ballot as well. Is itmandatory?▫ Arguable point. Postal ballot is an alternative to a meeting
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Corporate meetings and collective decision-making
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Corporate collective decision-making
BoardMembers Debenture-
holdersCreditors
General meetings
Class meetings
Full BoardBoard
Committees
Postal ballotin lieu of meetings
Resolutionsin meetings
Electronicvoting option Postal voting
option
Personalparticipation
Participationby AV means
Remote e-voting
Voting atmeeting
By meetingBy
circulation
Show ofhands
Poll
ElectronicPaper
Effective Date
• Secretarial Standards on Meetings of the Board of Directors
(SS-1) and Secretarial Standards on General Meetings (SS-2)
as approved by the Central Government on April 10, 2015 ,
have been issued by the Institute of Company Secretaries of
India (ICSI) vide ICSI Notification No. 1 (SS) of 2015 dated
April 23, 2015 and published in the Gazette of India
Extraordinary Part III - Section 4.
• Effective from July 1, 2015
• ICSI issued clarification on May 12, 2015 that SS-1 and SS-2
will apply to such Board Meetings and general meetings in
respect of which the notices are ‘issued’ on or after July 1,
2015
• Read our article on the same here
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Non compliance with SS
• What is SS not complied with?
▫ Sec 118 (11) provides for a “penalty” of Rs 25000/-on the company and Rs 5000/- on every officer
▫ Note that this is “penalty”
Hence, will not require prosecution; may be imposedby the adjudicating officer
Use of the expression “penalty of Rs 25000” and notpenalty upto Rs 25000/-
• Who is the “officer” who can be penalised?
▫ Arguable view is that sec 205 (1) imposes theobligation on the company secretary
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Provisions of SS vis-à-vis articles• While the SS are clearly subordinated to the Act,
question is, are they subordinated to the articles?• As a consistent principles, companies have the right to
self-regulate themselves• Meetings are matters of internal management of
companies; therefore, canonical rule of power to selfregulate should apply here
• While SS are given the mandate of the law by virtue ofsec. 118 (10), they do not represent matters of legislativepolicy; they are standards
• Unless the article is derogatory of a corporate standard,it is still permissible for companies to self regulate byarticles
• Example:▫ SS1 says board meetings may be called at any place▫ Articles may regulate the place of the board meeting
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Secretarial Standards on Meetings of
the Board of Directors (SS-1)
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Applicability of SS-1
• Meetings of Board of Directors of all companies incorporated
under the Act except One Person Company (OPC) in which there
is only one Director on its Board.
• Also applicable to Meetings of Committee (s) of the Board,
unless otherwise stated herein or stipulated by any other
applicable Guidelines, Rules or Regulations.
• If due to any subsequent changes in Act, 2013 a particular
Standard or any part thereof becomes inconsistent with the Act,
the provisions of the Act shall prevail.
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Convening of Meeting
• Any Director may summon a Meeting. CS or any other person
authorised by Board on the requisition of a Directors shall convene
a meeting. ( Para 1.1.1)
▫ Power to call or “summon” a meeting given to “any director”
▫ In case of dissenting directors on board, this may create a major
difficulty
Important for the Articles to restrain this power
▫ Article 67 (ii) of Table F also permits Manager along with CS to
convene a meeting.
• The Chairman, unless objected by majority of Directors, can
adjourn the Meeting at any stage for any reason. ( Para 1.1.2)
▫ Article 67 (i) of Table F permits the Board to adjourn its meetings
as it thinks fit.
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Time, Place, Mode and Serial Number
of Meeting• Every Meeting shall have a serial number ( Para 1.2.1)
▫ No such provision under the Act, 2013
For companies that need to start seriating now, how would serial nos bewritten?
Serial nos may be year-specific: 2015-16/1 is a serial no
Intent of seriating is clearly to prevent post-facto insertion of board meetings
• Meeting shall be convened at any time and place, on any day,excluding National Holiday ( Para 1.2.1)
▫ National Holiday includes Republic Day, Independence, Gandhi Jayantiand such other day as may be declared as National Holiday by theCentral Government.
▫ A Meeting adjourned for want of quorum shall also not be held on aNational Holiday.
• Place of meeting
▫ Unlike in case of general meetings, the place of board meetings need notbe India
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Participation in board meetings by
AV means• A director may participate via AV means
▫ SS 1, 1.2.3 seems to be granting a generic power to a director to use AVfor participating in board meetings
▫ Several companies have not permitted directors to participate via VC
There may be several internal concerns
• Director shall not participate through Electronic mode in meetingson restricted items, unless expressly permitted by the Chairman (Para 1.2.3).
▫ Chairman means Chairman of Board or Committee or Chairmanappointed or elected for a meeting.
