Secretarial Standards
The Secretarial Standards Board (SSB) was constituted in the year 2000 by The Institute of Company Secretaries of India (ICSI) to formulate Secretarial Standards. Now the question that would hit your mind is – What was the need of formulating these standards? The answer to this question is that companies in India follow diverse secretarial practices and therefore the need to blend, harmonize, and standardize such diversified secretarial practices was felt.
The Secretarial Standards Board identified the areas in which Secretarial Standards were required to be issued taking into consideration the relevant laws, business environment, and practical applicability. Thereafter, the Secretarial Standards were introduced by The Institute of Company Secretaries of India (ICSI) to bring uniformity in the common and repeated practices taking place in the day-to-day affairs of the company.
Before the publication of secretarial standards by ICSI, the companies were complying with the provisions of the Act and its Rules without adhering to any standardized procedures. With the introduction of secretarial standards issued by the ICSI being approved and notified by the Central Government, a uniform framework of best procedures and practices has been prescribed for adoption and adherence by the companies.
The Secretarial Standards address the areas where the law is silent or ambiguous, needs clarity, or has multiple interpretations and facilitate the corporate world and professionals by providing clear interpretation. These standards do not modify the law in any way but interpret it correctly for stakeholders’ reference. Secretarial Standards lay down a set of principles to which companies are expected to adhere while performing their duties.
Value Additions through Secretarial Standards
Secretarial Standards have led to transparency and accountability which are considered significant characteristics of good corporate governance. They have strengthened the timely flow and quality of information leading to higher standards of governance. The Secretarial Standards have created huge confidence in the minds of investors who are concerned about sound procedures followed in a company upon adoption of these standards.
Board Meetings and General Meetings are such events of a company where all major important decisions are taken. Standardization of the processes and adoption of practices through these standards has brought a revolutionary improvement in the decision-making process. All these factors have in turn introduced ease of doing business in India.
Stakeholders of Secretarial Standards
The following have been identified as the stakeholders of Secretarial Standards:
- Ministry of Corporate Affairs
- Board of Directors
- Company Secretary
- Shareholders
- Internal Auditors
- Stock Exchanges
- Regulatory Bodies
- Statutory Auditors
- Foreign Institutional Investors
The significance of the Secretarial Standards thus lies in their implementation by a Company Secretary and adoption by the Board of Directors. Every resolution passed by the Board as well as shareholders, in addition to the applicable section(s) of the Companies Act and Securities Laws, should have a reference of Secretarial Standards so as to enrich best practices.
The above-mentioned standards are mandatorily applicable to all Private and Public Limited Companies. However, it does not apply to OPC (One Person Company).
Compliance with Secretarial Standards
Section 118 (10) of the Companies Act, 2013 requires every company to observe the secretarial standards with respect to General and Board Meetings specified by the Institute of Company Secretaries of India and approved as such by the Central Government. A Secretarial Audit Report requires the Secretarial Auditor to examine compliances with the applicable clauses of the Secretarial Standards issued by the Institute of Company Secretaries of India.
The Secretarial Standards have laid down stringent rules for compliance of procedures for conducting board meetings & general meetings which helps in building up the corporate governance practices, corporate disclosures, and transparency stronger and reducing non-compliance. It strengthens Board processes and prevents mismanagement.
Generally, in addition to the Secretarial Standards, the requirements laid down under any other applicable laws and rules and regulations need to be complied with. However, in case there is a variation/variation in any provision of the applicable laws and the Secretarial Standards, the stricter provisions shall prevail and need to be complied with.
Section 205(1)(b) of the Act provides with the functions of the Company Secretary which shall include – To ensure that the Company complies with the applicable secretarial standards. Section 118 is binding on all Companies and section 205 is binding on all Company Secretaries.
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