SS-1 and Non-Statutory Committees: Is Compliance Required? - MMJC

Background

Secretarial Standard-1 (“SS-1”), issued by the Institute of Company Secretaries of India (“ICSI”), provides guidance on various aspects of conducting board meetings, committee and general meetings. Question arises is whether SS-1 would apply to committees of the board of directors constituted under Companies act, 2013 [‘the Act’]?

Introduction

Clause 1.1 of SS-1 states as follows, “The principles enunciated in this Standard for Meetings of the Board of Directors are also applicable to Meetings of Committees of the Board, unless otherwise stated herein or stipulated by any other applicable guidelines, rules, or regulations.”. ICSI Guidance Note on SS-1 states provides as follows, “SS-1 shall not apply to Committees that are voluntarily constituted by the Board unless the company itself adopts it.”.

This makes it clear that SS-1 is applicable to statutory committees and companies may voluntarily comply with SS-1 with respect to non-statutory committees.

The term ‘Committee’ is defined under SS-1 as a “Committee of Directors mandatorily required to be constititued by the Board under the Act.”

On reading the definition of ‘Committee’ and scope of SS-1 it is clear that provisions of SS-1 would be applicable to meetings of committees of board of directors that are mandatorily required to be constituted under the Act.

Committees that are mandatorily required to be constituted under the Act are Audit committee, Nomination and remuneration committee, Corporate Social Responsibility Committee and stakeholder relationship committee. Hence it is clear that meetings of these committees are required to be conducted in accordance with provisions of SS-1.

Applicability of SS-1 to companies that have their equity shares listed on a recognised stock exchange

Securities and Exchange Board of India [‘SEBI’] vide its consultation paper dt: February 7, 2025, has proposed to make SS-1 applicable to companies who have their equity shares listed on a recognised stock exchange.

If this proposal is approved by SEBI, then listed companies will have to ensure compliance with provisions of SS-1. Till now listed companies were required to comply with provisions of SS-1 as it was mandated under section 118(10) of the Act. If this consultation paper is approved by SEBI then non-compliance with SS-1 would amount to violation of section 118(10) of Companies Act 2013 as well as that of SEBI (Listing Obligations and Disclosure Requirements) regulations, 2015.

Conclusion:

Compliance vs. Choice With the recent SEBI consultation paper dated February 07, 2025, proposing an amendment to Regulation 48 of the LODR Regulations, requiring listed entities to comply with applicable Secretarial Standards as notified under Section 118(10) of the Companies Act, 2013 question that may arise is whether committees mandatorily required to be constituted by SEBI LODR (viz. Risk Management Committe