▫ The Act read with the Rules contain a prohibition with no scope for theChairman to permit discussion on restricted items
Clear conflict between the Act and the SS
• Bar on use of AV facility for annual financial statements extended toaudit committee as well
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Notice• 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 byfacsimile or by e-mail or by any other electronic means ( Para 1.3.1)▫ Section 173 (3) permits by hand delivery, post or by electronic means.
• Notice shall be sent to postal address or e-mail address registeredwith the Company.▫ In the absence of such details, any of such addresses appearing in the
Director Identification Number (DIN) registration of the Director.▫ In case notice is sent by speed post or by registered post or by courier,
additional 2 days shall be added for service.• Proof of sending Notice and its delivery to be maintained.▫ Proof of sending and delivery
May require companies to use email clients that prove delivery Maintenance of proof – maintain how long? SS is silent. General
preservation of records Rules provide 8 years’ time• Notice shall be given even if meetings are held on pre-determined
dates ( Para 1.3.5)• In case of meetings convened at shorter notice, the fact shall be
stated in the Notice
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Content of Notice• Notice shall specify the serial number, day, date, time and full
address of venue. ( Para 1.3.3)
• Where participation through Electronic mode is being
facilitated, Notice shall clearly mention a venue, whether
registered office or otherwise, to be venue of Meeting.
▫ This shall be the place where all recording of the
proceedings at the Meeting would be made.
• Notice shall seek advance confirmation from directors as to
whether they will participate .
▫ Contact number or email address of Chairman, CS or any
other person authorised by Board shall be provided to whom
Director shall confirm in this regard.
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Agenda and Notes on Agenda 1/2
• Agenda and Notes to Agenda shall be given to Directorsatleast 7 days before the date of Meeting. ( Para 1.3.7)▫ Proof of sending Agenda and Notes on Agenda and their delivery
shall be maintained by the Company.
• Notice, Agenda and Notes on Agenda shall be sent to OriginalDirector also, even if the same has been sent to the AlternatedDirector.
• Supplementary notes on any of the Agenda item, any item notincluded in Agenda shall be taken up with the permission ofChairman and with the consent of majority of Directorspresent. ( Para 1.3.10)▫ This shall include atleast one Independent Director, if any.
▫ Where ID is not present at the Meeting, Minutes shall be finalonly after atleast 1 ID, if any, ratifies the decicision for such item
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Agenda and Notes on Agenda- 2/2
• Each item of business requiring approval at the Meeting shall
be supported 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 and the
nature of concern or interest, if any, of any Director in the
proposal, which the Director had earlier disclosed. ( Para
1.3.8)
▫ Each item of business to be taken up shall be serially
numbered which would enable ease of reference.
• Draft of resolution, where required, shall be either set out in
the note or placed at the Meeting.
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Agenda Notes in case of UPSI• Unpublished price sensitive information includes
financial result, dividend, change in capital structure,changes in KMP, mergers, demergers, Material eventsas per Clause 36 of LA.
• Agenda notes for UPSI may be given at a shorterperiod of time.▫ General consent for the same may be taken at first
Meeting of the Board in each financial year and alsowhenever there is any change in Directors.
▫ Where general consent has not be taken, requisiteconsent to be taken before the item is taken up forconsideration at the Meeting. Fact of the same to be recorded in Minutes.
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Notes on UPSI items• Notes/back up papers about UPSI items are
typically never sent 7 days in advance▫ Commonest case is financial statements
• PIT regulations actually prohibit circulation of UPSIitems except on “need to know” basis
• Para 1.3.7 sets a complicated rule on UPSI items▫ General consent every year in the first board meeting▫ And whenever there is a change in directors▫ And if no generalised consent, at the time of discussion
of the item
• Typically, this will become a minuting burden▫ Minutes for every such item to record consent for
shorter agenda notes
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Contents of Notes on agenda
• Compendious requirements for notes onagenda
• Each agenda item requiring approval to bebacked by▫ a note setting out the details of the proposal▫ relevant material facts that enable theDirectors to understand the meaning, scopeand implications of the proposal
▫ the nature of concern or interest, if any, of anyDirector in the proposal, which the Directorhad earlier disclosed
▫ Draft of the resolution
• Each agenda items will be serially numbered
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Tabled items
• Tabled items, that is, items which were notoriginally on agenda are quite a common feature
• These items may be taken up only with theconsent of majority, including at least one ID, ifany▫ SS goes to say, if there is no ID present in the
meeting, the item shall be valid only ifsubsequently ratified by one ID Difficult to understand how could there be any
deliberation/decision outside the meeting, for the IDto ratify Seems to change the settled view about board to be
necessarily a collective forum
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Frequency & Quorum of Meetings
• Meetings of Board ( Para 2.1)▫ Atleast 4 meetings in each Calendar Year with maximum
interval of 120 days between any two consecutive Meetings.▫ Quorum – same provisions as per Act, 2013
• Meetings of Committees ( Para 2.2)▫ As often as necessary subject to the minimum number and
frequency stipulated by the Board or as prescribed by anylaw or authority.
