It is crucial to adhere to secretarial standards in the meeting’s processes and in topics related to them since company law provisions are growing stricter and ROCs are being more vigilant. Secretarial Standard 1 serves as a reference for conducting the Board Meeting in accordance with the Company Act, 2013 regulations. The provisions of Secretarial Standard-1 on Board Meetings have been as simply stated as possible in this article by Legal Window’s experts.
Short Glimpse
ICSI was the world’s first professional organization to begin the process of developing Secretarial Standards for the integration, harmonization, and standardization of corporate secretarial procedures. With the help of ICSI, the Worldwide Federation of Company Secretaries (IFCS) agreed to establish an International Secretarial Standards Board, which will develop international secretarial standards to extend good corporate governance discipline beyond national lines.
The Act, having recognized Secretarial Standards, initially prescribed two Standards, namely the Standard on Board Meetings (SS-1) and the Standard on General Meetings (SS-2) (SS-2). The Act requires that every corporation follow both secretarial requirements, and any noncompliance will result in penalties. To be completely compliant with the Companies Act, about nine lakh operating companies in India would have to conform to these Secretarial Standards. These guidelines would facilitate conducting business and improve governance.
Meaning of Secretarial Standard 1
In accordance with Section 118(10) of the Companies Act, 2013 the Institute of Company Secretaries of India (ICSI) has released Secretarial Standard 1. (Act). The Secretarial Standards Board (SSB), which was established by the ICSI in the year 2000, develops secretarial standards and establishes a set of guidelines for calling and conducting board meetings (including committee meetings) and other related events.
The secretarial standards are a set of principles that companies are supposed to embrace and adhere to when carrying out their corporate responsibilities, resulting in greater corporate governance. The Board of Directors is responsible for ensuring appropriate, timely, and adequate compliance with the terms of the Act, and they are professionally aided by Company Secretaries. The Institute of Company Secretaries of India (ICSI) noticed divergent secretarial practices over time while regulating the profession of the Company Secretary and felt the need for integration, harmonization, and standardization of divergent secretarial practices and established the Secretarial Standards Board (SSB) in 2000.
It is a unique and beneficial step, and ICSI has formed such a Board for the first time in the history of the business sector worldwide. The SSB is made up of experienced company secretaries representing companies as well as practicing company secretaries, as well as representatives from regulators, other professional organizations, and other chambers.
Scope of Secretarial Standard 1
The following is the scope of Secretarial Standard 1:
Applicability of Secretarial Standard 1
- The Board of Directors meetings
- Committee of the Board meetings
Non-Applicability of Secretarial Standard 1
- One Person Company (or “OPC”) with a board that only has one director.
- Companies have a license under Section 8 of the Companies Act, 2013.
- Such class(es) of corporations as the Central Government may be exempt via the notice, such as IFSC Public Company and IFSC Private Company
SS – 1 is in accordance with the Act’s provision. However, the Act’s provisions must take precedence if a Standard or a portion of it becomes incompatible with the Act as a result of later amendments to the Act.
If formed under the Act, companies engaged in the generation or supply of energy, banking companies, insurance companies, and companies subject to any special acts are also subject to SS-1. However, if the terms of these Special Acts, which apply to these companies and include the Banking Regulation Act, 1949, the Insurance Act, 1938, etc., conflict with SS-1, the provisions of those Special Acts must take precedence.
The Need for Secretary Standards
A question about the establishment of Secretarial Standards is why it took so long. It undoubtedly indicates a consistent shift in mentality toward the acknowledgment of business secretarial function. According to the new rule, all listed and unlisted companies with a paid-up share capital of at least five crore rupees must have a full-time company secretary. Secretarial audits are now required for larger corporations. Many of the paperwork needed by law to be filed by companies may still be approved by a company secretary in practice.
Also, there is a growing understanding among Indian and international investors that it is preferable to invest in companies that respect transparency and appreciate the need of adhering to applicable laws, regulations, and good practices. Secretarial tasks have also gained importance in this environment.
Given the ever-increasing need to increase corporate governance, there is an urgent need to ensure adequate processes and procedures are followed. Corporate Governance reports are now required to be included in yearly reports of publicly traded corporations. In light of the foregoing, there is an obvious necessity to implement Secretarial Standards.
