Website – Compliance under Companies Act, 2013

What is Website?

A Website is a set of related web pages located under a single domain name. Commonly it is also known as virtual address and website of a Company gives company a virtual existence on the internet. In current world, having a website is must for every Business. The Internet has grown at an incredibly fast speed, reaching 3.68 billion users (40% of world’s population) by December 2015. Today, it is almost criminal for a business to not be online.

Does Companies Act, 2013 mandates Company to have its own website like Registered Office address?

Answer is NO.

It is not mandatory for Company to have its own website. The Companies Act, 2013, Rules or notification issued under the Companies Act, 2013 does not mandates the Company to have its own website. However, for Listed Companies, Securities and Exchange Board of India (SEBI), has made it mandatory to maintain a functional and updated website with effect from April 2011 [Initially under Listing Agreement and thereafter under SEBI LODR (Listing Obligations and Disclosure Requirements) Regulation].

What if a Company voluntarily creates its own website? Can they choose any design for it? Or there are any mandatory requirements regarding website which company need to comply with?

Since for Listed Company, a functioning website is mandatory, SEBI has also provided various information, which company needs to put up on its website but question remains unanswered when it comes to all Companies other than Listed Companies. Companies Act, 2013, its Rules and including Secretarial Standard have mandated various information/disclosures which needs to be updated on the Company Website, if any. Each time the word Website is used in Companies Act, 2013 or in relevant Rules, it is followed by the words ‘If Any’, makes it clear that it is not mandatory for Company to have a website, but if it has, it shall comply with the requirement of that particular Section of the Act.

The current article presents a list of the enhanced disclosure requirements under the Companies Act, 2013 and the SEBI LODR.

Here, it is important to note that, in case if Company does not have website, it shall not be liable for any punishment, but in case if Company has its own website, and if it fails to comply with the aforesaid section, liability is huge on company as well as every officer who is in default.

(A) Disclosures under Companies Act, 2013:

1.       Information Pertaining to Registered Office [Section 12(3)(c)]:

Applicability: All Companies

The Section specifically says that “Every Company shall get its name, address of its registered office and the Corporate Identity Number along with telephone number, fax number, if any, e-mail and website addresses, if any, printed in all its business letters, billheads, letter papers and in all its notices and other official publications.” Which means in case if Company has its website, it shall be mandatory for Company to get its website address to be printed on its business letters, billheads etc.

Penalty if requirement is not complied with:

Subsection 8 of Section 12 clarifies that ‘If any default is made in complying with the requirements of this section, the company and every officer who is in default shall be liable to a penalty of one thousand rupees for every day during which the default continues but not exceeding one lakh rupees.

2.       Change of Object for raising money through Prospectus [Rule 32 & Rule 32(3) of the companies(incorporation) Rules, 2014] [Section 13(8)(i)]  &

Variation of terms of contracts referred to in the prospectus or objects for which prospectus was issued [Rule 7(3) of the Companies (Prospectus and Allotment of Securities) Rules, 2014] (Section 27 of The Companies Act, 2013):

Applicability: Companies which has raised money by issuing prospectus (mainly Listed Companies)

A company which has raised money by issuing prospectus and has still some un utilized amount of the money so raised shall not change its objects for which it raised money through the prospectus unless a Special Resolution is passed by the company. The details of such a resolution as may be prescribed shall be published on the Website of the company, if any, indicating there in the justification for such change.

3.    Other compliances for conversion of section 8 companies to any other kind [Rule 22(1)(b) of the Companies (Incorporation) Rules, 2014] (Section 18 of The Companies Act, 2013) :

Applicability: Section 8 companies (For promotion of commerce, art, science etc.)

The Company shall, within a week from the date of submitting the application to the Regional Director, publish a notice, and a copy of the notice in Form No. INC 19 shall be sent forthwith to the Regional Director and the said notice shall be published on the website of the company, if any, and as may be notified or directed by the Central Government.

