GREEN INITIATIVE IN CORPORATE GOVERNANCE

[Mr. M. GOVINDARAJAN]

Corporate Governance means best practices of processes, rules, policies etc., which affects the way a firm is heading or being controlled.  Corporate Governance also says the relationships between the many players interested and the goals for which the corporation is governed.   Corporate Governance is the present day topic for the business entities to adopt the same for the benefit of stakeholders, consumers etc., Environment is one of the aspect for Corporate Governance.  Green initiatives are every where at present.   Now it is extended to Corporate Governance also.  Information Technology Act gives helping hand in this regard.   

                        Section 4 of Information Technology Act, 2000 provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding contained in such law, such requirement shall be deemed  to have been satisfied if such information or matter is- 

• rendered or made available in an electronic form; and
• accessible so as to be usable for a subsequent reference 

Section 5 of Information Technology Act, 2000 deals with the legal recognition of digital signatures.   It provides that where any law provides that information or any other matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is authenticated by means of digital signature affixed in such manner as may be prescribed by the Central Government.   For the purposes of this section ‘signed’, with its grammatical variations and cognate expressions, shall, with reference to a person, means affixing of his hand written signature or any mark on any document and the expression ‘signature’ shall be construed accordingly.

Section 13 of Information Technology Act, 2000 deals with the time and place of dispatch and receipt of electronic record.  The said section provides that-

(1)   save as otherwise agreed to between the originator and the addressee, the despatch of an electronic record occurs when it enters a computer resources outside the control of the originator.; 

(2)   save as otherwise agreed between the originator and the addressee, the time of receipt of an electronic record shall be determined as follows, namely:- the addressee has designated a computer resource for the purpose of receiving electronic record,- receipt occurs at the time when the electronic record enters the designated computer resources; or 

(3)   if the electronic record is spent to a computer resources of the addressee that is not the designated computer resource, receipt occurs at the time when the electronic record is retrieved by the addressee; 

(4)   if the addressee has not designated a computer resource along with specified timings, if any, receipt occurs when the electronic record enters the computer resource of the addressee. 

(5)   save as otherwise agreed to between the originator and the addressee, an electronic record is deemed to be received at the place where the addressee has his place of business.                

The provisions of sub-section (2) shall apply notwithstanding that the place where the computer resource is located may be different from the place where the electronic record is deemed to have been received under sub-section (3). 

For the purpose of this section.- if the originator or the addressee has more than one place of business, the principal place of business, shall be the place of business; if the originator or the addressee does not have a place of business, his usual place of residence shall be deemed to be the place of business; "usual place of residence ", in relation to a body corporate, means the place where it is registered. 

                        Section 81 of the Information Technology Act, 2000 provides that the provisions of this Act shall have effect notwithstanding anything consistent therewith contained in any other law for the time being in force. 

                        The Ministry of Corporate Affairs has taken a ‘Green initiative in the Corporate Governance’ by allowing paperless compliances by the companies after considering the provisions of Information Technology Act for legal validity of compliances under Companies Act, 1956 through electronic mode.  The following are green initiatives taken by the Ministry of Corporate Affairs- 

• Sending copies of Balance sheets and Auditors Report etc., to the members of the company as required under Sec. 219 of the Companies Act, 1956 through electronic media. 

The Ministry clarifies that the company would be in compliance of Sections 219(1) of the Companies Act, 1956, in case, a copy of Balance Sheet etc., is sent by electronic mail to its member subject to the fact that company has obtained- 

a)      e-mail address of its members for sending the notice with balance sheet, profit and loss account, Auditor’s Report, Director’s Report and explanatory statement etc., through e-mail after giving an advance opportunity to the member to register his e-mail address and changes therein from time to time with the company or with the concerned depository;

b)      company’s website display full text of these documents well in advance prior to mandatory period and issue advertisement in prominent newspapers in both vernacular and English stating that the copies of aforesaid documents are available in the website and for inspection at the Registered Office of the company during office hours.   Website must be designed in a way so that document can be opened easily and quickly;

c)      in cases where any member(s) has not registered his e-mail address for receiving the Balance Sheet etc., through e-mail, the Balance sheet etc., will be sent by other modes of services as provided under Section 53 of the Companies Act, 1956;

d)      in case any member(s) insist for physical copies of above documents the same should be sent to him physically, by post free of cost. 

• Allowing paperless compliances.
  

Section 192A of the Companies Act, 1956 read with Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 already recognizes voting by electronic mode for postal ballot.   In order to have secured electronic platform for capturing accurate electronic voting processes, the Department clarified that the agency appointed for providing and supervising electronic platform for electronic voting shall be an agency duly approved by the Ministry of Corporate Affairs.   It is further clarified that NSDL and CSDL are being approved by the Ministry of Corporate Affairs subject to the condition that they obtain a certificate from Standardization Testing and Quality Certification (STQC) Directorate, Department of Information Technology, Ministry of Communications & IT.   Once they obtain the same and inform the Ministry they will be authorized to undertake these activities. 

• Participation  by shareholders in general meeting.
  

