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Club CEO

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BRIEF ANALYSIS OF SECRETARIAL STANDARDS 1 to 5

SS-1 Secretarial Standard on Meetings of the Board of Directors:

The standard seeks to prescribe a set of principles for convening and conduct of Meetings of the Board of Directors and matters related thereto.

The principles enunciated in this Standard for meetings of the Board of Directors are equally applicable to meetings of Committees, unless otherwise stated herein or otherwise stipulated by any other applicable guidelines, Rules or Regulations. Directors are in a fiduciary position vis-à-vis the company and, to that extent, they are also deemed to be trustees of the properties and assets of the company. They owe a duty to the shareholders and should exercise care, skill and diligence in the discharge of their functions and in the exercise of the powers vested in them. All the powers vested in Directors are exercisable by them only collectively. As an individual Director, no Director has the power to act on behalf of the company unless such powers have been delegated to him by the Board.

Briefly, the Secretarial Standard provides for the following, amongst others:

 The 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.
 Notice should be given to all Directors, whether in India or abroad and may be sent by hand, post, facsimile or e-mail. Where Notice is given by electronic mode, a hard copy of the Notice should also be sent by post
 The Notice of a Meeting should be given even when Meetings are held on pre-determined dates or at pre-determined intervals.
 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.
 Leave of absence should be granted to a Director only when a request for such leave has been communicated to the Secretary or to the Board or to the Chairman.
 To ascertain the ‘will of the majority’, resolutions to be passed by circulation should be sent to all Directors, whether in India or abroad.
 The date on which the resolution sent for passing by circulation shall be deemed to have been passed.
 The annual accounts of a company should be approved at a Meeting of the Board and should not be approved by means of a Resolution passed by circulation.
 In the case of a listed company, if there is any material variance should be discussed and approved at a Meeting of the Board and not by means of a Resolution passed by circulation.
 Within fifteen days from the date of the Meeting of the Board or Committee or of an adjourned Meeting, the draft Minutes thereof should be circulated to all the members of the Board or the Committee, as the case may be, for their comments.
 The Minutes of proceedings of a Meeting should be entered in the Minutes Book within thirty days from the conclusion of the Meeting.
 As decisions taken by the Board are collective decisions, Standard provides that the names of the Directors who dissented or abstained from the decision should be recorded.
 The Minutes of all Meetings should be preserved permanently.

SS-2 Secretarial Standard on General Meetings:

The standard seeks to prescribe a set of principles for convening and conduct of General Meetings and matters related thereto.

The decision-making powers of a company are vested in its Members and the Board of Directors. Such powers are exercisable through Meetings of the Members and the Board respectively. Except where the law expressly provides that certain powers of a company are to be exercised only by the company in General Meeting, the Board is entitled to exercise all the powers of the company. Although Members acting through the forum of a General Meeting exercise ultimate check over a company, they should not interfere with the exercise by the Board of the powers which are vested in the Board. Every company is required to hold, every year, a Meeting of its Members called the Annual General Meeting and may also hold any other meeting, called an Extra-Ordinary General Meeting, as and when required or on the requisition of Members. The business to be transacted at an Annual General Meeting may consist of items of ordinary business as well as special business. The items of ordinary business specifically required to be transacted at an Annual General Meeting should not be transacted at any other General Meeting.
Every public company having a share capital is also required to hold a Statutory Meeting. If a company defaults in holding its Annual General Meeting in any year, any Member of the company has a statutory right to approach the prescribed authority to direct the company to hold the Meeting. A company may also hold Meetings of its Members, or class of Members or debenture holders or creditors under the directions of the Court or the Company Law Board or any other prescribed authority, and any such Meeting shall be governed by the Articles or by the rules, regulations and directions prescribed for the conduct of any such Meeting.

Some of the salient features of this standard are the following:

 Notice of every General meeting should be given to every member.
 All directors of the company should attend all meetings of shareholders and be available to reply to shareholders queries.
 The Chairman should explain the objective and implication of each resolution, before the resolution is put to vote
 The Standard details in depth with the concept of voting by poll
 In case of listed companies with over 5000 members, the result of the poll should be published in a leading newspaper circulating in the neighbourhood of the registered office of the company
 Annual Report of companies should disclose the particulars of all general meetings held during the last three years.

SS-3 Secretarial Standard on Dividend:

The standard seeks to prescribe a set of principles in relation to declaration and payment of Dividend and matters incidental thereto or connected therewith.
Dividend is a return on the investment made in the share capital of a company, as distinct from the return on borrowed capital, which is in the form of interest. For the purposes of this Standard, capitalization of profits in the form of bonus shares is not Dividend. The term “Dividend” has been inclusively defined in the Companies Act, 1956, to the effect that it includes Interim Dividend. The Act neither specifically defines the term Dividend nor makes any distinction between interim and final Dividend.