Section 118(10) of Companies Act, 2013 requires the ICSI-specified Secretarial Standards to be followed at General Meetings and Board Meetings. The adoption of Secretarial Standards by corporations will have a significant influence on the quality of their secretarial activities.
Secretary Standards’ Benefits
The business sector’s acceptance of the Secretarial Standards will have a significant influence on the quality of secretarial procedures used by companies, making them comparable to the finest practices in the world.
- It leads to an improvement in the quality of secretarial procedures used by businesses.
- It improves corporate governance and leads to more transparency in Board Meeting processes, particularly for private companies; and
- It minimizes litigation. Many lawsuit situations arise from disagreements that arise as a result of Board Meeting notifications not being received, the agenda being introduced without appropriate warning, and so on.
- It boosts the trust of investors who wish to invest in Private Limited enterprises, such as Private Equity players and overseas investors. Many private equity investors have already praised this decision.
Why was Secretarial Standard 1 created together with other Standards?
This was done to create more clarity, encourage good governance practices, and guarantee that businesses across the nation adhere to consistent practices.
Section 118(10) of Companies Act, 2013 requires the ICSI-specified Secretarial Standards to be followed at General Meetings and Board Meetings. The adoption of Secretarial Standards by corporations will have a significant influence on the quality of their secretarial activities.
Secretarial Standard-1 on Board Meetings
The Secretarial Standard on Board Meetings, which must now be followed, now includes precise practices and procedures, primarily concerning the following:
- Who may convene the meeting
- Time, place, and mode of holding such meeting
- Meeting notice and agenda
- Meetings of Board Committees and independent directors
- Quorum
- Attendance at meetings
- Directors’ participation in a meeting via electronic mode
- Chairman of board or committee meetings
- Procedure for passing board resolutions at board meetings or by circulation
For a better understanding of our reader we have tried to simplify and incorporated the concept of Secretarial Standard-1 on Board Meetings SS-1, in a tabular form, which is as follows:
Who Can Convene a Board Meeting |
|
Notice Shall be issued by
|
|
Period of Notice |
|
Adjournment of the Meeting |
|
Day, Time, Place | Any day, at any time, and anywhere |
To whom Notice of the meeting will be given |
|
Mode of Sending Notice
(Including Agenda and Notes on Agenda) |
|
Address of Sending Notice
(Including Agenda and Notes on Agenda)
|
|
Content of Notice
|
|
the business which is in the nature of Unpublished Price Sensitive Information |
|
Participation through Electronic Mode: |
|
Meeting conducted at a
shorter Notice |
|
Frequency of Meetings |
|
Quorum |
|
Leave of absence |
|
Chairman | Board Meeting Schedule:
Commissions’ Meetings:
|
Penalties for not adhering to Secretarial Standard-1 on Board Meetings
If any failure to comply with the provisions of Section 118 occurs, the company will be fined 25,000/- (Rupees Twenty-Five Thousand) and each officer of the business would be fined Rs. 5,000/-. (Rupees Five Thousand). Section 205(1) (b) requires the Company Secretary to ensure that the company follows the appropriate Secretarial Standards.
Endnote
Secretarial Standards will instill huge trust in the eyes of investors, particularly fund managers and foreign investors, who are worried about excellent governance standards and sound processes. This will result in more finance flowing into India, more projects, and increased modernization and expansion. At the same time, the Board of Directors would be more transparent and accountable. With strong and dependable corporate decision-making procedures, these standards will improve investor trust and assist the corporate world in realizing the Prime Minister’s agenda — ‘Make in India’ and ‘ease of doing business by giving a baseline on good governance. Many corporations were voluntarily adopting secretarial standards and disclosing compliance in their annual reports.
Connect to Legal Window, if you are facing any issue regarding the Secretarial Standard-1 on Board Meetings. Our Experts would be Happy to Help!
Neelansh Gupta is a dedicated Lawyer and professional having flair for reading & writing to keep himself updated with the latest economical developments. In a short span of 2 years as a professional he has worked on projects related to Drafting, IPR & Corporate laws which have given him diversity in work and a chance to blend his subject knowledge with its real time implementation, thus enhancing his skills.
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