The Ministry clarified that a shareholder of the company may participate in a general meeting under the provisions of Companies Act, 1956 through electronic mode.  For this purpose the company shall also comply with the following requirements and procedures, in addition to the normal procedures required under the Companies Act, 1956 for holding general meeting- 

• Electronic mode means video conference facility i.e., audio-visual electronic communication facility employed which enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate effectively in the meeting;
• The notice of the meeting must inform shareholders regarding availability of participation through video conference and provide necessary information to enable shareholders to access the available facility of video conferencing;
• The Chairman of the meeting and Secretary shall assume the following responsibilities:
  • to safeguard the integrity of the meeting via video conferencing;
  • to ensure proper video conference equipment/facilities;
  • to prepare the minutes of the meeting;
  • to ensure that no one other than the concerned shareholder or proxy to the shareholder is attending the meeting through electronic mode;
  • if a statement of a participant in the meeting via video conferencing is interrupted or garbled, the Chairman of the meeting or Secretary shall request for a repeat or reiteration, and if need be, the Chairman or Secretary shall repeat what he heard the participant was saying for confirmation or correction. 

• Section 166 of the Companies Act provides that a company is required to have its Annual General Meeting either at the registered office of the company or at place within the city, town or the village in which registered office of the company is situated.   Section 174 provides that at least five members in case of public company and two members in case of other company have to be personally present and shall be the quorum for the general meeting.  In a general meeting where shareholders are allowed to participate through electronic mode, the quorum as required under Section 174 of the companies act as well as the chairman of the meeting shall have to be physically present at the place of the meeting.    To provide larger participation and for curbing the cost borne by the shareholders to attend general meetings, listed companies may provide video conferencing connectivity during such meetings at least five places in India in such a way that it covers top five states/Union territories based on maximum number of members or at least 1000 members, whichever is more, residing as per the address registered with the depositories. 

• Participation by Directors in meetings of Board/Committee of directors.
  

The Ministry clarified that directors of a company may participate in a meeting of Board/Committee of Directors under the provisions of the Companies Act, through electronic mode.   For this purpose the company shall also comply with the following requirements and procedures, in addition to the normal procedures required under the Companies Act in holding meetings of Board/Committee of Directors. 

• Electronic mode means video conferencing facility i.e., audio-visual electronic communication facility employed which enables all persons participating in that meeting to communicate concurrently with each other without an intermediary, and to participate effectively in the meeting;
• Every director of the company must attend the meeting of Board/Committee of directors personally at least one meeting a financial year of the company. 
• The Chairman of the meeting and Secretary shall assume the following responsibilities:
  • to safeguard the integrity of the meeting via video conferencing;
  • to ensure proper video conference equipment/facilities;
  • to prepare the minutes of the meeting;
  • to ensure that no one other than the concerned director or other authorized participants are attending the meeting through electronic mode;
  • if a statement of a participant in the meeting via video conferencing is interrupted or garbed, the Chairman or Secretary shall request for a repeat or reiteration, and if need be, the Chairman or Secretary shall repeat what he heard the participant was saying for confirmation or correction.
  • The notice of the meeting must inform directors regarding availability of participation through video conference, and provide necessary information to enable directors to access the available facility of video conferencing.  The notice of the meeting shall also seek confirmation from the director as to whether he will attend the meeting physically or through electronic mode and shall also contain the contact number(s)/e-mail addresses of the Secretary/designated officer to whom the director shall confirm in this regard.   In the absence of any confirmation from the director, it will be presumed that he will physically attend the Board meeting.
  • At the start of the scheduled meeting through electronic mode, a roll call shall be made by the Chairman/Secretary.  Every director and authorized participant shall state, for the record the full name, location that he can completely and clearly see and communicate with each other participants and will ensure that no one other than the concerned director or authorized participant is attending the meeting through electronic mode.
  • The Chairman/Secretary, then, shall confirm the participation of the directors in the meeting who are not physically present.   After the roll call, the Chairman/Secretary may certify the existence of a quorum.  A director participating in a meeting through use of video conference shall be counted for the purpose of quorum.   A roll call should also be made at the conclusion of the meeting or at re-commencement of the meeting after every break to ensure presence of quorum through the meeting.
  • The place where the Chairman or Secretary is sitting during the Board shall be taken as place of meeting in terms of Sec. 288 of the Act and all recordings will be made at this place.   The statutory registers shall be placed before the Chairman for compliance of the Act.  The statutory registers required to be signed by the other directors shall be deemed to have been signed by directors participating through electronic mode if they have given their consent to this effect in that meeting.
  • If a motion is objected to and there is a need to vote, the Chairman/Secretary should call the roll and note the vote of each director who should identify himself.
  • In the end of the meeting, the Chairman of the meeting shall announce the summary of the decisions taken in that meeting in respect of each agenda item and names of directors who have consented or dissented to those decisions.   Video recording of that part of the meeting shall be preserved by the company for one year from the conclusion of that meeting.  In the minutes the Chairman shall also confirm the mode of attendance of every director of the company during last three meetings whether personally or through electronic mode.  Draft minutes of the meeting shall be circulated in soft copy not later than 7 days of the meeting for comments/confirmation to the directors who attended the meeting to dispel all doubts on matters taken up during the meeting.   The minutes shall be entered in the minute books as prescribed under Section 193 of the Act.   The minutes shall disclose the particulars of Directors who attended the meeting through electronic mode. 

• Certificate by digital signature:
  

At present the Registrar of Companies has to issue a number of certificates to the companies and other stakeholders in physical form.   In order to cut timelines and an another step towards ‘green initiative’ it has been decided that all certificates and standard letters issued by the Registrar of Companies will now be issued electronically under the digital signature of the Registrar of Companies. 

Certainly initial problems will be there in implementing this green initiative.   If full support is extended by the Corporate entities, stakeholders etc., then it would be a successful one.