MOHAN R. LAVI Related
PHOTOS
Ordinary shareholders in companies look forward to two documents from
the investee probably in order of priority — the dividend cheque and
the annual report. With the days of triple-percentage dividends almost
history now, the annual report is a much-awaited document to gauge the
performance of an entity. The Ministry of Corporate Affairs (MCA) —
courtesy a green initiative — has put a roadblock in the way of the
shareholder receiving the annual report by post. The ongoing annual
general meetings have seen shareholders vent their angst against this
move.
Companies Act/Companies Bill
Circular no. 18/2011 dated April 29, 2011 issued by the MCA is the
Circular that implemented the green initiative, apparently at the
behest of industry bodies. The MCA made sure that there is legal
backing to the initiative by quoting Section 4 of the Information
Technology Act, 2000 which states that where any law requires
provision of information in written, typed or printed form, the
requirement would be satisfied if the said information is provided in
electronic form and accessible so as to be usable for a subsequent
reference. The Circular stated that Section 219 of the Companies Act —
which provides a right for members of companies to receive copies of
the balance sheet and the auditors' report — would not be violated if
companies e-mail these documents to shareholders.
The company has to ensure that the e-mail ID of the shareholder is
registered either with the company or the depository and the company's
Web site displays a full text of these documents well in advance. In
case the email ID of the shareholder is not registered, Section 53 of
the Companies Act which details service of documents on members of a
company takes over. The Circular makes a closing statement that in
case a shareholder insists on physical copies of the documents, it
shall be provided to him free of cost.
The Circular preceding this Circular also dealt with the green
initiative and found succour in the electronic mode specified in
Section 4 of the Information Technology Act to tide over the fact that
the Department of Posts had effectively discontinued the certificate
of posting scheme — one of the delivery modes specified in Section 53.
The “go-green” motto has ensured that Section 192A of the Companies
Act, 1956 along with the Companies (Passing of Resolution by Postal
Ballot) Rules, 2001 have been amended to bless voting by electronic
mode for postal ballot. Section 121 of the Companies provides for
similar provisions with a proviso specifying that the Central
Government may prescribe the manner of circulation of financial
statements of companies having such net worth and turnover as may be
prescribed. The intention appears to be to mandate certain class of
companies to compulsorily use electronic communication.
Shareholder angst
Shareholder angst on this initiative range from infrastructure issues
to the perils and inconsistencies of electronic communication.
Complaints are already being made that requests for physical copies
have not been executed.
The annual report of a company contains much more information now than
the balance sheet and the report of the auditors. Whether it is the
management discussion and analysis, the risk-management report or the
notes on accounts, shareholders would be analysing all the data
provided therein to pass judgement on their investments. If the local
version of International Financial Reporting Standards is implemented,
shareholders would have more information on the financial statements
at their disposal as disclosure requirements in Ind-AS are intense.
The middle path
Companies would welcome the green initiative in view of the
substantial savings in printing and postal costs that would accrue if
annual reports are not printed and circulated.
The shareholders though would retort that the company can save costs
in other areas. When there are two extremely divergent views, the
middle path is normally the best solution. Companies could print
janata versions of their annual reports which contain the relevant
information sans the glitzy paper and high-resolution photographs at a
fraction of the cost.
--------------------------------------------------------------------------------
Companies could print ‘janata' versions of their annual reports which
contain all the relevant information sans the glitzy paper and
high-resolution photographs at a fraction of the cost.
--------------------------------------------------------------------------------
(This article was published in the Business Line print edition dated
October 10, 2011)
PHOTOS
Ordinary shareholders in companies look forward to two documents from
the investee probably in order of priority — the dividend cheque and
the annual report. With the days of triple-percentage dividends almost
history now, the annual report is a much-awaited document to gauge the
performance of an entity. The Ministry of Corporate Affairs (MCA) —
courtesy a green initiative — has put a roadblock in the way of the
shareholder receiving the annual report by post. The ongoing annual
general meetings have seen shareholders vent their angst against this
move.
Companies Act/Companies Bill
Circular no. 18/2011 dated April 29, 2011 issued by the MCA is the
Circular that implemented the green initiative, apparently at the
behest of industry bodies. The MCA made sure that there is legal
backing to the initiative by quoting Section 4 of the Information
Technology Act, 2000 which states that where any law requires
provision of information in written, typed or printed form, the
requirement would be satisfied if the said information is provided in
electronic form and accessible so as to be usable for a subsequent
reference. The Circular stated that Section 219 of the Companies Act —
which provides a right for members of companies to receive copies of
the balance sheet and the auditors' report — would not be violated if
companies e-mail these documents to shareholders.
The company has to ensure that the e-mail ID of the shareholder is
registered either with the company or the depository and the company's
Web site displays a full text of these documents well in advance. In
case the email ID of the shareholder is not registered, Section 53 of
the Companies Act which details service of documents on members of a
company takes over. The Circular makes a closing statement that in
case a shareholder insists on physical copies of the documents, it
shall be provided to him free of cost.
The Circular preceding this Circular also dealt with the green
initiative and found succour in the electronic mode specified in
Section 4 of the Information Technology Act to tide over the fact that
the Department of Posts had effectively discontinued the certificate
of posting scheme — one of the delivery modes specified in Section 53.
The “go-green” motto has ensured that Section 192A of the Companies
Act, 1956 along with the Companies (Passing of Resolution by Postal
Ballot) Rules, 2001 have been amended to bless voting by electronic
mode for postal ballot. Section 121 of the Companies provides for
similar provisions with a proviso specifying that the Central
Government may prescribe the manner of circulation of financial
statements of companies having such net worth and turnover as may be
prescribed. The intention appears to be to mandate certain class of
companies to compulsorily use electronic communication.
Shareholder angst
Shareholder angst on this initiative range from infrastructure issues
to the perils and inconsistencies of electronic communication.
Complaints are already being made that requests for physical copies
have not been executed.
The annual report of a company contains much more information now than
the balance sheet and the report of the auditors. Whether it is the
management discussion and analysis, the risk-management report or the
notes on accounts, shareholders would be analysing all the data
provided therein to pass judgement on their investments. If the local
version of International Financial Reporting Standards is implemented,
shareholders would have more information on the financial statements
at their disposal as disclosure requirements in Ind-AS are intense.
The middle path
Companies would welcome the green initiative in view of the
substantial savings in printing and postal costs that would accrue if
annual reports are not printed and circulated.
The shareholders though would retort that the company can save costs
in other areas. When there are two extremely divergent views, the
middle path is normally the best solution. Companies could print
janata versions of their annual reports which contain the relevant
information sans the glitzy paper and high-resolution photographs at a
fraction of the cost.
--------------------------------------------------------------------------------
Companies could print ‘janata' versions of their annual reports which
contain all the relevant information sans the glitzy paper and
high-resolution photographs at a fraction of the cost.
--------------------------------------------------------------------------------
(This article was published in the Business Line print edition dated
October 10, 2011)
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