MCA SWIMS IN GREEN WATERS

MCA SWIMS IN GREEN WATERS

(Designing an eco friendly Corporate Framework)
Our planet ‘Earth’….’Mother Earth’ as it is popularly called is said to be in danger because of the green house emissions and the rampant disappearance of the green cover. But it is not the Earth which is in danger, it is us, the human beings who are in known danger and we need to take all voluntary and forced steps towards saving ourselves and our future generations from the perils of growing non-conducive mother earth. There are several steps being taken by all kinds of bodies towards not only sensitizing people on their responsibility to the environment but also bringing in statutory compulsions directed towards saving the precious environment.
It is a matter of pride that Ministry of Corporate Affairs has taken right step towards this pertinent direction by bringing in some break through directions.
There are lakhs of companies registered in India. If not anything else, the Companies had to at least file their statutory papers which was consuming tons & tons of paper.






Just going back to the history of the filing of papers and documents with the erstwhile Department of Company Affairs (now known as Ministry of Corporate Affairs), the statutory filings alone used to be loaded with realms of paper. The annual reports, constituting of the balance sheets, profit and loss account, directors’ report, auditor’s report etc. used to be filed in three sets, not mentioning about the other filings, for example, form nos. 8 & 13 (creation, modification of charge) which was also required to be filed in three sets. We all know that since 2006 MCA-21 has revolutionized the way corporate would do their paper compliances and from then on physical filing is no more allowed and be it annual reports of a large company or a small company, all of it has to be filed electronically thereby not requiring the Companies to print volumes of papers and thereby saving that many trees from being cut. This according to me is one of the biggest ‘Green’ initiatives taken by MCA.









The filing issue was arrested well by MCA. But there was a still larger issue in front of them which had captured their attention and MCA was working on it. The matter pertaining to huge printing of ‘n’ number of annual reports which were required to be sent to each shareholder every year. We all understand the impact and usage of these annual reports. Vide General Circular No.17/2011, MCA brought out a change which had far reaching effect on section 53 of the Companies Act, 1956 by leveraging and using sections 2, 4, 5 and 81 of the Information Technology Act, 2000. These sections give legal validity to compliances done through electronic mode.










Section 53 deals with service of documents on members by the Company. Keeping in view the above, the Company would have complied with section 53 of the Companies Act, 1956 if the service of documents has been made through electronic mode provided the Company has obtained the e-mail addresses of its members for sending the notice/ documents/ annual reports through email. An advance opportunity has to be mandatorily given to each shareholder to register their email address and changes therein from time to time.






My suggestion would be to send printed inland letters to each shareholder intimating of the participation of the Company in the green initiative of MCA and also mentioning specifically and in clear language about the requirement of their email addresses for facilitating sending of notices/ documents/ annual reports by email. The Company must also mention about the shareholder’s right to receive the said papers even physically for which they have to specifically write to the Company. The Company will not charge for sending the documents in physical mode. In cases where any shareholder has not registered his email address for receiving the papers etc. through email, the papers will be sent by other modes of service as provided under section 53 of the Companies Act, 1956.






Towards sending the papers electronically, my view is, either the Company can use the services of the Registrar & Share Transfer Agents in sending emails (the email addresses made available by the Depositories and R & T Agents), at a cost. Another option could be to outsourcing to a ’Data Management’, team hired for such purposes. This team can also be given mandate for continuous upgradation and feeding of email addresses & for this purpose writing to shareholders at intervals for their email addresses. Yet another option could be to purchase bulk email software and send emails, inhouse. This software would also give report of the mail’s deliverability and non-deliverability. MCA has not mentioned about the steps that the Company needs to take if the documents sent to an email-id, bounces/ returns undelivered. As a matter of prudence, the Company may write to those shareholders at their physical address about the said fact and asking for their current/changed email id.






This year, for the larger benefit of the shareholders and to give the shareholders an opportunity to get accustomed, few Companies are also thinking of sending the annual reports physically, in the usual manner (just that for the purposes of section 53, UCP has been discontinued by the Postal Department from 23.02.2011) and their annual reports are carrying specific item in the notes or by way of a loose leaflet about the Green Initiative. In such cases, there is a particular mention being made to the shareholders for their submission of email id’s and that after the date of the present year’s annual general meeting, the Company will immediately thereafter adopt the Green Initiative.


