The principles enunciated in this Standard for Dividend relate to Dividend under the Act and are governed by the provisions of Sections 205, 205A, 205B, 205C, 206, 206A, 207 of the Act and also by the Companies (Transfer of Profits to Reserves) Rules, 1975, the Companies (Declaration of Dividend out of Reserves) Rules, 1975 and the Investor Education and Protection Fund (Awareness and Protection of Investors) Rules, 2001. The provisions of Section 27 of the Securities Contracts (Regulation) Act, 1956 are also applicable as are, in the case of listed companies, the requirements of the Listing Agreement. Any specific provision relating to Dividend in the Income Tax Act, 1961, and any other statute would, in addition, be applicable as set out in that statute/legislation. The principles set out herein relate both to equity as well as preference share capital in accordance with the provisions of Sections 85 and 86 of the Acts. While the principles generally relate to final Dividend, certain principles also apply to Interim Dividend declared by the Board of Directors. Further, the principles set out herein are in respect of Dividend as it relates to a going concern. This Standard does not deal with Dividend of companies under liquidation, for which reference has been made in the Guidance Note on the subject.

Some of the salient features of this standard are the following:

 Dividend can be declared out of free reserves and surplus in the profit and loss account of the company.
 Interim dividend may be declared after the board has considered the interim financial statements of the period for which interim dividends is to be declared after taking into account depreciation for the full year and arrears of depreciation.
 Interim dividend should not be declared out of reserves
 Calls in arrears and any other sum due from a member may be adjusted against dividend payable to the member
 Dividend, whether interim of final, once declared becomes a debt and should not be revoked
 Unpaid /Unclaimed Dividend should be transferred to the Investor Education and Protection Fund on expiry of seven years from the date on which they were transferred to unpaid dividend account.

SS-4 Secretarial Standard on Registers and Records:

This Secretarial Standard seeks to prescribe a set of principles in relation to various registers and records including the maintenance and inspection thereof.

Under the Companies Act, 1956, a company is required to maintain certain registers and records. There are some other registers and records, the maintenance of which are not statutorily required but is essential for the smooth, efficient and systematic functioning of the company. Some of the registers and records are required to be kept open by a company for inspection by directors and members of the company and by other persons, including creditors of the company. The right to inspect such registers and records is an enforceable right. Companies are also required to allow extracts to be made from certain documents, registers and records and to furnish copies of certain documents, registers and records on demand by a member or by any other specified person. Government authorities have the right of access to all registers and records. Non-compliance with the provisions relating to maintenance, preservation and inspection of registers and records, to the extent they are statutory, creates punishable offences and leads to various penalties on the company, the directors and every officer in default.
The Information Technology Act, 2000, permits the maintenance of registers and records in electronic mode. Such registers and records should be maintained in accordance with the provisions of the said Act.

The following are some of the registers which the Standard deals with:
 Register of investments not held in the name of the company
 Register of buy back of securities
 Register of charges
 Register of index of members
 Register of index of debenture holders
 Register of contracts in which directors are interested
 Register of inter corporate loans and investments
 Register of proxies
 Register of transfer and transmission of debentures.

SS-5 Secretarial Standard on Minutes:
Minutes of meetings are vital record in itself; which describes what happened in a company and when. Being conclusive in nature, this record plays a very vital role in the company functioning and also as an evidence of happenings in a company.

Therefore minutes must contain a fair and correct summary of the discussions and decisions taken at the meeting. This Secretarial Standard prescribes a set of principles for maintaining, recording, signing, dating, inspecting and preserving such minutes so as to ensure that the minutes record the true proceedings of the meetings and are accessible for future reference.
The expression “minutes” means a brief summary of the proceedings of a meeting. The Company Secretary or authorized official of the company should record the proceedings of the meetings. This Standard applies to Minutes of Meetings governed by the Act. The principles enunciated in this Standard are also applicable to class meetings of Members, debenture holders and creditors. These principles may also be applicable to any meeting convened on the directions of the Court or the Company Law Board or any other prescribed authority unless otherwise directed.

Some of the salient features of this standard are the following:

 Minutes should be recorded in books maintained for that purpose.
 A separate Minutes Book should be maintained for each type of Meeting.
 The pages of the Minutes Book should be consecutively numbered.
 Minutes should not be pasted or attached to the Minutes Book.
 Minutes Books should be kept at the Registered Office of the company. Minutes of the Board and Committee Meetings may, with the approval of the Board, be kept at the office where such Meetings are generally held.
 Minutes should begin with the number and type of the Meeting, name of the company, day, date, venue, time of commencement and conclusion.
 Minutes should record the names of the directors and the Company Secretary present at the Meeting.
 Minutes should contain in unambiguous terms a fair and correct summary of the proceedings of the Meeting.
 Minutes should be written in third person and past tense.
 Each item of business taken up at the Meeting should be appropriately numbered.
 Minutes should be entered in the Minutes Book within thirty days from the date of conclusion of the Meeting.
 The date of entry in the Minutes Book should be recorded.
 Minutes, once entered in the Minutes Book, should not be altered.
 Within fifteen days from the date of the conclusion of the Meeting of the Board or Committee the draft Minutes thereof should be circulated to all the members of the Board or the Committee, as the case may be, for their comments.
 Minutes of the Meeting of the Board or Committee should be signed and dated by the Chairman of the Meeting or the Chairman of next Meeting.
 Directors are entitled to inspect Minutes of all Meetings. Members are entitled to inspect the Minutes of all General Meetings.
 Minutes of all Meetings should be preserved permanently.


Compiled & Contributed by CS Professional Student Kumari Sindhu C

http://www.csstudentsclub.com

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