ICSI’S
SECRETARIAL STANDARDS ON BOARD MEETINGS — ALTHOUGH MANDATORY FOR COMPANY
SECRETARIES — CANNOT OVERRIDE THE PROVISIONS OF THE COMPANIES ACT
2013 –OBSERVES NCLAT
AchintyaKumarBaruaaliasManjuBaruav.RanjithBarthkur[2018]9123(NCLAT)
COMPANY HAS TO PROVIDE VIDEO CONFRENCING IF A
DIRECTR DEMANDS FOR IT
Corporates cannot stay away from
providing video conferencing facilities for Board meetings if a director
requests for such a facility.
It is mandatory for companies to provide video conferencing if a
director so desires, said the National Company Law Appellate Tribunal (NCLAT)
in a recent ruling.
Simply put, the NCLAT has held that it is not the company’s sole
prerogative to decide whether video conferencing facility should be provided or
not.
As per NCLAT’s reading of the Companies
Act 2013 along with the framed rules, companies cannot deny the director’s
right of participation in Board meeting via video conferencing.
SECTION 173 (2)) OF COMPANIES ACT ON VIDEO
CONFERENCING
The concerned provision (Section
173 (2)) in company law should be taken as a compulsory requirement and not an
optional one, the NCLAT has said.
173(2)of CA 2013 requires that the
participation of directors in a meeting of the Board may be either in person or
through video conferencing or other audio visual means, as may be prescribed,
which are capable of recording and recognising the participation of the
directors and of recording and storing the proceedings of such meetings along
with date and time:
Provided that the Central Government may, by
notification, specify such matters which shall not be dealt with in a meeting
through video conferencing or other audio visual means.
ICSI SECRETARIAL STANDARDS Vs COMPANIES ACT 2013
In giving this ruling, the NCLAT
has also made it clear that the ICSI’s Secretarial Standards on Board Meetings
— although mandatory for Company Secretaries — cannot override this position of
the Companies Act 2013 and its rules.
This would mean that the NCLAT is not in agreement with the
contention that the secretarial standards guidelines are that such video
conference participation can be done only “if the company provides such
facility”.
This latest NCLAT ruling has also in a way strengthened the
viewpoints made in certain quarters that ICSI’s Secretarial Standards should
only be “desirable best practices” and not thrust as mandatory norms for
corporates.
Would it be possible to ensure that nobody else is present
at the venue where a Director participating in the meetings through video-conferencing.
Where a director resorts to making use of video conferencing facility,
it would not be possible for the Chairperson to ensure that the director is
alone when participating from wherever the video call is made.
It was being contended that Chairperson would have no means to
know as to who else is sitting in the room or place concerned.
However, NCLAT has not agreed to this
viewpoint.
NCLAT ruling is welcome
and clarificatory in nature. It has set right the apprehensions in minds of
directors as well as companies”.
DUTY OF DIRECTOR TO MAINTAIN CONFIDENTIALITY
Anyway it is the responsibility of
a director participating in a video conference to be cautious in keeping the
data and details confidential.
This is because the laws like
Information Technology Act and Companies Act already provide for civil and
criminal liabilities on directors for sharing of data and details to outsiders
without the knowledge of the company.
MCA Vs NCLAT
It is suggested that ICSI should
request the MCA to appeal against above decision in the Supreme Court to reaffirm
that ICSI’s Secretarial standards are mandatory to have better corporate governance. and cannot be surpassed .
Courtesy:
Business Line
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