There is still a huge populace of shareholders who do not have email id’s and many shareholders of Companies are still not having shares in the dematerialized mode. The Ministry’s steps may force them to become technology driven and this would be surely a welcome change in their lives too, just like the ways in which many professionals transformed when MCA brought in electronic filing.






I foresee that the Government may gradually make giving of email id’s compulsory at the time of filling up the forms for dematerialization of their holdings, just like to obtain DIN, email id is mandatory. We are also aware that MCA had floated the draft of the Companies (dematerialization of Certificates) Rules, 2011 for public comments. These rules will make it mandatory for all public companies and their subsidiaries which have raised money by issue of shares, debentures, by accepting public deposits, stock, bond or any other financial instruments from public (other than directors of the Company) to issue and keep such share certificates, debenture certificates and certificates issued for receipt of such deposits etc. in dematerialized form only.










Yet another step from the Ministry was towards simplification of DIN rules vide General Circular No. 5/2011 by which apart from making things simpler, the need for physical submission of DIN application form along with its supporting documents has been done away with. Instead, along with the online generated DIN form, one has to scan the supporting documents and it has to be filed as an attachment.






In a small way though, the General Circular issued with regard to payment of MCA fees is there in vogue with an instruction to stop offline payments for amounts below Rs.50,000.00 (except 3 cases where challan mode for payment has been allowed vide General Circular dated 27.05.2011). This is majorly done to ofcourse fasten the approval process as banks follow T+1 for reporting online payments. Let us see the greener aspect. Most of the payments unless it is for increase in authorized capital of the Company or for new Company incorporation, would fall within the ambit of less than Rs.50,000.00. For physical payments, challans were required in 3 sets and with online payments, which is no more required. Hence, a small but important step towards Green Initiative.






The Ministry vide General Circulars No. 27/2011 and 28/2011 dated 20.05.2011 brought out breath taking steps, something which seemed to be far fetched but at the same time was inevitable. These circulars spelled out participation by shareholders in general meetings through electronic mode and participation by directors in meetings of Board/Committee of Directors through electronic mode, respectively. Meetings can be attended by way of video conferencing, subject to compliance of certain conditions given in the circulars mentioned above, read with clarification issued vide Circular No.21/2011 dated 02.05.2011. For board meetings, count by way of video conferencing will be allowed for the purposes of quorum. Every director will have to attend at least one meeting personally in a financial year. For General Meeting, it is very clear that for quorum, members physical presence will only count. Ministry has made it mandatory for all listed companies to provide video conferencing facility for General Meetings from FY 2012-2013 onwards and just to re-iterate, companies are under no obligation to provide video-conferencing for Board Meetings.






I am sure lot of working companies will benefit immensely out of this bold initiative of MCA. There will huge saving of costs and time. Now-a-days, Boards of Companies are multi cultured and constitutes of directors from different states, nations and countries. Recognizing presence of way of video conferencing is a welcome step as it will ensure much larger participation, unhindered exchange of thoughts and most vital, everything gets minuted……hey on the lighter side, each director attending physically or through video conferencing, gets their sitting fees too.






The MCA has vide General Circular No.29/2011 initiated another green step. 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. At present, these certificates are issued physically under the manual signature of ROC’s and issued by post.






Yet another greener move has been made by allowing e-polling in postal ballot vide Notification No. GSR (E) dated 30.05.2011. Quite a welcome step.






I am sure after reading the above; we all must be in a position to appreciate the MCA’s move in all directions to ensure eco friendly operations






We can all understand that very soon Companies would be able to send all shareholder notifications in electronic mode alone, thereby minimizing, rather almost negating the need of using paper. This is a huge leap in not only showing its firm commitment to saving the universe but also moving towards more professionalism, transparency and the optimum use of technology. It will make storage and retrieval of documents easy and the shareholders and stakeholders including analysts would be able to use this data at ease for subsequent reporting and analytics










All in all, I admire the green dive being made by MCA and my accolades for the same. In days to come, the dive is going to get deeper and deeper and we all are going to get more and more tech-savvy. Thanks to MCA.