4.    Form and particulars of advertisement or circulars [Rule 4(3) of the Companies (Acceptance of Deposits) Rules, 2014] (Section 73 of The Companies Act, 2013) :

Applicability: Public Companies

Every company inviting deposits from the public shall upload a copy of the circular on its website, if any.

Penalty if requirement is not complied with:

If any default is made in complying with the provisions of this section the company shall, in addition to the repayment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees; and every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty five lakh rupees but which may extend to two crore rupees, or with both.

5.    Closure of register of members or debenture holders or other security holders [Rule 10(1) of the Companies (Management and Administration) Rules, 2014] (Section 91 of The Companies Act, 2013):

Applicability: All Companies

A company closing the register of members or the register of debenture holders or the register of other security holders shall give at least seven days previous notice and in such manner, as may be specified by Securities and Exchange Board of India, if such company is a listed company or intends to get its securities listed, by advertisement at least once in a vernacular newspaper in the principal vernacular language of the district and having a wide circulation in the place where the registered office of the company is situated, and at least once in English language in an English newspaper circulating in that district and having wide circulation in the place where the registered office of the company is situated and publish the notice on the website as may be notified by the Central Government and on the website, if any, of the Company.

Penalty if requirement is not complied:

If any default is made in complying with the provisions of this section the company and every officer of the company who is in default shall be liable to a penalty of five thousand rupees for every day subject to maximum of one lakh rupees during which the register is kept closed.

6.       Notice of meeting [Rule 18(3)(ix) of the Companies (Management and Administration) Rules] (Section 101 of The Companies Act, 2013) &

Also, as per Secretarial Standard 1:

Applicability: All Companies

The notice of the general meeting of the company shall be placed on the website of the Company, if any.

As per Secretarial Standard 1

The notice shall specify the day, date, time and full address including route map and prominent land mark for easy location. In case of companies having a website, the route map shall be hosted along with the notice on the website.

7.     Voting through electronic means [Rule 20(3)(ii) of the Companies (Management and Administration) Rules, 2014] (Section 108 of The Companies Act, 2013) &

Secretarial Standard 1:

Applicability: Public Companies providing E - Voting

The notice of voting through electronic means shall also be placed on the website of the company, if any and of the agency forthwith after it is sent to the members.

As per Secretarial Standard 1

Companies which have website if any should display notice of the facility of e-voting, website address of the company, name, designation, address, e-mail ID and phone number of the person responsible to address the grievances connected with the e-voting.

Such Notice shall remain on the website till the date of the General Meeting.

The result of the voting, with details of the number of votes cast for and against the Resolution, invalid votes and whether the Resolution has been carried or not shall be displayed on the website of the Company if any further, the results of voting along with the scrutinizer’s report shall also be placed on the website of the company if any, in case of companies having a website.

Rule 20(3)(xiv) of the Companies (Management and Administration) Rules, 2014 :

The results declared along with the scrutinizer’s report shall be placed on the website of the company and on the website of the agency within two days of passing of the resolution at the relevant general meeting of members.

8.        Procedure to be followed for conducting business through postal ballot [Rule 22(4) of the Companies (Management and Administration) Rules, 2014] (Section 110 of The Companies Act, 2013) & Also, as per Secretarial Standard 1:

Applicability: Public Listed Companies

The notice of the postal ballot shall be placed on the website of the company forthwith after the notice is sent to the members and such notice shall remain on such website till the last date for receipt of the postal ballots from the members.

As per Secretarial Standard 1:

Notice of Postal Ballot:

In case, of conducting a Postal Ballot the Notice of the Postal Ballot shall be placed on the Website of the company and such Notice shall remain on the website till the last date for receipt of the postal ballot forms from the Members.

Notice shall specify the day, date, time and venue where the results of the voting by postal ballot will be announced and the link of the website where such results will be displayed.

Notice shall also specify the mode of declaration of the results of the voting by postal ballot.

Notice of the postal ballot shall inform the Members about availability of e-voting facility, if any, and provide necessary information thereof to enable them to access such facility.