▫ Presence of all the members of any Committee constitutedby Board is necessary unless otherwise stipulated in Act,any other law, Articles or by the Board.
• Meeting of Independent Directors ( Para 2.3)▫ At least once in a Calendar Year.▫ CS shall facilitate convening and holding of such meeting,
if so desired by IDs.
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Quorum in Committee meetings
• Para 3.5 comes with a strange rule
▫ Says presence of all members of a Committee is thequorum
▫ Unless otherwise stipulated by the Act, Rules, articlesor the Board
• Since unanimous presence is quite tough in mostmeetings, it is incumbent on companies to surpassthis strange rule by at least a board resolution
▫ Board resolution may be passed soonest
▫ Generic board resolution will suffice
▫ Recommended strength is 1/2 or 2 whichever is higher
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Interested directors
• Not only does an interested director have torefrain from participating, the SS now requiresinterested director not to be “present” at thetime of discussions
• This will require minutes to record the fact of thedirector having left the room/ left the VC facility
• In case of Chairman also, this rule applies
▫ Chairman required to handover the chair to a dis-interested director
▫ Vacate the room
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Attendance at Meetings – 1/2• Separate attendance register for the Meetings of Board
and Committee to be maintained. (Para 4.1.1)
▫ Article 65 of Table F provides for the same.
• Pages serially numbered and bound periodically depending on
size and volume.
• Shall contain date, & serial number of meeting, name of
Committee, place and time of meeting, names of Directors,
signature of those present, name and signature of CS who is in
attendance and also of invitees.
▫ For directors participating electronically, Chairman shall confirm
attendance.
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Attendance at Meetings – 2/2
• Attendance register to be maintained at Registered officeor such other place as approved by Board. ( Para 4.1.4)▫ Shall be open for inspection by the Directors. ( Para 4.1.5)
• Entry to be authenticated by CS or by Chairman, where thereis no CS. ( Para 4.1.6)
• To be preserved for at least 8 financial years and may bedestroyed thereafter with permission of Board. ( Para 4.1.7)
• To be kept in custody of CS and where there is no CS, anyDirector authorised by Board. ( Para 4.1.8)
• Leave of absence to be granted only when request for suchleave has been received by the CS or Chairman. ( Para 4.2)▫ Practically, there is no impact of granting of leave currently;
hence, the practice of leave of absence may be dropped
▫ Minutes may simply record those present
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Passing of Resolution by Circulation – 1/2
• The Chairman of the Board or in his absence, the Managing
Director or in his absence, the Whole-time Director and where there
is none, any Director other than Interested Director, shall decide
whether the approval of he Board for a particular business shall be
obtained by means of a Resolution by circulation. ( Para 6.1.1)
• Such business to be explained by way of 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, the
nature of concern or interest, if any, of any Director in the proposal,
which the Director had earlier disclosed and the draft of the
Resolution proposed. ( Para 6.2.3)
▫ Manner of signifying assent or dissent and the date by which Director
shall respond shall also be indicated in the note.
Not more than seven days from the date of circulation of the draft of the
Resolution shall be given to the Directors to respond and the last date shall be
computed accordingly
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Passing of Resolution by Circulation – 2/2
• Every resolution shall carry a serial number.
▫ Idea seems to have serial nos for circular resolutions of the company –
to negate possibility of insertion of circular resolutions post facto
• Resolution shall be deemed to have been passed on the last date
specified for signifying assent or dissent by the Directors or the date
on which assent from more than two-third of the Directors has been
received, whichever is earlier, and shall be effective from that date,
if no other effective date is specified in such Resolution ( Para 6.3.2)
▫ 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 the signed Resolution shall be taken as the date of
signing.
• In cases where the interest of a Director is yet to be communicated
to the company, the concerned Director shall disclose his interest
before the last date specified for the response and abstain from
voting.
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Minutes• Minutes may be maintained in physical or electronic form with
Timestamp.
▫ “Timestamp” means the current time of an event that is recorded by aSecured Computer System and is used to describe the time that isprinted to a file or other location to help keep track of when data isadded, removed, sent or received.
▫ ICSI is likely to come out with a clarification with respect to the same.
• Minutes of the Board Meetings, if maintained in loose-leaf form,shall be bound periodically depending on the size and volume andcoinciding with one or more financial years of the company.(Para 7.1.6)
• Every Company shall follow a uniform and consistent form ofmaintaining the Minutes. Any deviation in such form ofmaintenance shall be authorised by the Board.
