Introduction:
Due to COVID-19 outbreak and lockdown situation prevailing in India, various provisions of the Companies Act, 2013 (“Act”) and rules made there under have already been relaxed by the Ministry of Corporate Affairs (“MCA”) for ease of compliance by the stakeholders. The MCA in particular, has issued
(i) Circulars bearing No. 1/32/2013-CL-V dated 19th March 2020 and bearing No. 11/2020 dated 24th March 2020 relaxing the various requirement for holding of board meetings;
(ii) Circulars bearing No. 14/2020 dated 8th April 2020 and bearing No. 17/2020 dated 13th April 2020 allowing companies to hold Extraordinary General Meetings (“EGMs”) through video conferencing (“VC”) or through other audio-visual means (“OAVM”) complemented with e-voting facility/simplified voting through registered emails, without requiring the shareholders to physically assemble at a common venue.
Any relaxation granted by the MCA from the compliance of provisions of Board and General Meetings under the Act will automatically and consequentially apply to Secretarial Standards as the case may be and the relaxed provisions of the Act will prevail. Pursuant to the relaxations granted by the MCA under the aforesaid circulars, a few provisions of Secretarial Standards on Meetings of the Board of Directors (“SS-1”) and Secretarial Standards on General Meetings (“SS-2”) also stand relaxed. In light thereof, the Institute of Company Secretaries of India (“ICSI”) on 3rd April 2020 and 15th April 2020 has issued clarifications/guidance on applicability of SS1 and SS2 (“Clarifications”).
Facets of the Clarifications issued:
I. Clarifications in respect of SS-1
1. Subject Matter:
Holding of Board meetings under Section 173(2) of the Act read with Rule 4 of the Companies (Meetings of Board and its Powers) Rules, 2014.
Position before relaxations granted by the MCA:
Paragraph 1.2.3 of SS-1 states that directors are not allowed to participate in such Board meetings through electronic modes, i.e., physical presence of the directors is mandatory for certain restricted items.
Present Position in light of relaxations given by the MCA:
Such meetings may now be conducted through VC or OAVM by duly ensuring compliance with Rule 3 of the Companies (Meetings of Board and its Powers) Rules, 2014.
2. Subject Matter:
Mode of delivery of Notice for Board meetings.
Position before relaxations granted by the MCA:
Paragraph 1.3.1 of SS-1 provides that the notice of such meeting to the director will be as per his preferred mode of delivery.
Present Position in light of relaxations given by the MCA:
The company may choose an expedient mode of delivery in sending notices, including through email to the concerned directors. Wherever references have been made to physical mode of delivery, it would be sufficient compliance if notice, agenda and minutes of board meetings and committee meetings are served through email.
3. Subject Matter:
Mandatory requirement of holding meetings of the Board of the companies within the prescribed interval.
Position before relaxations granted by the MCA:
Paragraph 2.1 of SS-1 provides that the maximum interval between two consecutive meetings should not exceed 120 (One Hundred and Twenty) days.
Present Position in light of relaxations given by the MCA:
The gap between two consecutive meetings of the Board may extend to 180 (One Hundred and Eighty) days till the next two quarters, instead of 120 (One Hundred and Twenty) days.
4. Subject Matter:
Meetings of Committees.
Position before relaxations granted by the MCA:
Paragraph 2.2 of SS-2 requires that the members of the committee shall meet as often as necessary subject to the minimum number and frequency prescribed by any law or authority or as stipulated by the Board.
Present Position in light of relaxations given by the MCA:
For the Financial Year 2019-2020, if the members of the committee of a company are not able to hold such a meeting, the same shall not be viewed as a violation.
5. Subject Matter:
Meeting of Independent Directors.
Position before relaxations granted by the MCA:
Paragraph 2.3 of SS-1 requires the Independent Directors of the company to hold at least one meeting in a Financial Year.
Present Position in light of relaxations given by the MCA:
For the Financial Year 2019-2020, if the Independent Directors of a company are not able to hold such a meeting, the same shall not be viewed as a violation.
6. Subject Matter:
Manner of handling unsigned documents referred in Board meetings, however not a part of the notes/agenda of the meeting.
Position before relaxations granted by the MCA:
Paragraph 7.3.3 of SS-1 provides that wherever the decision of the Board is based on any unsigned documents (including reports or notes or presentations tabled or presented at the meeting), which were not part of the notes/agenda and are referred to in the Minutes, such documents shall be identified by initialling by the Company Secretary or the Chairman.
Present Position in light of relaxations given by the MCA:
If such a situation arises, while conducting a Board meeting through VC or OAVM, then the Company Secretary or the Chairman shall identify such documents by initialling them once the situation normalises.
7. Subject Matter:
Manner of recording minutes of the Board meeting.
Position before relaxations granted by the MCA:
Paragraph 7.6.4 of SS-1 states that within fifteen days of signing of the Minutes, a copy of the signed Minutes, certified by the Company Secretary or, where there is no Company Secretary, by any Director authorised by the Board, shall be circulated to all the Directors as on the date of the meeting.
Present Position in light of relaxations given by the MCA:
Since all the meetings are now taking place through VC or OAVM, the company may not be able to record/print the final Minutes in the Minutes book maintained for this purpose at the registered office and get the same signed physically by the Chairman. In such cases, the company should record and acknowledge/sign the Minutes digitally by the Chairman, and the same can be recorded and signed physically once the situation normalises.
II. Clarifications in respect of SS-2
1. Subject Matter:
Mode of delivery of Notice for General Meetings.
Position before relaxations granted by the MCA:
Paragraph 1.2.2 of SS-2 states notice shall be sent to members by registered post or speed post or courier or e-mail and not by ordinary post in the following cases:
(a) if the company provides the facility of e-voting; or
(b) if the item of business is being transacted through postal ballot.