Results of Poll Conducted:

The result of the poll with details of the number of votes cast for and against the Resolution, invalid votes and whether the Resolution has been carried or not shall be displayed on the website of the Company.

Rule 22(13) of the Companies (Management and Administration) Rules, 2014:

The results shall be declared by placing it, along with the scrutinizer’s report, on the website of the company.

Special notice [Rule 23(3) of the Companies (Management and Administration) Rules, 2014]

Where it is not practicable to give the notice in the same manner as it gives notice of any general meetings, the notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated and such notice shall also be posted on the website, if any, of the Company.

9.       Unpaid Dividends [Section 124(2)] &

Dividend Distribution Policy (Regulation 43A of the SEBI LODR, September 2015): &

Applicability: All Companies issuing dividend

A company shall within a period of 90 days after transferring the amount of unpaid dividends to a separate bank account of “Unpaid Dividend Account” will have to prepare a statement containing the shareholder’s names, their last known addresses, and the unpaid dividend to be paid to them on the company’s Website, if any, and also on any other website approved by the Central Government.

The listed entity proposes to declare dividend or the dividend distribution policy it shall disclose such information along with the same in its annual report and on its website. The listed entities other than top five hundred listed entities based on market capitalization may disclose their dividend distribution policies on a voluntary basis in their annual reports and on their websites if any.

Penalty if requirement is not complied with:

If a company fails to comply with the requirements of this section, the company shall be punishable with fine which shall not be less than five lakh rupees but which may extend to twenty-five lakh rupees and every officer of the company who is in default shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

10.    Corporate Social Responsibility [Section 135(4)(a)] [Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014] :

Applicability: To all Companies which fall under CSR criteria

The Board of Director of certain class of Companies are required to approve the Corporate Social Responsibility Policy (CSR Policy) for the company. Such content of CSR Policy is mandatory for Board to disclose in its report (Board report) and also to place it on the company’s website, if any.

11.    Placing of financial statements and other documents of a listed company on the website [Section 136(1)(a)] (Regulation 47 of the SEBI LODR September, 2015):

Applicability: Listed Company

A listed company shall also place its financial statements including consolidated financial statements, if any, auditor’s report and all other documents required by law to be attached thereto, on its website, which is maintained by or on behalf of the company.

The third proviso to this section provides that every company having a subsidiary or subsidiaries shall publish separate audited accounts in respect of each of its subsidiary on its website, if any.

Penalty if requirement is not complied with:

If any default is made in complying with the provisions of this section, the company shall be liable to a penalty of twenty-five thousand rupees and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.

12.    Notice of candidature of a person for directorship [Rule 13(2) of the companies (Appointment and Qualification of Directors) Rules, 2014] (Section 149 of the Companies Act, 2013) &

Code for Independent Directors Section 149(8) [Schedule IV (IV) (6)] &

Change in directors (Regulation 30 Para A of Part A Schedule III of the SEBI LODR, September 2015):

Applicability: All Companies & Companies required to appoint Independent Directors

The company shall, at least seven days before the general meeting, inform its members of the candidature of a person for the office of a director or the intention of a member to propose such person as a candidate for that office ‐ by placing notice of such candidature or intention on the website of the company, if any.

Schedule IV of the Companies Act, 2013 deals with the Code for Independent Director. The code mandates the Company that the terms and conditions of appointment of independent directors shall also be posted on the company’s website.

Change in directors, key managerial personnel (Managing Director, Chief Executive Officer, Chief Financial Officer, Company Secretary and Auditor and Compliance Officer).

All pecuniary relationship or transactions of the non executive directors with company the listed company shall be disclosed in the annual report also, the criteria of making payments to non executive directors alternatively, this may be disseminated on the listed company’s website if any.

Penalty if requirement is not complied with:

If any default is made in complying with the provisions of this section, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

13.   Notice of resignation of director [Rule 15 of the Companies (Appointment and Qualification of Directors) Rules, 2014] (Section 168 of The Companies Act, 2013) :

Applicability: All Companies

The company shall within 30 days from the date of receipt of notice of resignation from a director intimate the registrar in Form DIR – 12 and post the information on its website if any.