• Minutes of of the preceding Meeting shall be noted at a Meeting ofthe Board/ Committee ( as the case may be) held immediatelyfollowing the date of entry of such Minutes in the Minutes Book.( Para 7.3.5)
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Specific Contents of Minutes – 1/2
• Election , if any of Chairman;
• Presence of Quorum;
• Directors who sought and were provided Leave of absence;
• Mode of attendance of every Director;
▫ In case of participation through Electronic mode, his particulars, thelocation from where and the Agenda items in which he participated.
• CS in attendance and name of invitees, if any and mode of theirattendance if through electronic mode;
• Noting of Minutes of preceding Meeting, Minutes of Committees;
• The text of the Resolution(s) passed by circulation since the lastMeeting, including dissent or abstention, if any.
• The text of the Resolution(s) passed by circulation since the lastMeeting, including dissent or abstention, if any;
• The fact that an Interested Director was not present during thediscussion and did not vote;
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Specific Contents of Minutes – 2/2
• The views of the Directors particularly the Independent Director, if
specifically insisted upon by such Directors
▫ Unless the Chairman is of the opinion that the same is defamatory of
any person, irrelevant or immaterial or detrimental to the interest of
the Company;
• If any Director has participated only for a part of the Meeting, the
Agenda items in which he did not participate;
• The fact of the dissent and the name of the Director who dissented
from the Resolution or abstained from voting thereon
• 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
• The time of commencement and conclusion of the Meeting.
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Other details to be captured in
Minutes• The brief background of all proposals and summarize the
deliberations thereof. In case of major decisions, the rationale
thereof shall also be mentioned. ( Para 7.2.2.2)
• Decisions shall be recorded in the form of Resolutions, where
it is statutorily or otherwise required. In other cases, the
decisions can be recorded in a narrative form
• Where a Resolution was passed pursuant to the Chairman of
the Meeting exercising his second or casting vote, the Minutes
shall record such fact
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Finalisation of Minutes• Proof of sending draft Minutes within 15 days from the date of
conclusion and its delivery shall be maintained by thecompany.
• The Directors, whether present at the Meeting or not, shallcommunicate their comments, if any, in writing on the draftMinutes within seven days from the date of circulation thereof,so that the Minutes are finalised and entered in the MinutesBook within the specified time limit of thirty days▫ Act, 2013 requires only Directors present in the meeting to
confirm the same – Rule 3 (12) (b) of Companies ( Meetings ofBoard and its Powers) Rules, 2014
• A Director, who ceases to be a Director after a Meeting of theBoard is entitled to receive the draft Minutes of that particularMeeting and to offer comments thereon, irrespective ofwhether he attended such Meeting or not.
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Timelines for minuting
• Date of the meeting = A
• Circulation of minutes = B = A +15
• Comments on draft minutes = C = B +7
• Entry of minutes in the minute book =A +30
• Signing of minutes = E= anytime at or before thenext board meeting
• Circulation of Signed Minutes certified by the CSor where no CS, by Director = E+15
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Entry, Signing and Inspection of Minutes
• Minutes, once entered in the Minutes Book, shall not bealtered. Any alteration in the Minutes as entered shall be madeonly by way of express approval of the Board at its subsequentMeeting in which such Minutes are sought to be altered. ( Para7.5.3).
• A copy of the signed Minutes certified by the CompanySecretary or where there is no Company Secretary, by anyDirector authorised by the Board shall be circulated to allDirectors within fifteen days after these are signed. ( Para7.6.4)
• A Director is entitled to inspect the Minutes of a Meeting▫ held before the period of his Directorship;▫ held during the period of his Directorship, even after he ceases to be a
Director
• A Member of the company is not entitled to inspect theMinutes of Meetings of the Board.
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Preservation of Papers
• Minutes of all Meetings shall be preserved permanently
in physical or in electronic form with Timestamp ( Para
8.1)
• Office copies of Notices, Agenda, Notes on Agenda and
other related papers shall be preserved in good order in
physical or in electronic form for as long as they remain
current or for eight financial years, whichever is later and
may be destroyed thereafter with the approval of the
Board ( Para 8.2)
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Secretarial Standards on General
Meetings (SS-2)s
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Applicability of SS-2
• All types of General Meetings of all the Companiesincorporated under the Act except One Person Company(OPC) and class or classes of companies which areexempted by the Central Government throughnotification.
• The Principles enunciated in this Standard for GeneralMeetings of Members are applicable mutatis mutandis to▫ Meetings of debenture-holders▫ Meetings of creditors.
• However, the mandatory force as per sec 118 (10) is onlyfor general meetings.
