Gist of Key Points To Be Noted - IN SS -2 - General Meetings

SECRETARIAL STANDARD ON GENERAL MEETINGS – SS2

Overview:

Secretarial Standard on General Meeting issued by the Council of the ICSI and approved by Central Government is to be mandatorily adhered by all the Companies as per the Provision of Section 118 (10) of Companies Act, 2013.

The Corporates are now required to follow stringent norms such as providing detailed explanation on implications of particular resolutions while conducting shareholder’s meetings.

Effective Date:

1^st July, 2015.

Secretarial Standards should be followed by all Companies on all General Meetings being held on 1^st July, 2015 or thereafter as the case may be.

Applicability:

All types of General Meetings (Members or Debenture-Holders or Creditors or Meetings called by CLB, NCLT or prescribed authority) of all Companies except OPC and class or classes of Companies exempted by the Central Government through notification.

New Insertions/Critical Points to Be Noted:

1.    Secretarial Standard provides the facility of sending the notice of general meeting through hand delivery or ordinary post for the companies which does not provide e-voting facility and postal ballot option in additions to other means as specified in “The Company (Management and Administration) Rules, 2014”.

      2.  Mandatory hosting of notice in the Website of the Company, if any available.

3.    To maintain the system of confirmation of the total number of recipients e-mailed and a record of each recipient to whom the Notice has been sent and copy of such record and any Notices of any failed transmissions and subsequent resending shall be retained by or on behalf of the company as ‘‘proof of sending’’.

4.    Notice shall contain complete particulars of the venue of the Meeting including route map and prominent land mark for easy location. In case of companies having a website, the route map shall be hosted along with the Notice on the website.

5.    If any proposed resolution contains any reference to document, contract, agreement, the Memorandum of Association or Articles of Association, the relevant explanatory statement shall state that such documents are available for inspection and such documents shall be so made available for inspection in physical or in electronic form during specified business hours at the Registered Office of the company and copies thereof shall also be made available for inspection in physical or electronic form at the Head Office as well as Corporate Office of the company, if any, if such office is situated elsewhere, and also at the Meeting.

6.    In case of appointment of Independent Directors, the justification for choosing the appointees for appointment as Independent Directors shall be disclosed and in case of re-appointment of Independent Directors, performance evaluation report of such Director or summary thereof shall be included in the explanatory statement.

7.    Quorum shall be present not only at the time of commencement of the Meeting but also while transacting business.

8.    One person can be an authorised representative of more than one body corporate. In such a case, he/she is treated as more than one Member present in person for the purpose of Quorum. However, to constitute a Meeting, at least two individuals shall be present in person.

9.    Secretarial Auditors or authorised representative (qualified) of Secretarial Auditors to attend the meeting.

10.  All Proxies received by the company shall be recorded chronologically in a register kept for that purpose.

11.  Every Resolution shall be proposed by a Member and seconded by another Member.

12.   Every company, which has provided e-voting facility to its Members, shall also put every Resolution to vote through a ballot process at the Meeting. A Proxy can vote in the ballot process.

13.   Based on the scrutiniser’s report received on Remote e-voting and voting at the Meeting, the Chairman or any other Director so authorised shall countersign the scrutiniser’s report and declare the result of the voting forthwith with details of the number of votes cast for and against the Resolution, invalid votes and whether the Resolution has been carried or not.

14.  The qualifications, observations or comments or other remarks on the financial transactions or matters which have any adverse effect on the functioning of the company, if any, mentioned in the Auditor’s Report shall be read at the Annual General Meeting and attention of the Members present shall be drawn to the explanations / comments given by the Board of Directors in their report.

15.  The qualifications, observations or comments or other remarks if any, mentioned in the Secretarial Audit Report issued by the Company Secretary in Practice, shall be read at the Annual General Meeting and attention of Members present shall be drawn to the explanations / comments given by the Board of Directors in their report.

16.  No gifts, gift coupons, or cash in lieu of gifts shall be distributed to Members at or in connection with the Meeting.

17.  A company may maintain its Minutes in physical or in electronic form with Timestamp. Every company shall, however, follow a uniform and consistent form of maintaining the Minutes. Any deviation in such form of maintenance shall be authorised by the Board.

18.  Minutes shall state, at the beginning of the Meeting, name of the company, day, date, venue and time of commencement and conclusion of the Meeting.

19.  Minutes shall record the names of the Directors and the Company Secretary present at the Meeting.

Specific Contents to form part of the Minutes of General Meeting as per SS- 2:

1.  Election of Chairman, if any shall be recorded.

2.  The fact that certain registers, documents, the Auditor’s Report and Secretarial Audit Report, as prescribed under the Act were available for inspection.

3.  Presence of Quorum.

4.  Number of Members present in the meeting including the representative.

5.  The number of proxies and the number of shares represented by them.

6.  The presence of the Chairmen of the Audit Committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee or their authorised representatives.

