Tuesday 2 August 2011

Green Initiative or "Cutting Corners" Initiative?

Green Initiative or "Cutting Corners" Initiative?

Many of you who happen to be shareholders of various companies would have received emails such as the one given below:

Sub: Service/dispatch of documents through email by 'XYZ Limited' - Request to register/update E-Mail addresses  Reg.

The Ministry of Corporate Affairs (MCA) vide it's Circular Nos.17/2011 and 18/2011 dated 21.04.2011and 29.04.2011 respectively, informed that, it has taken a 'Green Initiative in the Corporate Governance' by allowing paperless compliances by the Companies after considering Sections 2, 4, 5 and 81 of the Information Technology Act, 2000 for legal validity of compliances under the Companies Act, 1956 through electronic mode.

'Certificate of Posting' is one of the accepted mode of service for service of documents as per Section 53 of the Companies Act, 1956 and the Department of Posts has recently discontinued postal facility through the 'Certificate of Posting' vide their Circular dated 23.02.2011.

The MCA has clarified that, a Company would have complied with Section 53 of the Companies Act, 1956, if the service of document has been made through electronic mode, provided the Company has obtained e-mail addresses of it's members for sending the notices/documents through e-mail by giving an advance opportunity to every shareholders to register their e-mail address and changes therein from time to time with the Company. It is also clarified that, in cases where any member has not registered his e-mail address with the Company, the service of document etc., will be effected by the other modes of service as provided under Section 53 of the Companies Act, 1956.

As per the above circulars the Company may serve/dispatch the notice/documents (i.e Balance Sheet, Profit & Loss a/c, Directors' Report, Auditors' Report and Notice calling for the general meetings, etc.,) to the shareholders of the Company by way of electronic mode. Hence, we hereby request all the shareholders to register/update their e-mail addresses as per the detials given below to receive notices/documents through electronic mode and update their e-mail addresses from time to time. 

They claim that this is supposed to be a "Green Initiative" so as to save paper, avoid cutting trees, etc., "All in alignment with SEBI Approved Norms"

However, I find a few objectionable aspects to this whole "Green Initiative":

  • Why are they making "Email Copies" the default option? Whenever any change is proposed to be introduced, the "Status quo ante" ought to be the default option. Any proposed option to change should be sought to be implemented by obtaining a specific approval from the shareholder. I'm not aware of a SINGLE COMPANY that has made the "Physical Copy" the default option!

  • Is the real purpose to "Go Green" or to save some money? If the genuine purpose is to "Go Green", is there a single company which has transferred the money so saved to any of the following "reserves"?:
    • "Future Dividend Payment Reserve" which will be kept in a distinct fund which will not be used by the company for routine business operations
    • "Investor Education Reserve" - so that the funds will be used for investor education purposes
    • "Contribution to charities approved by shareholders Reserve" - which will be identified and approved by the shareholders at the AGM.

Wonder if any listed company will care to respond???

Regards,

N


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