• If due to any subsequent changes in Act, 2013 a particularStandard or any part thereof becomes inconsistent withthe Act, the provisions of the Act shall prevail.
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Notice - 1/4
• Notice in writing of every meeting shall be given to every
Member, Director, Auditor, Secretarial Auditor and
Debenture Trustee of the Company. (Para 1.2.1)
▫ As per Section 101 (3) of the Act, 2013, Notice need to be given
to every member, legal representative, assignee, auditor and
director of the company.
▫ In case the Member is a company or body corporate which is
being wound up, Notice shall be sent to liquidator.
• Notice shall be sent by hand or by ordinary post or by speed
post or by registered post or by courier or by facsimile or by
e-mail or by any other electronic means. ( Para 1.2.2)
▫ Section 20 (2) permits by hand delivery, post, registered post,
speed post or by electronic means.
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Notice - 2/4
• Notice shall specify the day, date, time and full address
of the venue of the Meeting. (para 1.2.4)
▫ Section 101 (2) states that every notice shall specify the
place, date, day and the hour of the meeting.
▫ Notice shall contain complete particulars of the venue of the
meeting including route map and prominent land mark for
easy location.
▫ Notice and the route map is also required to be hosted on
the website of the Company, if any.
• General Meetings may be held at any place within India.
▫ Explanation to Rule 18 of Companies (Management and
Administration) Rules, 2014 also provides the same.
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Notice - 3/4
• Notice of the meeting to be held shall clearly specify the
nature of the Meeting and the business to be transacted thereat.
(Para 1.2.5)
▫ In respect of items of Ordinary Business, Resolutions are not
required to be stated in the Notice except where the Auditors or
Directors to be appointed are other than the retiring Auditors or
Directors, as the case may be.
• Where reference is made to any document, contract,
agreement, the MOA or AOA, the relevant explanatory
statement shall state that such documents are available for
inspection in physical or electronic form at the Registered
Office, Head Office as well as the Corporate Office of the
Company, if any and also at the Meeting.
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Notice - 4/4• In case of re-appointment of Independent Directors, performance
evaluation report of such Director or summary thereof shall beincluded in the explanatory statement.
• Request for consenting to shorter notice and accompanyingdocuments shall be sent together with the Notice and the Meetingshall be held only if approval is received from not less than ninety-five per cent of the Members entitled to vote at such Meeting. (Para1.2.7)
▫ Meeting shall be held only if consent is received prior to the date fixedfor Meeting.
▫ This would mean virtually accessing shareholders twice
• A Meeting convened upon due notice shall not be postponed orcancelled. (Para 1.2.11)
• If, for reasons beyond the control of the Board, a Meeting cannot beheld on the date originally fixed, the Board may reconvene theMeeting, to transact the same business as specified in the originalNotice, after giving not less than three days intimation to theMembers.
44
Frequency & Quorum of Meetings –
1/2• Every company shall, in each Calendar Year, hold a
General Meeting called the Annual General Meeting. (Para2.1)
• Quorum for General Meeting shall be (Para 3.1):
▫ In case of public company –• If the number of Members as on the date of Meeting is not more than
one thousand – 5 Members Personally Present;
• If the number of Members as on the date of Meeting is more thanone thousand but up to five thousand – 15 Members PersonallyPresent;
• If the number of Members as on the date of Meeting is more thanfive thousand – 30 Members Personally Present;
▫ In case of private company – 2 members personallypresent.
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Frequency & Quorum of Meetings –
2/2• A duly authorised representative of a body corporate or the
representative of the President of India or the Governor of aState is deemed to be a Member personally present and enjoysall the rights of a Member present in person.(Para 3.2)▫ One person can be an authorised representative of more than one
Body Corporate.
• Example: In case of public company having not more than 1000members, Quorum requirement is 5 members personally present –Supposing if one person is appointed as an authorised representativeby 5 body corporates and only that one person is present for themeeting then for the purpose of quorum he will not be counted,however if one more person is present for the quorum the same willbe counted as 5+1 = 6 members personally present.
• Members who have voted by Remote e-voting have the rightto attend the General Meeting and accordingly their presenceshall be, counted for the purpose of Quorum. (Para 3.2)
46
Presence of Directors & Auditors• If any Director is unable to attend the Meeting, the Chairman shall explain
such absence at the Meeting. (Para 4.1.1)▫ The Chairman of the Audit Committee, NRC or SRC, or any other Member
of any such Committee authorised by the Chairman of the Committee toattend on his behalf, shall attend the General Meeting.