Present Position in light of relaxations given by the MCA:
In case of general meetings, instead of sending notices through physical mode of delivery, it would be sufficient compliance if such notices are sent only through e-mail to the members whose emails are registered with the company or with the depository participant/depository, subject to compliance of other requirements stated in the MCA circulars.
Please note: This relaxation also applies to paragraphs 8.5 and 16.4.1 of SS-2, dealing with sending notices in case of e-voting and postal ballot respectively.
2. Subject Matter:
Particulars of notice.
Position before relaxations granted by the MCA:
Paragraph 1.2.4 of SS-2 states that the notice shall specify the day, date, time and full address of the venue of the meeting including the route map.
Present Position in light of relaxations given by the MCA:
The requirement of SS-2 to mention route map need not be stated in the notice of the meeting if the meeting is convened in accordance with the MCA circulars.
However, the notice must state the venue of the meeting and also state that if the meeting is conducted through VC or OAVM, such meeting shall be deemed to be conducted at such venue.
3. Subject Matter:
Inspection of documents.
Position before relaxations granted by the MCA:
As per paragraph 1.2.5 of SS-2, where reference is made to any document/agreement, the Memorandum of Association or Articles of Association, the explanatory statement must mention that such documents are available for inspection in physical or electronic form during specified business hours at the Registered Office, Head Office, Corporate Office, and at the Meeting.
Present Position in light of relaxations given by the MCA:
For the purposes of SS-2, it is sufficient if such documents are available for inspection through e-mode, and guidelines for such inspection must be given in the notice.
4. Subject Matter:
Documents to accompany the notice of the meeting.
Position before relaxations granted by the MCA:
Paragraph 1.2.10 of SS-2 states that the notice shall be accompanied by an attendance slip and a proxy form with clear instructions for filling, stamping, signing, and depositing the proxy form.
Present Position in light of relaxations given by the MCA:
Since proxy is not allowed when a meeting is conducted through VC or OAVM, the requirement of attendance slip and proxy form does not apply to meetings convened as per the MCA Circular dated 8 April 2020.
5. Subject Matter:
Quorum.
Position before relaxations granted by the MCA:
Members need to be personally present at a meeting to constitute the quorum.
Present Position in light of relaxations given by the MCA:
Since meetings will be conducted through VC or OAVM, physical presence will not be required, and compliance will be sufficient if the meeting is held in accordance with MCA Circular dated 8 April 2020.
6. Subject Matter:
Appointment of Chairman.
Position before relaxations granted by the MCA:
Paragraph 5.1 of SS-2 provides the manner of appointment of the Chairman for general meetings.
Present Position in light of relaxations given by the MCA:
For meetings held through VC or OAVM, the manner of appointment of the Chairman must follow the MCA circulars, not paragraph 5.1 of SS-2.
7. Subject Matter:
Postal Ballot Form.
Position before relaxations granted by the MCA:
Paragraph 6.6.3 states that in case of postal ballot, the letter of appointment/authorisation must be submitted along with the physical ballot form.
Present Position in light of relaxations given by the MCA:
For SS-2 compliance, it is sufficient if such appointment/authorisation letters and ballot forms are submitted through e-mail.
8. Subject Matter:
Manner of Voting.
Position before relaxations granted by the MCA:
Paragraph 7.3 provides voting by show of hands.
Paragraph 7.4 provides voting by poll along with the procedure.
Present Position in light of relaxations given by the MCA:
For EGMs held through VC or OAVM, the manner of voting shall be as per the MCA circulars and not the procedures laid down in SS-2.
9. Subject Matter:
Declaration of result.
Position before relaxations granted by the MCA:
Paragraph 8.6.2 of SS-2 states that the result of the voting with full details must be displayed for at least three days on the notice board at various offices of the company.
Present Position in light of relaxations given by the MCA:
It is sufficient if the result is declared and posted on the company’s website, if any.
This relaxation also applies to Paragraph 9.5.2 and Paragraph 16.6.2 of SS-2 (declaration of results of poll and postal ballot).
10. Subject Matter:
Particulars of notice where voting is through postal ballot.
Position before relaxations granted by the MCA:
Paragraph 16.4.3 states that the notice must specify day, date, time, and venue where results will be announced, mode of declaration, and website link where results will be displayed.
Present Position in light of relaxations given by the MCA:
If postal ballot is conducted as per MCA circulars, it is enough to provide the website link where the result will be declared instead of the physical venue.
11. Subject Matter:
Postage Prepaid Reply Envelope in case of Postal Ballot.
Position before relaxations granted by the MCA:
Paragraph 16.5.1 of SS-2 states that the postal ballot form shall be accompanied by a postage-prepaid reply envelope addressed to the scrutiniser.
Present Position in light of relaxations given by the MCA:
No need to submit a postage-prepaid reply envelope, as all correspondence will be via emails.
12. Subject Matter:
Minutes of the meeting.
Position before relaxations granted by the MCA:
Paragraph 17.4.1 requires minutes to be entered in the Minutes Book within 30 days of conclusion of the meeting. Paragraph 17.5.1 requires the minutes to be signed by the Chairman/Director within 30 days.
Present Position in light of relaxations given by the MCA:
Since meetings are held through VC/OAVM, the company may not be able to print minutes at the registered office or obtain physical signatures. The minutes may be recorded and digitally signed by the Chairman, and the physical signing can be done later once the situation normalises.
Conclusion:
In the current nationwide lockdown scenario and threat posed by COVID-19, the clarifications/ guidance provided by the ICSI will definitely ease the difficulties faced by the companies in conducting meetings (whether Board or otherwise) and further, help them to be compliant with the Act, the rules made thereunder and the Secretarial Standards.
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