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Mandatory Website Disclosures- A Requirement under Companies Act 2013 and SEBI

Varun Hariharan

| Updated: Apr 26, 2020 | Category: Legal, Startup

Mandatory Website Disclosures

A website can be understood as a collection of publicly available information which is present in a primary single domain. The main purpose of a website is for public use to gain information and knowledge. Websites are used for various purposes. Websites can be managed by a single individual, a group of people and a company. Individuals refer WebPages to gain maximum information regarding a particular subject matter.

Websites are used by companies as potential marketing tools. Apart from this companies publish key information regarding their financials, goals, mission and vision statement, the products and services offered by them. They would also publish information regarding the progress of the firm. This would be used by stakeholders, shareholders and public to make decisions. When a company considers to issue its shares in a publicly listed stock exchange (Initial Public Offering), they would publish such information on their WebPages in order to ensure that they have multiple amount of subscribers to consider investing in their shares. Therefore this is considered compulsory for a company to improve its business. Apart from this, the company also publishes information regarding the changes in the shareholders and directors of the company. All this information is published in the website for the users to make an informed choice to consider the services offered by the company.

Some monitoring bodies and institutions would want mandatory website disclosures from companies. Due to the amount of frauds and corporate governance scandals in the past, this has become a practice in many countries to consider publishing information on the website. Monitoring agencies and investors would know the performance of the company based on the information published on the website. More compliance on the website front is required as these agencies want the companies to follow compliance. Furthermore, when there is a proper procedure or process followed by companies, the faith of stakeholders and investors would be restored. Therefore there are Mandatory Website Disclosures that are required to be followed by companies.

Mandatory Website Disclosures

The Companies Act 1956 (Previous Company Law) does not specify any form of Mandatory Website Disclosures. According to the Previous Company Law stated that disclosures have to be made when it comes to reports of the progress of the company. Such reports can the following- Annual General Report of the Company/ Meetings of the Company and major resolutions that have been decided in the meetings. These reports were considered as mandatory website disclosures.

During the 2008 recession, the downfall of Satyam Computers showed that the governance framework was not up to the standards prescribed by the Securities Exchange Board of India and the Previous Company Law. The Government of India came out with the requirement to enact a law related to regulation of Companies when it comes to disclosing information on the company affairs. The Companies Act 2013 (Present Company Law) was brought out with a view to prioritise the need for companies which are listed to disclose more information in their website. This was also considered that companies have to disclose information to monitoring bodies such as SEBI and MCA, apart from publishing the mandatory website disclosures.

This move was considered to improve the amount of transparency between Directors, Shareholders and key stakeholders of the company. One of the essential elements of corporate governance is in order to maintain the standards of transparency in the website. Such standards of transparency must be maintained both at an internal level and an external level. Therefore at an internal level, the transparency would be maintained. At an external level, the transparency standards would be published through the website. Also monitoring agencies would have a report on these standards. Therefore the need of Mandatory Website Disclosures was brought out.

Standards of Mandatory Website Disclosures

Under the present Company law, it is not an obligation to have a website. The present company law there is a requirement of having a registered office for conducting dealings; however it is not mandatory to have a website. However as per the regulations under the Securities Exchange Board of India, companies that have their shares in a recognised stock exchange have to ensure that they have a working website. This website has to be updated on a continuous basis. The law behind this is the SEBI (Listing Obligations and Disclosure Requirement) regulations.

There are certain rules and regulations under the Companies Act 2013 and SEBI which make it crucial for a company to have Mandatory Website Disclosures. The present Company act specifies that it is not mandatory to have a website for disclosing information. It is evident through a plain reading of the Companies Act 2013 that the words website (“if required”) is used. From the above it is not essential for a company to have a website.

Mandatory Website Disclosures- Its Applicability to all Companies

Companies are divided into private companies and public companies. However, the mandatory website disclosures would not be applicable to all companies. Companies that are listed and public would have more obligations to the public. Hence these companies would have the requirement of disclosing more information on the affairs of their business. Some disclosures would be applicable to private companies, but would not be applicable to public companies.

Mandatory Website Disclosures that is required under the Companies Act 2013 (Previous Company Law) and SEBI LODR Regulations 2015

There are certain mandatory website disclosures that will apply to all forms of companies.  Some of the rules under the Companies Act 2013 which support mandatory website disclosures are as follows:

Section 12(3)c of the Companies Act- Registered Office

The information pertaining to the registered office such as name, address, telephone, fax, contact details have to be mentioned in every correspondence and letter head of the company. This directly means that if a company has a website, then such information must be present on the website. This would apply to emails, business letters and other modes of correspondence.  The penalty imposed under this is that every officer who has actual knowledge of the default or contravention would pay a fine of Rs.1000/- and if the contravention continues then 1 Lakh.