▫ Directors simpliciter are not required to attend general meetings as such Hence, question of explaining absence should not arise
• Directors who attend General Meetings of the company and the CompanySecretary shall be seated with the Chairman. (para 4.1.2)▫ Strange to see Standard laying seating arrangement
• The Auditors and Secretarial Auditors, unless exempted by the companyshall, either by himself or through his authorised representative, attend theAGM and shall have the right to be heard at such Meeting on that part ofthe business which concerns him as Secretarial Auditor. (Para 4.2 & 4.3)▫ The Standard casts a mandatory obligation to attend “every generalmeeting” Secretarial auditor is an engagement, not an office. Hence at a given time, a
company may not have a secretarial auditors
▫ The authorised representative who attends shall also be qualified to be anAuditor/ Secretarial Auditor In essence a qualified person only can attend
47
Chairman• The Chairman of the Board shall take the chair & conduct the Meeting. (Para 5.1)
▫ If the chairman is not present within 15 minutes after the time appointed for
holding the Meeting, OR if he is unwilling to act as Chairman of the Meeting,
OR if no Director has been so designated – the Directors present at the Meeting
shall elect one of themselves to be the Chairman of the Meeting.
Conflict with the law – law provides for members to elect a chairman
▫ If no Director is present within 15 minutes after the time appointed for holding
the Meeting, OR if no Director is willing to take the chair, the Members present
shall elect, on a show of hands, one of themselves to be the Chairman of the
Meeting.
• The Chairman shall explain the objective and implications of the Resolutions
before they are put to vote at the Meeting ( Para 5.2)
• While this was implicit earlier, now this becomes a part of the Standard.
• In case of public companies, the Chairman shall not propose any Resolution in
which he is deemed to be concerned or interested nor shall he conduct the
proceedings for that item of business. (Para 5.3)
• This is also a new law; there was no bar earlier in directors not participating in general
meeting matters
48
Proxies
• A Member entitled to attend and vote is entitled to appoint a Proxy, or where that isallowed, one or more proxies, to attend and vote instead of himself and a Proxy neednot be a Member. (Para 6.1)▫ Same Provision under Section 105 read with Rule 19 of the Companies (Management &
Administration) Rules, 2014.▫ Multiple proxies by a single member are clearly permitted▫ Generalised proxies – that is, proxy for “all meetings held in a year” are no more valid as
law reqires agenda of the meeting to be put in the proxy form
• The Proxy-holder shall prove his identity at the time of attending the Meeting. (Para6.4.1)
• Undated Proxy shall not be considered valid. (Para 6.5.2)• Proxies shall be deposited with the company either in person or through post not later
than 48 hours before the commencement of the Meeting in relation to which they aredeposited and a Proxy shall be accepted even on a holiday if the last date by which itcould be accepted is a holiday. (Para 6.6.1)• Logistic difficulty for companies whose office complexes are closed on a public holiday• Care to be taken in deciding the date of the meeting
• All Proxies received by the company shall be recorded chronologically in a registerkept for that purpose. (Para 6.9)
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Voting – 1/2• Voting at the Meeting:
▫ Every company, which has provided e-voting facility to itsMembers, shall also put every Resolution to vote through aballot process at the Meeting. ( Para 7.2.2)
▫ A Proxy can vote in the ballot process.
• Voting Rights:▫ Every Member holding equity shares and, in certain cases as
prescribed in the Act, every Member holding preferenceshares, shall be entitled to vote on a Resolution. (Para 7.5.1)
• Second/ Casting vote:▫ Unless otherwise provided in the Articles, in the event of
equality of votes, whether on show of hands or electronicallyor on a poll, the Chairman of the Meeting shall have a secondor casting vote. (Para 7.6)
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Voting – 2/2
• A Member who is a related party is not entitled to
vote on a Resolution relating to approval of any
contract or arrangement in which such Member is a
related party. (Para 7.5.2)
▫ The restriction has been extended for all transactions
with related parties and not those entered under Section
188 of Act, 2013.