Penalty if requirement is not complied with:

If any default is made in complying with the provisions of this section, the company and every officer of the company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

14.   Vigil Mechanism in Audit Committee for Listed Companies and other Prescribed Companies [Proviso to Section 177(10)] Read with Rule 7 Chapter XII &

Information to investors (Regulation 85 of the SEBI LODR September, 2015):

Applicability: Listed Companies and Unlisted Public Companies

The Section 177 (9) provides that certain class of Companies shall establish a vigil mechanism for directors and employees to report genuine concerns in such manner as may be prescribed. The following class or class of Company shall have Vigil Mechanism:

·       Every Listed Company

·       Companies which accept deposit

·       Companies which have borrowed money from Banks/Financial Institutions exceeding Rs. 50 crores

Further, sub section 10, provides that, the vigil mechanism shall provide for adequate safeguards against victimization of persons who use such mechanism and make provision for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases.

The proviso to the sub-section 10 makes it mandatory for Company to disclose the details of establishment of such mechanism on its website, if any, and in the Board’s report.

The listed company shall display the email address of the grievance redressal division and other relevant details prominently on its website and in the various materials / pamphlets/ advertisement campaigns initiated by it for creating investor awareness.

Penalty if requirement is not complied with:

If any default is made in complying with the provisions of this section, the company shall be liable to a penalty of not less than one lakh rupees which may extend to five lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to one year or with fine which shall not be less than twenty five thousand rupees which may extend to one lakh rupees, or with both.

15.    Compromises, Arrangements and Amalgamation [Proviso to Section 230(3)] (Effective 15^th December, 2016 except section 230(11) and 230(12)) (Regulation 30 Para A of Part A of Schedule III of The SEBI LODR September, 2015):

Applicability: All Companies

Where a meeting is proposed to be called in pursuance of an order of the Tribunal u/s 230(1) in case of compromise/ arrangement, a notice of such meeting shall be sent to all the creditors or class of creditors and to all the members or class of members and the debenture-holders of the company, which shall be accompanied by a statement disclosing the details of the compromise or arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, KMP, and the debenture-holders

The sub-section further provides that such notice and other documents shall also be placed on the website of the company, if any, and in case of a listed company, these documents shall be sent to the SEBI and Stock Exchanges where the securities of the companies are listed, for placing on their website and shall also be published in newspapers in such manner as may be prescribed.

16.   Website (Regulation 46 of the SEBI LODR September, 2015):

The listed company shall maintain a functional website containing the basic information about the listed entity.

The listed company shall disseminate the following information on its website:

details of its business; terms and conditions of appointment of independent directors; composition of various committees of board of directors; code of conduct of board of directors and senior management personnel; details of establishment of vigil mechanism/ Whistle Blower policy; criteria of making payments to non-executive directors, if the same has not been disclosed in annual report; policy on dealing with related party transactions, corporate governance report, agreements entered into with media companies and/or their associates such agreements that are not in normal course of business shall be disclosed on website of the listed company. Etc.

The listed company shall update any change in the content of its website within two working days from the date of such change in its content.

(C)PENALTIES FOR NON COMPLIANCE:

Triggering of certain events mandates a company to disclose/publish that certain information on its website. However, where there are no specific penalties provided for non compliance of the website disclosure requirements penalty as per Section 450 (Punishment where no specific penalty or punishment is provided) of The Companies Act, 2013, if the company or any officer of the company who is in default or such other person shall be punishable with fine which may extend to ten thousand rupees, and where the contravention is continuing one, with a further fine which may extend to one thousand rupees for every day after the first during which the contravention continues.

Hence, it is advisable to update the website, if any, of the company on time and upon happening of such events which trigger the requirement for such disclosure.

Bibliography:

  

1.       ICSI

2.       SS - 1

3.       Ministry of Corporate Affairs

4.       http://www.internetlivestats.com/