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SS-6 Secretarial Standard on Transmission of Shares and Debentures:

Realizing the divergent practices involved in the transmission of shares and debentures and the difficulties faced by both the companies and the investors, this Secretarial Standard intends to lay down principles in relation to the documentation, verification of legal claimants in case of physically and electronically held shares as well as smooth functioning of the process. The Standard interalia deals with situations where shares are singly or jointly held, nominee has been appointed, shareholder has died intestate, etc.

The word “transmission” means devolution of title to Shares otherwise than by transfer. On transmission of Shares, the person to whom the Shares are transmitted becomes the registered shareholder of the company and is entitled to all rights and subject to all liabilities attached to the Shares. In case the deceased held Shares in more than one company, the legal heir(s)/Nominee has to correspond with each of the companies by submitting relevant documents, along with the share certificates to effect transmission of Shares. In case of dematerialised holdings, the formalities for transmission of all securities can be completed by submitting the documents required by the Depository Participant. This Standard applies to Transmission of Shares held by individual shareholders in physical mode.

Transmission of Shares should be effected by the company on receipt of intimation of death of a Member and on production of necessary documents, such as:

(i) Death certificate;
(ii) Request for transmission signed by the Legal Heirs/Legal Representatives/Claimants with their specimen signature;
(iii) Succession Certificate or Letter of Administration or Probate of Will;
(iv) Original share certificates;
(v) Orders of the Court or of competent authority, if applicable;
(vi) Permission under the Foreign Exchange Management Act, 2000, if applicable.

SS-7 Secretarial Standards on Passing Resolutions by Circulation:

Though decisions relating to the policy and operations of the company are arrived at meetings of the Board held periodically, it may not always be practicable to convene a meeting of the Board to discuss matters on which decisions are needed urgently. In such circumstances, passing of resolution by circulation can be resorted to. The Act requires certain business to be approved at meetings of the Board only. However other business that does not require detailed discussion or urgent decisions can be approved by means of resolutions by circulation, if there is a provision in the Articles to pass a resolution by circulation.

This Secretarial Standard seeks to lay down a set of principles for passing of resolutions by circulation.

 Chairman of the Board or the managing director or any other director if there is no chairman or managing director should decide whether the approval of the Board for a particular business should be obtained by means of a resolution by circulation.
 A resolution proposed to be passed by circulation should be sent in draft form, together with the necessary papers, individually to all the directors or, in the case of a Committee to all the members of the Committee, at the same time.
 Each business proposed to be passed by way of resolution by circulation should be explained by a note setting out the details of the proposal and the draft of the resolution proposed.
 The draft of the resolution to be passed and the necessary papers should be circulated by hand, or by post, or by facsimile, or by email or by any other electronic mode.
 The resolution is deemed to have been passed on the date on which it is approved by the majority of the Directors entitled to vote on the resolution other than interested directors.
 Resolutions passed by circulation should be noted at the next meeting of the Board or Committee, as the case may be, and the decision recorded in the minutes of such meeting.
 Passing of resolution by circulation should be considered valid as if it had been passed at a duly convened meeting of the Board or of the Committee.

SS-8 Secretarial Standards on Affixing of Common Seal:

This Secretarial Standard seeks to lay down a set of principles for affixing the common seal of the company.

Common seal of the company has a very critical importance in the functioning of the company. It is the signature of the company to any document on which it is affixed and binds the company for all obligations undertaken in the document. The Act requires affixation of the common seal on certain documents, share certificates and share warrants issued by the company.

Briefly the Secretarial Standards provides for the following:

 Common seal means the metallic seal of a company which can be affixed only with the approval of the Board of directors of the company.
 It should be adopted by a resolution of the Board and its impression should be made part of the minutes of the meeting in which it is adopted.
 The Common Seal should be kept in the custody of the director or the company secretary or any other official as authorized by the Board.
 The person affixing the official seal shall sign and write on deed or other instrument, the date and place at which it is affixed.
 A company shall have only one common seal. The Act provides that from the date of incorporation mentioned in the certificate of incorporation, the company shall have a common seal. The Articles of Association provides the procedure relating to affixing of common seal.
 Every company should maintain a register containing particulars of documents on which the official seal of the company has been affixed.

SS-9 Secretarial Standards on Forfeiture of Shares:

This Standard seeks to lay down a set of principles for forfeiture of both equity and preference shares arising from non-payment of calls. On forfeiture of shares the member loses the amount paid thereon and his interest in the ownership of the shares. In today’s fiercely growing economy and the ever increasing need for good corporate governance in India Inc, it would not be surprising to see many more Secretarial Standards being introduced and all of them being made mandatory.

 The Articles should contain a provision for forfeiture of shares.
 Forfeiture of shares requires approval of the Board in a duly convened meeting.
 If a call on the shares, together with interest accrued thereon, in accordance with the terms of issue of the shares, remains unpaid after the day appointed for payment thereof, the company should serve a notice on the shareholder requiring payment of the call remaining unpaid, together with interest which may have accrued.
 If the amount payable specified in the notice was not paid within the stipulated date, any share in respect of which the notice has been given may at any time thereafter be forfeited.
 The Board at a duly convened meeting should approve the forfeiture and authorize any director or manager or the secretary to make a declaration of such forfeiture. The date of approval by the Board is the date of forfeiture.
 The Board can annul the forfeiture by passing a resolution before the reissue of forfeited shares. On annulment, the name of the member should be restored in the register of members for those shares.
 A person whose shares have been forfeited would cease to be a member of the company, in respect of those shares, remain liable to pay to the company all moneys, which at the date of forfeiture were payable by him to the company in respect of the shares.
 A forfeited share may be reissued or otherwise disposed of on such terms and in such a manner as the Board may think fit.
 On reissue the transferee should be registered as the holder of the share.

SS-10 Secretarial Standard on Board’s Report:

The Companies Act, 1956 requires the Board of Directors of every company to present annual accounts to the shareholders along with its report, known as the “Board’s Report”. The Board’s Report is the most important means of communication by the Board of Directors of a company with its stakeholders. The Board’s Report should, so far as is material for the appreciation of the state of the company’s affairs by its members, deal with any changes which have occurred during the financial year. The Board’s Report should cover wide spectrum of information that stake holder’s need, in addition to financial data, to understand fully the prospects of the company’s business and the quality of the management.

Generally, information relating to finance raised during the year, utilization of funds, purpose for which it was raised, repayment of public deposits, liability for unclaimed deposits and long term agreements including with employees which have substantial financial impact are included in the Board’s Report. The Report should also contain the information and explanations on every reservation, qualification or adverse remarks contained in the auditor’s report. The Board’s Report of a listed company should include a statement on compliance of corporate governance norms within the company and also a report covering management discussion and analysis (MDAR).

Briefly the Secretarial Standard provides for the following:

 The Board’s Report should be attached with balance sheet of the company
 as per Standard, the disclosure in the Board’s Report are:
• State of affairs of the company
• material changes and commitment, if any, affecting the financial position of the company
• amount, if any, proposed to carry to any reserves
• amount, if any, recommended by way of dividend per share
• directors responsibility statement
 the report should be considered and approved at a duly convened meeting of the Board
 the report and any addendum thereto should be signed by the chairman of the Board, if any or by not less than two directors of the company, one of whom shall be a managing director, where there is one
 the report shall be collective responsibility of all the directors though the report may have been approved only by a majority of directors.

Compiled & Contributed by CS Professional Student Kumari Sindhu C


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