▫ SS becomes more restrictive than the Act, 2013
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E-voting
• The Board shall appoint scrutinizers for e-voting orballot process, agency for e-voting, decide cut-offdate, authorize the Chairman or in his absence, anyother Director to receive the scrutiniser’s register,report on e-voting and other related papers withrequisite details. ( Para 8.4)
• Result of e-voting shall be displayed on the NoticeBoard of the company at its Registered Office and itsHead Office as well as Corporate Office, if any, if suchoffice is situated elsewhere, and also be placed on thewebsite of the company, in case of companies having awebsite and of the Agency. ( Para 8.6.2)▫ The concept of the results of e-voting being put on notice
boards seems strange Presumes there is lot of footfall of members to see the results
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When is the ballot process in case
of e-voting to be done• Typically, poll when “demanded” can be ordered
within 48 hours of the meeting• Most companies use this practice▫ To eliminate the participation of less enthusiastic
members
• However, e-voting rules as also the SS seems tosuggest that the timing of the poll is actuallyapplicable only in case of poll “demanded”▫ In case ballot process in e-voting matters, the poll is
self-ordered Hence not demanded
Rules seem to suggest the poll should be done during themeeting itself
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Conduct of Poll – 1/2• When a poll is demanded on any Resolution, the Chairman shall get
the validity of the demand verified and, if the demand is valid, shallorder the poll forthwith if it is demanded on the question ofappointment of the Chairman or adjournment of the Meeting and, inany other case, within forty-eight hours of the demand for poll. (Para 9.1)
• In the case of a poll, which is not taken forthwith, the Chairmanshall announce the date, venue and time of taking the poll. ( Para9.2)
▫ If the date, venue and time of taking the poll cannot be announced atthe Meeting, the Chairman shall inform the Members, the modes andthe time of such communication, which shall in any case be withintwenty four hours of closure of the Meeting. A Member who did notattend the Meeting can participate and vote in the poll in such cases.
• At least one of the scrutinisers shall be a Member who is present atthe Meeting, provided such a Member is available and willing to beappointed.
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Conduct of Poll – 2/2
• Based on the scrutiniser’s report, the Chairman shall declare the
result of the poll within two days of the submission of report by
the scrutiniser, with details of the number of votes cast for and
against the Resolution, invalid votes and whether the Resolution has
been carried or not.
▫ Rule 21 (1) (m) of Companies ( Management and Administration)
Rules, 2014 did not prescribe time.
• The result of the poll with details of the number of votes cast for
and against the Resolution, invalid votes and whether the Resolution
has been carried or not shall be displayed on the Notice Board of the
company at its Registered Office and its Head Office as well as
Corporate Office, if any, if such office is situated elsewhere, and
also be placed on the website of the company, in case of companies
having a website. ( Para 9.5.2)
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Withdrawal of Resolutions
• Resolutions for items of business which are likely to affect themarket price of the securities of the company shall not bewithdrawn. However, any resolution proposed forconsideration through e-voting shall not be withdrawn. ( Para10)▫ Rule 17 (10)(d) of Companies ( Share Capital & Debenture) Rules,
2014 also provide similar for buy back of securities. Further, Rule20 (4) (xviii) of Companies ( Management and Administration)Rules, 2014 also mandates that resolution proposed forconsideration through e-voting shall not be withdrawn.
• What about amendments?▫ Non-substantive changes can be made▫ Substantive changes also, it seems, cannot be made▫ Way out for “withdrawal”
Only way seems to be put another resolution to vote, rescindingthe first one
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Rescinding and Modification of
Resolutions• A Resolution passed at a Meeting shall not be rescinded
otherwise than by a Resolution passed at a subsequentMeeting. ( Para 11)▫ To annul a resolution, one more meeting to be convened and
resolution to be passed.
• Modifications to any Resolution which do not change thepurpose of the Resolution materially may be proposed,seconded and adopted by the requisite majority at theMeeting and, thereafter, the modified Resolution shall beduly proposed, seconded and put to vote. ( Para 12)▫ No modification to any proposed text of the Resolution shall
be made if it alters the substance of resolution▫ No modification shall be made if already put to vote by
remote e-voting.
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Reading of Reports at AGM
• The qualifications, observations or comments orother remarks on the financial transactions ormatters which have any adverse effect on thefunctioning of the company, if any, mentioned inthe Auditor’s Report and Secretarial AuditReport shall be read and attention of theMembers present shall be drawn to theexplanations / comments given by the Board ofDirectors in their report. ( Para 13.1)▫ Typical practice has been reading the first and last
line and take the reports as read▫ Nothing wrong in this practice
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Distribution of Gifts
• No gifts, gift coupons, or cash in lieu of giftsshall be distributed to Members at or inconnection with the Meeting. (Para 14)
▫ This is a very important development
▫ Gifts at or in connection with meetings have beenruled out
▫ However, generic gifts to all shareholders,irrespective of their turning out at meetings, areperfectly valid
For example, discount coupons to all shareholders
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Passing of resolution by Postal
Ballot (PB) – 1/3• The Board shall identify the business to be transacted through
PB, approve notice and explanatory statement, authorize CS orif no CS, then Director to conduct the PB process and appointone scrutinizer. ( Para 16.3)▫ Power to delegate has been limited.
• Notice of PB also to be provided to Directors, Auditors,Secretarial Auditor and Debenture Trustees, if any.
