[Opinion] Company Directors & CS Held Liable for Delayed Draft Minutes Circulation and Entries
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- Last Updated on 18 August, 2023
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Prof R Balakrishnan – [2023] 153 taxmann.com 418 (Article)
1. Introduction
As per the explanation to sub-section (1) of section 205 of the Companies Act 2013, secretarial standards means the “secretarial standards” as issued by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved by the Central Government. Sub-section (10) of section 118 of the Companies Act 2013 provides that every company shall observe secretarial standards with respect to general and board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act 1980 and approved as such by the Central Government. The secretarial standards provide clarity on the respective subjects and it does not mean that the secretarial standards are alternative to the original laws enacted by the parliament. One could conclude by saying that wherever the law is not clear it requires an explicit spirit of the law, the secretarial standard provides clarity on the respective subjects to the user. As per the provisions of the Companies Act 2013, adherence by a company to the Secretarial Standard is mandatory.
Pursuant to the provisions of section 118 of the Companies Act 2013, it is clear that the company needs to adhere to the secretarial standards as per the provisions of the Companies Act 2013. Further, the board report of the company shall include a statement on compliance with applicable secretarial standards as mandated in the secretarial standard -1 on meetings of the board of directors vide paragraph 9. In case, a certain portion of applicable secretarial standards is not adhered to, the same should be highlighted in the board report along with the reasons for not complying with the same. The board report may also include the other secretarial standards voluntarily adopted by the company and in case the voluntary adoption is partial the same need to be stated in the report.
2. Relevant provisions of the Companies Act 2013 and the relevant clauses of the secretarial standard-1 relating to this case
The following are relevant provisions of the Companies Act 2013 and the requirements of secretarial standards 1 relating to meetings of the board or directors.
| Companies Act 2013 Section 118 – Minutes of proceedings of general meeting, meeting of Board of Directors and other meetings and resolutions passed by postal ballot. |
|
| Section | Provision |
| 118 (1) | Every company shall cause minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusion of every such meeting concerned, or passing of the resolution by postal ballot in books kept for that purpose with their pages consecutively numbered. |
| 118(10) | Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980), and approved as such by the Central Government. |
| Secretarial Standard -1 (SS-1) (Issued by The Institute of Company Secretaries of India and approved by the Central Government under section 118(10) of the Companies Act, 2013) Secretarial Standard on Meeting of the Board of Directors |
|
| Clause | Requirement |
| 7 | Minutes |
| Every company shall keep Minutes of all Board and Committee Meetings in a Minutes Book. Minutes kept in accordance with the provisions of the Act evidence the proceedings recorded therein. Minutes help in understanding the deliberations and decisions taken at the Meeting. | |
| 7.4 | Finalization of Minutes |
| Within fifteen days from the date of the conclusion of the Meeting of the Board or the Committee, the draft Minutes thereof shall be circulated by hand or by speed post or by registered post or by courier or by e-mail or by any other recognised electronic means to all the members of the Board or the Committee, as on the date of the Meeting, for their comments | |
| 7.5 | Entry in the Minutes Book. |
| 7.5.1 | Minutes shall be entered in the Minutes Book within thirty days from the date of conclusion of the Meeting. |
| In case a Meeting is adjourned, the Minutes in respect of the original Meeting as well as the adjourned Meeting shall be entered in the Minutes Book within thirty days from the date of the respective Meetings. | |
| Companies Act 2013 | |
| Penal provision for any default/violation (if any) | |
| Section | Provision |
| 118(11) | If any default is made in complying with the provisions of this section in respect of any meeting, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees. |
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