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In a corporate-friendly move, the Centre has done away with a rule that prohibited the conduct of certain businesses such as approval of financial statements, holding of audit committee meetings and approval of mergers and acquisition through video conferencing mode.
The permanent removal of this rule is seen as Ministry of Corporate Affairs (MCA) endorsing the use of digital tools for conduct of company business on a permanent basis and also an indication that the government does not see the pandemic getting over anytime soon.
The latest MCA move is expected to be a big booster dose for corporates in these current pandemic times, especially when independent directors and C-suite executives are unable to travel due to Covid-19 induced travel restrictions.
MCA has now removed the rule entirely, instead of giving exemption to this rule from time to time — exemption was given four times since last year.
The MCA had last extended, from January 1 this year by six months, the window to conduct board meetings via video conferencing or other audiovisual means for approval of annual financial statements, board reports, proposals on mergers, de-mergers, acquisitions and takeovers besides meeting of audit committees.
This was the first time that the exemption was extended by six months – from December 31 2020 to June 30, 2021.The earlier three extensions were for the three monthly periods up to June 30, September 30 and December 31, 2020.
Experts’ take
SN Ananthasubramanian, former president of Company Secretaries Institute and Practising Company Secretary said: “Considering the restrictions on travel, erraticity of the pandemic and fluidity of the situation, this MCA move seems to be a pragmatic one.”
Aseem Chawla, Managing Partner, ASC Legal, said that through this move, the earlier dispensation of conducting meetings via video conferencing and amendments put forth in September 2020, is being made permanent. Therefore, going forward, there would not be any list of reserved matters which cannot be dealt with in video conferencing meetings, he added.
The technology tools are great enablers if utilised constructively. The Corporate Governance oversight mechanism is bound to change in this new normal, he said.
Harish Kumar, Partner, L&L Partners said: “Amidst continued Covid circumstances, earlier MCA had exempted this requirement till June 30, 2021, but now the omission of said requirements entirely is a prudent step. It will largely benefit the companies, especially with foreign directors who transact restricted business matters related to approval of financial statements, board report, prospectus, etc through video conferencing or other audio visual means.”
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