• Notice of PB shall specify the day, date, time and venue wherethe results of the voting by postal ballot will be announced andthe link of the website where such results will be displayed (Para 16.4.3)▫ The concept of “venue” of declaration seems strange▫ The results are simply uploaded▫ However, the SS seems to bring back the antiquated concept of
calling a meeting to declare the results of a postal ballot
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Passing of resolution by Postal
Ballot (PB) – 2/3• The advertisement of notice of PB in addition to matters
specified under Rule 22 (3) of Companies (Managementand Administration) Rules, 2014 shall also specify:▫ day, date, time and venue of declaration of results and the
link of the website where such results will be displayed.
• PB form shall be considered invalid in case of following( Para 16.5.3):(a) A form other than one issued by the company has been
used;(b) It has not been signed by or on behalf of the Member;(c) Signature on the postal ballot form doesn’t match the
specimen signatures with the company;(d) It is not possible to determine without any doubt the assent
or dissent of the Member;
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Passing of resolution by Postal
Ballot (PB) – 3/3(e) Neither assent nor dissent is mentioned;
(f) Any competent authority has given directions in writing tothe company to freeze the Voting Rights of the Member;
(g) The envelope containing the postal ballot form is receivedafter the last date prescribed;
(h) The postal ballot form, signed in a representative capacity,is not accompanied by a certified copy of the relevantspecific authority;
(i) It is received from a Member who is in arrears of paymentof calls;
(j) It is defaced or mutilated in such a way that its identity asa genuine form cannot be established;
(k) Member has made any amendment to the Resolution orimposed any condition while exercising his vote
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Results of Postal Ballot ( PB)• The result of the voting with details of the number of
votes cast for and against the Resolution, invalid votesand whether the Resolution has been carried or not, alongwith the scrutiniser’s report shall be displayed on theNotice Board of the company at its Registered Office andits Head Office as well as Corporate Office, if any, if suchoffice is situated elsewhere, and also be placed on thewebsite of the company, in case of companies having awebsite. ( Para 16.6.2)
• The Resolution, if passed by requisite majority, shall bedeemed to have been passed on the last date specified bythe company for receipt of duly completed postal ballotforms or e-voting. ( Para 16.6.3)
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Minutes
• Minutes may be maintained in physical or electronic form
with Timestamp. ( Para 17.1.3)
• Every Company shall follow a uniform and consistent form of
maintaining the Minutes. Any deviation in such form of
maintenance shall be authorised by the Board.
• Minutes Books shall be kept at the Registered Office of the
Company or at such other place, as may be approved by the
Board. ( Para 17.1.7)
▫ Section 119 of Act, 2013 provides that minutes of general
meeting or of resolutions passed by postal ballot shall be
maintained at registered office of the Company.
▫ Permitting the minutes to be kept at a place other than registered
office certainly makes inspections impossible
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Specific Contents of Minutes – 1/3
(Para 17.2.2)
• Election , if any of Chairman;
• The fact that certain registers, documents, the Auditor’s Reportand Secretarial Audit Report, as prescribed under Act wereavailable for inspection.
• Presence of Quorum;
• The number of members present in person includingrepresentatives;
• The number of proxies and the number of shares representedby them;
• The presence of the Chairmen of the Audit Committee, NRCand SRC or their authorised representatives.▫ Listing Agreement requires the Chairman of Audit Committee to
only attend AGM. However, SS requires them to attend all GM.
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Specific Contents of Minutes – 2/3
• The presence if any, of the Secretarial Auditor, Auditor, or
their authorised representatives, the Court/ Tribunal appointed
observers or scrutinisers;
• Summary of the opening remarks of the Chairman;
• Reading of qualifications, observations or comments or other
remarks on the financial transactions or matters which have
any adverse effect on the functioning of the company, as
mentioned in the report of the Auditors and Secretarial
Auditors;
• Summary of the clarifications provided various Agenda Items;
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Specific Contents of Minutes – 3/3
• In respect of each Resolution, the type of the Resolution, thenames of the persons who proposed and seconded and themajority with which such Resolution was passed;▫ Where a motion is moved to modify a proposed Resolution, the
result of voting on such motion shall be mentioned. If aResolution proposed undergoes modification pursuant to amotion by shareholders, the Minutes shall contain the details ofvoting for the modified Resolution.
• In the case of poll, the names of scrutinisers appointed and thenumber of votes cast in favour and against the Resolution andinvalid votes.
• If the Chairman vacates the Chair in respect of any specificitem, the fact that he did so and in his place some otherDirector or Member took the Chair
• The time of commencement and conclusion of the Meeting.
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Preservation of Minutes and
related papers
• Minutes of all Meetings shall be preserved permanently
in physical or in electronic form with Timestamp. ( Para
18.1)
• Office copies of Notices, scrutiniser’s report, and related
papers shall be preserved in good order in physical or in
electronic form for as long as they remain current or for
eight financial years, whichever is later and may be
destroyed thereafter with the approval of the Board ( Para
18.2)
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