The Institute of Company Secretaries Of India (ICSI) has come up with bigger secretarial standards (SS) – SS-7 SS-8 SS-9 that would bring about greater clarity and governance in the corporate sector.
These relate to passing of resolutions by circulation (SS-7), affixing of common seal (SS-8) and forfeiture of shares (SS-9). The proposed SS-7 authorizes the chairman of the board or managing director and in their absence any other director to decide whether the approval of the board for a particular matter is to be obtained by means of resolution by circulation. As per this standard, the draft resolution should be circulated along with the necessary papers to all the directors either by hand or by post or by facsimile or by e-mail or by any electronic mode. This standard also lists the number of matters that should be passed only at board meeting and not through resolution by circulation, as they require a proper discussion. ?According to section 289 of the Company’s Act, Board of Directors can pass resolution by circulation but it doesn?t laydown the procedure like who will authorize and which write-ups should be passed. This secretarial standard would lay down a proper procedure?, said N K Jain, secretary and CEO, ICSI. SS-8 deals with affixing of common seal . As per this standard the common seal shall be adopted by a resolution of the board and the impression of the seal shall be made part of the minutes of the meeting in which it is adopted. SS-8 will specify those documents on which the company would be required to affix the common seal and the procedure for affixing the common seal. The common seal shall be affixed to any document in the presence of managing director or any two directors, and the company secretary or any other person who is specifically authorized by the board. In order to facilitate Indian MNCs operating abroad, the standard further provides that a company may have an official seal for use outside India, which shall be a facsimile of the common seal.
SS-9 proposes to ensure that the forfeiture is carried out bonafide and in the interests of the shareholders. As per SS-9, forfeiture of shares is to be made only with the approval of the board. No forfeiture can be made unless notice is served on the shareholder whose shares are being forfeited. The notice to the defaulting member should be served by registered post acknowledgement due. The standard also specifies the contents of notice.
To protect the interest of the defaulting members, the standard SS-9 provides that the amount paid by the member and any dividend/bonus shares due to him should be adjusted against his dues before forfeiting his shares. Law does not say anything on forfeiture.