The corporate law regime in India is undergoing a massive upgradation and there are plethora of amendments and new legislations happening as part of that. Though there are trifle of laws and regulations, galaxies of professionals and abundance of regulators, the compliance and corporate governance standards of our country is still very bleak. Despite all the stringent regulations, guidelines and principles the promoters seldom give any prominence to corporate governance aspects of their business. There is no dearth of scams in listed companies where the deities’ corporate governance is installed, banks and other financial institutions are becoming playground for corporate fraudsters, regulators are seen as lethargic towards noncompliance and governance professionals are not acting as compliance officers in its real sense. All these are pointing the fingers towards one thing- Lack of inculcation of Governance Principles.
The overlooking aspects
During my professional life I observed that many of the entrepreneurs are not bothered to look into the compliance aspects due to many obvious reasons. In India, majority of businesses operates and manages as family business in which only close relatives are actively participated. In some cases, the promoters are cocooned from long cherished friendships. For them the inter-personal relationship are far more valuable than the principles of corporate governance. They don’t simply see value in holding the quarter-wise board meetings, sending notices, giving disclosures, conducting general meetings etc as they are doing those during their day to day life in a better manner. They are unable to find real distinction between their close-knitted relationships and corporate responsibilities. The frequent amendments and changes in corporate laws are more or less a ruckus to them as they do not see any value addition in that. Nevertheless, it is not a difficult task for a governance professional to play an active role in educating and thereby inculcate the culture of governance among the promoters. The real skill of a governance professional lies, I believe, in educating and handholding the promoters to walk the path of corporate governance.
Baby footsteps towards governance
Though there will be an initial resistance, as a company secretary, we can insist to conduct the board meetings of the companies in proper manner. While conducting the board meetings prominence may be given to discuss the business related matters along with other compliance matters. It is really fun to see how the promoters respond when the item for disclosure of interest, MBP-1 etc are coming in between normal business items. Minutes and other board related documents to be depicted as a dispute resolution mechanism rather than a compliance document. The filings with various statutory authorities should be projected as a disclosure and transparency mechanism rather than showcasing as a compulsive statutory requirement. The promoters should be encouraged to document all decisions, execute agreements whenever needed and disclose their interest wherever applicable. Slowly and gradually they will get accustomed to the new culture of governance and sooner or later they will get addicted to the habit of governance.
Role of an expert and a coach.
The company secretary, as a governance professional, has to often wear the hat of a trainer rather than of a policeman. He has to step into the shoes of a passionate teacher rather than a grumpy headmaster. Instead of trying to inflict fear among the stakeholders he should be able to convince them about the necessities and advantages of the legal requirement. In depth knowledge in all corporate laws is something which is not just desirable for a company secretary but which is truly indispensable. A company secretary should be able to think beyond the companies act to gain confidence of the promoters. There are numerous laws and regulations that are applicable for a company on day to day basis. The advent of Insolvency and Bankruptcy Code, 2016, The Companies (Registered Valuers And Valuation) Rules, 2017, newly introduced adjudication of offences under companies act etc had opened up new avenues for company secretaries. Similarly, the opportunities under GST regime, SEBI, RBI and FDI policies etc also had changed the expectations of industry on the professionals. Though we cannot master in all laws it is not a tough job to be a master of few and jack of all. In order to attain that, the company secretary should tune himself as an ardent reader, proficient writer and possess great oratory skills. He has to gain maximum knowledge in all the laws that are applicable to corporates and should be able to update them on timely manner about recent happening and its impact on them.
Guardian of chronicles and conscience
The role of company secretary has evolved over a period but something remains unchanged even under the transformed corporate environment. Company Secretary, whether in employment or practice, should maintain integrity and trustworthiness throughout his/her profession. He should devise proper systems and standards to maintain the records and information pertaining to the companies in very confidential and authentic manner.
Advisor, Mentor and a guide
Gone are the days which Company Secretaries were considered as mere compliance officers. The present day corporate milieu demands much from the profession. A CS should be able to advise, mentor and guide the promoters at right time at right place. He should be able to understand the entire business environment, financial aspects, legal aspects, Human resource matter etc and play the lead role in mentoring the entire corporate set up in proactive manner. Quality is something which is infectious. It spreads from one person to another through close relationships. If a Company or its promoters are not abiding the corporate laws or they are not simply giving any weightage to the governance principles, then it is the duly of the company secretary to inculcate the right culture into them in an infectious manner.
The only solution to the present age corporate mayhems are nothing but lack of training about the advantages of accomplishing the corporate governance. If a company secretary is able to invent the right kind of corporate atmosphere in an organization, pinpoint the rewards of being transparent, highlight the benefits of making proper and timely disclosures, able to stand independent while maintaining the warmth of inter-personal relationships, then the Corporate Governance will spread its wings in true colors.
Let us work together to design and deliver an eminent corporate regime to create a better India.
(This article is written for and published in the Souvenir published during "Srushti" - Conducted by Kochi Chapter of SIRC of Institute of Company Secretaries of India on 17th August, 2019)
Bijoy P Pulipra
The author is an insolvency professional, Registered Valuer and Company Secretary and can can be reached at bijoy@artismc.com