Secretarial Standards

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Secretarial Standards Need Expectations
By CS ALKA KAPOOR DIRECTOR (PROFESSIONAL
DEVELOPMENT)
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• Company Law must be forward looking, market
  centric and encourage informed decision making by
  the shareholders.
• Company Law must afford greater autonomy of
  operations and opportunity of self regulation
  with higher transparency in corporate actions
  through better disclosures.
• The Companies Bill, 2012 is a modern, futuristic
  and forward looking legislation which provides
  paradigm shift in approach and focuses primarily
  on good governance practices through disclosure
  based regime.

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• The basic purpose of any Standard is to
• integrate, harmonise and standardise the diverse
  practices prevalent
• Adopt global best practices and ensure uniformity
  of practices
• bring better disclosures and transparency and
  accountability in corporate action
• lead to ease in doing business
• better understanding of corporate processes by
  all stakeholders including foreign investors.
• Uniformity is important because different
  practices may lead to deceptive conclusion.

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• Companies Bill, 2012 is big landmark in
  translating this approach into reality.
• Secretarial Standards have been given a place of
  pride in the Bill.
• Although many forward looking companies have been
  voluntarily adopting SSs, the Standards now have
  a statutory recognition.

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The Institute of Company Secretaries of India is
the only professional body in the world to issue
Secretarial Standards.
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So far 10 Secretarial Standards have been issued
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Establishment of Secretarial Standards Board
(SSB)- a Visionary step

• SSB constituted in the year 2001
• Comprises of experienced members of the
  profession, representatives of regulatory
  authorities such as MCA, SEBI and Sister
  Professional Institutes like ICAI and ICAI-CMA.
• The main functions of SSB are
• Formulating Secretarial Standards
• Clarifying issues arising out of the Secretarial
  Standards
• Issuing Guidance Notes and
• Reviewing and updating the Secretarial
  Standards/Guidance Notes at periodic intervals

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Formulation of Secretarial Standards-Procedure

• Identify and prioritise the broad areas on the
  basis of their criticality and importance to the
  profession.
• Examine various divergent practices in vogue and
  identify the best practices which should be
  adopted.
• Formulate the preliminary draft and circulate to
  various government bodies, regulators,
  professional bodies, chambers of commerce, stock
  exchanges and to the Regional Councils/Chapters
  of ICSI for ascertaining their views.
• Contd

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Formulation of Secretarial Standards-Procedure

• Exposure draft prepared after considering
  suggestions on Preliminary draft and hosted on
  ICSI website and published in Chartered Secretary
  for public comments.
• After considering the comments received, the
  draft is finalized by SSB and submitted to the
  Council of the Institute for approval.
• The Council of the Institute considers the final
  draft, finalise the same in consultation with SSB
  and issues the Secretarial Standard.

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Companies Bill, 2012 and Secretarial Standards

• Clause 118(10) of Companies Bill, 2012 reads
• Every company shall observe secretarial standards
  with respect to Board and general meetings
  specified by the Institute of Company Secretaries
  of India constituted under section 3 of the
  Company Secretaries Act, 1980, and approved as
  such by the Central Government.

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• Clause 205 Functions of company secretary shall
  include
• (a) to report to the Board about compliance with
  the provisions of this Act, the rules made there
  under and other laws applicable to the company
• (b) to ensure that the company complies with the
  applicable Secretarial Standards
• (c) To discharge such other duties as may be
  prescribed.
• For the purpose of this section, this expression
  secretarial standards means secretarial
  standards issued by the Institute of Company
  Secretaries of India constituted under section 3
  of the Company Secretaries Act, 1980 and approved
  by the Central Government.

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Role of a Company Secretary in Practice

• Annual Return (Clause 92)
• A PCS Certifying the Annual Return shall to
  certify compliances of the provisions of the Act
  which also include compliance of Secretarial
  Standards.
• Secretarial Audit
• A PCS conducting the Secretarial Audit shall
  ensure that Secretarial Standards are implemented
  in the company and, in the event of any deviation
  from the Standards, to make appropriate
  qualifications or observations or other remarks
  in his Audit Report.

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SS1-Board Meetings

• A Board Meeting should be convened by giving at
  least 15 days notice. The agenda should be sent
  at least 7 days before the date of the meeting.
• To avoid any item of significance being
  considered and approved without the prior
  knowledge of Directors, the Standard provides
  that prior Notice for such item is essential.
• The quorum should be present at every stage of
  the Meeting. Any business transacted by a number
  lesser than the quorum is void.

