New Delhi: Allowing the use of technology to ensure flexibility and greater participation in board meetings, the ministry of corporate affairs, or MCA, has given its nod for directors to attend board and committee meetings via video conferencing.
The permission comes with some riders.
For one, “participation through video conferencing will not be allowed for meeting the quorum in a meeting”, said an MCA official who did not want to be identified.
Other stipulations are on safeguards against misuse of the facility. The chairman and secretary of a board meeting have to ensure that only a director or an authorized participant can attend the proceedings via video conferencing.
“If a statement of a participant in the meeting via video conferencing is interrupted or garbled, the chairman or the secretary shall request for a repeat or reiteration, and if need be, the chairman or secretary shall repeat what he heard the participant was saying for confirmation or correction,” MCA said in a circular on 20 May.
Times of India reported the development on Friday.
A director should attend at least one board meeting in a year in person, it said.
MCA has also allowed shareholders of public and private companies to participate in general body meetings through video conferencing. The chairman and secretary conducting such a meeting have to guard against proxy shareholders. Although the Companies Act of 1956 does not have a provision for video conferencing, the new Companies Bill pending in Parliament for passage allows it.
“In the absence of the new Companies Act, MCA has used the Information Technology Act, which has overriding powers over Companies Act, to implement this,” said the official mentioned above. “It is also part of the green initiative that MCA has taken up.”
Industry has been lobbying with the ministry for at least four years to allow video conferencing for board and general body meetings.
MCA has authorized National Security Depository Ltd and Central Depository Services (India) Ltd as agencies for providing and supervising electronic platforms. This is subject to the condition that they obtain the required certification from the ministry of communications.
Prithvi Haldea, chairman and managing director of Prime Database, a Delhi-based research firm, said video conferencing is a facilitating tool and should not be seen as a device that will encourage malpractices.
“Insider trading and leaking of information can happen even under closed door meetings. What the regulator should do is to map pre- and post-board meetings trading patterns, investment decisions, etc.,” said Haldea.
Pradeep Udhas, executive director and head of information technology and IT-enabled services sector at consultancy KPMG India Pvt. Ltd, said the benefits of video conferencing outweigh possible security breaches. “The percentage of breach in a serious board meeting versus those that go with proper governance won’t be that high.”
Video conferencing will help Indian companies bring international input at the board level, without having to face logistical problems. Udhas cautioned that companies have to be vigilant to ward off security threats, mainly in the form of hackers.
Ankit Fadia, an independent cyber security expert and ethical hacker, said video conferencing poses security risks but the threats can be tackled with some effort. “Companies will have to put in place strong legal checks,” he said.