7.  The presence if any, of the Secretarial Auditor, the Auditors, or their authorised representatives, the Court/Tribunal appointed observers or scrutinisers.

8.  Summary of the opening remarks of the Chairman.

9.   Reading of qualifications, observations or comments or other remarks on the financial transactions or matters which have any adverse effect on the functioning of the company, as mentioned in the report of the Auditors.

10.  Reading of qualifications, observations or comments or other remarks as mentioned in the report of the Secretarial Auditor.

11.  Summary of the clarifications provided on various Agenda Items.

12.  In respect of each Resolution, the type of the Resolution, the names of the persons who proposed and seconded and the majority with which such Resolution was passed.

13.  In the case of poll, the names of scrutinisers appointed and the number of votes cast in favour and against the Resolution and invalid votes.

14.  If the Chairman vacates the Chair in respect of any specific item, the fact that he did so and in his place some other Director or Member took the Chair.

15.  The time of commencement and conclusion of the Meeting.

16.  In respect of Resolutions passed by e-voting or postal ballot, a brief report on the e-voting or postal ballot conducted including the Resolution proposed, the result of the voting thereon and the summary of the scrutiniser’s report shall be recorded in the Minutes Book and signed by the Chairman or in the event of death or inability of the Chairman, by any Director duly authorised by the Board for the purpose, within thirty days from the date of passing of Resolution by e-voting or postal ballot.

Responsibility of Person to Comply SS:

As per section of 205 of the Act, the function of the Company Secretary (CS) includes to ensure that the company complies with the applicable SS. This means that it would be the duty of the CS to ensure that SS relating to general and Board meetings or such other SS as may be specified by the ICSI, and approved by the Central Government (‘CG’) are complied with. Nevertheless, there would be many more SS which would be required to be complied with upon approval of the CG in the time to come.

Point of Deliberation

Section 118 states that every company shall observe SS. This means that irrespective of the criteria of capital, listing, turnover, profit etc., all companies are required to observe SS. On the other side, requirement of appointment of whole-time CS lies only with the listed companies and every other company whose paid-up capital is Rs.5 crores or more.  The questions that now arose is that who would be responsible to observe the SS in the companies those are not required to appoint whole-time CS.   There may be an argument that if the company is not required to appoint CS then the requirement of observing SS would not arise as compliance of SS is the function of CS. However, this argument would not sustain as section 118 requires all the companies to observe SS.

Our view is that in case of Companies in which mandatory appointment of Company Secretary is not required, in such a case, the Board may authorise any competent personnel/authority of the Company to oversee the Compliance of Secretarial Standards as of now, till such clarifications as may be received from the Ministry of Corporate Affairs.

Conclusion:

The intention of the legislatures to observe SS appears to be clear as it would oblige the companies to adopt uniform practices in conducting Board & general meetings, matter pertaining to placing agenda, finalisation of minutes etc.  Further, miniscule compliance and corporate governance is bound to increase tremendously once the companies, irrespective of capital, turnover, profit etc., start complying with the SS.

Compliance with the strict rules would help strengthen the corporate governance practices and help curb corporate misdoings would be ensured by the Company Secretaries.

These Secretarial Standards would also help boost the investor confidence, particularly the fund’s managers and overseas investors.

     

BY

     

CS K VINOTH

CS D HEM SENTHIL RAJ

csthenewera.blogspot.in

Procedural Aspects Involved In Inter Se Transfer - SEBI (SAST) Regulation, 2011

ACQUISITION OF SHARES OR VOTING RIGHTS PURSUANT TO INTER-SE TRANSFER AMONG QUALIFYING PARTIES UNDER SEBI(SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVER) REGULATIONS, 2011

OVERVIEW:

General Exemption from making an open offer:

According to Regulation 10(1) (a), acquisition pursuant to inter se transfer of shares among the qualifying parties are exempted from the obligation to make an open offer under regulation 3 and regulation 4.

Who are Qualifying Parties?

The qualifying parties are:

i)        Immediate relatives;

ii)       Persons named as promoters in the shareholding pattern filed by the target company in terms of the listing agreement or these regulations for not less than three years prior to the proposed acquisition;

iii)     A company, its subsidiaries, its holding company, other subsidiaries of such holding company, persons holding not less than 50% of the equity shares of such company, other companies in which such persons hold not less than 50% of the equity shares, and their subsidiaries subject to control over such qualifying parties being exclusively held by the same persons.

iv)     PACs for not less than 3 years prior to the proposed acquisition, and disclosed as such pursuant to filings under the listing agreement.

v)      Shareholders of a target company who have been PACs for a period of not less than 3 years prior to the proposed acquisition and are disclosed as such pursuant to filings under the listing agreement, and any company in which the entire equity share capital is owned by such shareholders in the same proportion as their holding in the target company without any differential entitlement to exercise voting rights in such company.