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• Leave of absence to Directors should not be
  granted as a ritual. It should be granted only
  when specifically sought by a Director.
• Quarterly or half-yearly financial results should
  be approved at a meeting of the Board or its
  Committee and should not be approved by means of
  a Resolution passed by circulation.
• The limited review report, in case of material
  variance, should be discussed and approved at a
  Meeting of the Board and not by Resolution passed
  by circulation.
• Within fifteen days from the date of the meeting
  of the Board, the draft Minutes thereof should be
  circulated to all the Directors for their
  comments.

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• Apart from the Resolution or decision, the
  Minutes should mention the brief background of
  the proposal and the rationale for passing the
  Resolution or taking the decision.
• As decisions taken by the Board are collective
  decisions, the names of the Directors who
  dissented or abstained from the decision should
  be recorded.
• The Minutes of all meetings should be preserved
  permanently.

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SS2-General Meetings

• Notice of the General Meetings
• Notice of every General Meeting should be given
  to every member at the address provided by him
  whether in India or outside India.
• Notice should also be given to the Directors and
  other specified recipients such as banks and
  financial institutions and other interested
  parties.
• In case of listed companies with more than 5,000
  Members, an abridged version of the Notice should
  be published in a newspaper having wide
  circulation within such States of India where
  more than 1,000 Members reside.

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SS2-General Meetings

• All Directors of the company should attend all
  meetings of shareholders and be available to
  reply to shareholders queries. If any Director
  is unable to attend the Meeting for reasons
  beyond his control, the Chairman should explain
  such absence at the Meeting.
• Framing of Resolutions and explanatory statement
  in simple language in the Notice is emphasized
  for the benefit of members.
• The attendance of practising company secretary
  who has given the compliance certificate has been
  made mandatory at every Annual General Meeting.

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• The Standard also makes it obligatory for the
  auditors of the company to attend the Annual
  General Meeting if there are any reservations,
  qualifications or adverse remarks in the
  Auditors Report.
• Onerous responsibility has been placed on the
  Chairman of the meeting who is expected to be
  fair and impartial in the conduct of his duties.
  He is enjoined upon to provide a fair opportunity
  to Members who are entitled to vote to raise
  questions and/or offer comments and ensure that
  these are answered.

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• In case of listed companies with over 5,000
  Members, the result of the poll should be
  published in a leading newspaper circulating in
  the neighbourhood of the registered office of the
  company.
• Resolutions specified in the Notice for items of
  business which are likely to affect the market
  price of the securities of the company should not
  be withdrawn.
• No gifts, gift coupons or cash in lieu of gifts
  should be distributed before, at or in connection
  with the General Meetings.
• Annual Report of companies should disclose the
  particulars of all general meetings held during
  the last three years.
• Best practices for entering, recording and
  signing as well as preservation of the Minutes
  have been laid down.

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• SS-1 and SS-2 will have to be realigned with the
  New Act.
• SSB has already met to align these standards with
  the New Law.

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Secretarial Standards - expectations from the
profession

• Opportunity coupled with responsibility
• Complying with processes which are transparent,
  just and fair
• Quality check in true letter and spirit
• Have courage to stand up and give qualifications
  or observations or other remarks for any
  non-compliance
• A CS in employment to report to Board about
  compliance with provisions of Companies Act,
  Rules made thereunder and other laws applicable
  to company.
• Advise to company to bridge the gap, i.e.,
  solution to the problem
• Enhance visibility of the profession

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Secretarial Standards -expectations from the
Corporates

• Will lead to credibility and respect for
  companies in the eyes of stakeholders
• Better disclosures
• Transparent processes
• Uniform secretarial practices instilling good
  corporate culture through adoption of best
  practices and standards within the organisation
• Build investor confidence

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• It is the beginning of a new era where
  non-financial standards have been given
  importance and statutory recognition besides
  financial standards.
• The enhanced role envisaged for Company
  Secretaries under the Bill to shoulder the
  onerous responsibilities cast upon them by the
  regulator and in turn they would be acting as
  extended arms of the Ministry.

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Conclusion

• A synergy between hardware (systems and
  structures) and software (values) in
  organisational culture of companies is possible
  if the top management, Board of Directors and
  executives follow walk the talk in value based
  governance.
• Complying with good governance practices should
  not be regarded as a regulatory requirement but
  rather as an opportunity and value proposition
  for organisations.

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• Have the courage to say no. Have the courage
  to face the truth. Do the right thing because it
  is right. These are the magic keys to living
  your life with integrity
• W.Clement Stones

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