Conditions to be satisfied for availing the above general exemption:

a)      Acquirer to give prior notice of proposed acquisition (at least 4 working days prior to proposed acquisition) to stock exchanges where shares of the target company are listed (Regulation 10(5)).

b)      If the shares of the target company are frequently traded, the acquisition price per share shall not be higher by more than 25% of the Volume Weighted Average Price (VWAMP) for a period of 60 trading days preceding the date of issuance of notice to stock exchanges as per (a) above, as traded on the stock exchange where the maximum volume of trading in shares of the target company are recorded during such period.

If the shares of the target company are infrequently traded, the acquisition price shall not be higher by more than 25% of the price as per regulation 8(2)(c).

c)      The transferor and the transferee shall have complied with applicable disclosure requirements set out in chapter V.

What Regulations 8(2)(c) says:

In the case of direct acquisition of share or voting rights in, or control over the target company, and indirect acquisition of shares or voting rights in, or control over the target company where the parameters referred to in sub-regulation (2) of regulation 5 are met, the offer price shall be:

(c) The highest price paid or payable for any acquisition, whether by the acquirer or by any person acting in concert with him during the twenty six weeks immediately preceding the date of public announcement.

Rationale for Exemption of Inter-se Transfers:

The rationale for exempting inter se transfers among qualifying parties is spelt out by TRAC as under:

“Acquisitions arising out of inter se transfer of shares among qualifying parties as specified under the Regulations would be exempt from making an open offer. The nature and type of such qualifying parties has been spelt out with the underlying principle being that such transfers do not represent a typical acquisition carrying an economic value, which ought to result in providing an exit opportunity to all shareholders, The only circumstances where this principle has been deviated from is to permit transfer between co-promoters or persons acting in concert, who have been disclosed as such for at least three years, and that too only if the premium being paid to the exiting party is less than 25% of the VWAP over the 12 weeks period and subject to the parties having complied with all their disclosure obligations.”

PROCEDURAL CHECKLIST FOR ACQUISITION OF SHARES/VOTING RIGHTS THROUGH INTER-SE TRANSFER:

S.No	Particulars	Disclosure by	Disclosure to	Timeline
1	Disclosure under regulation 10(5) – Intimation to Stock Exchanges in respect of acquisition under Regulation 10(1)(a) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011	Promoter (Acquirer)	Stock Exchange	Intimation Disclosure to be filed with SE’s with at least 4 working days prior to the date of proposed acquisition.
2	The Delivery Instruction Slip duly signed by the seller to be submitted to the Depository Participant for the purpose of effecting the transfer of shares.	Promoter (Seller)	-NA-	On or after the 5th day of Notice to SE’s.
3	Disclosures under Regulation 10(6) – Report to Stock Exchanges in respect of any acquisition made in reliance upon exemption provided for in Regulation 10 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.	Promoter (Acquirer)	Stock Exchange	To be filed with SE’s within 4 working days from the date of acquisition of shares/voting rights.
4	Disclosure under Regulation 29(1) - Acquirer together with PAC acquires 5% or more in aggregate of the shares or voting rights of the target company (together with the existing shares or voting rights held by them)	Acquirer	Stock Exchange & Target Company	Within 2 working days of the receipt of intimation of allotment of shares or acquisition of shares or voting rights.
5	Disclosure under Regulation 29(2) - Acquirer together with PAC holding 5% or more in a target company shall disclose every acquisition or disposal of shares representing 2% or more of the shares or voting rights.	Acquirer/Seller	Stock Exchange & Target Company	Within 2 working days of the receipt of intimation of allotment of shares or disposal or acquisition of shares or voting rights as the case may be.
6	Disclosure under Regulation 13(4) of SEBI Prohibition of Insider Trading Regulations 1992 - For Change in Shareholding or voting rights held by Director or Officer and his dependents or Promoter or Person who is part of Promoter Group of a listed company.	Promoter/Director/ Officer/Substantial Shareholder(s)	Stock Exchange & Target Company	Within 2 working days of the receipt of intimation of allotment of shares or disposal or acquisition of shares or voting rights as the case may be.
7	Disclosure under Regulation 13(6) of SEBI Prohibition of Insider Trading Regulations 1992 - For Change in Shareholding or voting rights held by Director or Officer and his dependents or Promoter or Person who is part of Promoter Group of a listed company.	Target Company	Stock Exchange	Within 2 working days of the receipt of information received under sub regulations (4) of Regulation 13 of SEBI (PIT) 1992.
8	Disclosure under Section 93 of Companies Act, 2013 and Rule.13 of The Companies (Management and Administration) Rules, 2014.	Target Company	Registrar of Companies	Within 15 days of such change in Form No. MGT 10.

BY

CS K VINOTH

CS D HEM SENTHIL RAJ

csthenewera.blogspot.in