Section 13(8) (i) along with Rule 32 and 32(3) Companies (Incorporation) Rules 2014 – Alteration of Objects to Raise money through the use of Prospectus

Prospectus is offered only to potential investors who want to invest in the shares of a company. Therefore this regulation would apply only to companies that have their shares and securities in listed stock exchanges. Special resolution requires a majority vote of the shareholders of the business. Alternation of objects of the company requires a special resolution. Such resolution has to be published in the website of the company.  This is considered as a mandatory website disclosure.

Section 8 Compliance

Conversion of a Section 8 Company to any other form of Company (Rule 22(1)b of the Companies (Incorporation) rules 2014 along with section 18 of the Companies Act 2013

A company that is formed as a charity or its objects is not for the purpose of making profit is considered as a section 8 companies.  If the company wants to convert into another form of company, then the application to the regional director along with the notice copy- in Form INC 19 should be published in the website. The is one of the mandatory website disclosure which is carried out by the company, as section 8 company is formed for promotion of charity. On changing the objects of the business it must be published so that stakeholders would know the main purposes of the company. This is considered as a mandatory website disclosure as it involves change in objects.

Section 73 of the Companies Act 2013 along with Rule 4(3) of the Companies (Acceptance of Deposit) rules 2014 – For Advertising Circulars

Deposits can be accepted by companies. This is a mode of raising finance by the company. This section would only apply to a public company. Whenever a company invites deposits from the public, such initiation for deposits from the public must be uploaded on the website of the company. If the company fails to publish the information regarding the acceptance of deposits from the public then the penalties are stringent. The company would have to repay the deposit back to the investors and on failing to do that would be subjected to a fine of Rs 1 crore which can extend to Rs 10 Crore. This is considered as a mandatory website disclosure as it involves public money.

Section 91 of the Companies Act 2013 along with Rule 10(1) Companies (Management and Administration) Rules 2014 – Registers of Holders of Debentures to be closed

This compliance must be followed by all companies. Whenever a company wants to close the register of the debenture holders, then intimation must be given to the SEBI regarding such form of closure. Any companies that have its shares listed in a stock exchange must do the same. This notification must be given before 7 days of closing such register. Such notification must be published in the website of the company. A company that has its shares listed must give the notification is a local newspaper in English language.  The publication in the English Newspaper must also be published on the website and be considered as a mandatory website disclosure. Contravention of the above regulation would lead to the company liable for a penalty of 1 lakh rupees which can extend to Rs 5 Lakh.

Section 101 of the Companies Act 2013 along with Rule 18(3)(ix) Companies( Management and Administration) Rules 2014- Notice of meetings ( AGM, GM)

Such notices of meeting such as the annual general meeting and general meeting have to be published in the website. Apart from publishing in the website, the information must be circulated to all members. Publishing in the website would be considered as a mode of circulation amongst the members of the company. As per the Secretarial Standards 1- the notice of any such meeting of the company must be published on the official website of the company. Notice means intimation that the meeting is held. The notice must specify the location, time and address of such meeting which is held by the company.   

Section 108 of the Companies Act 2013 along with Rule 20(3)(xiv) Companies (Management and Administration) Rules 2014-

If all members are not able to be present for a meeting, there is a possibility of e-voting process. The information regarding the method of e-voting must be published on the website of the company. Along with this the name of the members, address of the website, telephone number and email id of the individual should be present on the website. Such information is present to address any form of grievances related to the voting process through electronic means. The notification must be present till the day of the general meeting. This is as per the Secretary Standards- 1. Apart from this the amount of valid votes and invalid votes must also be present on the website. The details of the voting results must be published in a manner according to the law. A report of the voting must also be published for a website and this must be published for two days after the publication of the results.

Section 110 of the Companies Act 2013 along with Rule 22(4) of the Companies( Management and Administration Rules) 2014- Postal Ballot Process

This system voting is done by mails.  Such information regarding the postal ballot process must be published on the website and details of such notice must be on the website till the last date of postal ballot process. the date, time and place of where the postal ballot occurs also must be mentioned in the website. The results of the ballot must also be published in the website of the company. As per Secretary Standard 1 this process should be considered and published on the website of the company.  The results of the postal ballot process and procedure must be published in the website. This would be considered as Mandatory Website Disclosures.

If such notice cannot be placed then a special form of notice would be published in the English newspaper regarding this.  These are mandatory website disclosures for the company.

Section 124(2) of the Companies Act 2013 along with Regulation 43A of the SEBI LODR regulations- Dividend Distribution by a listed entity and amount of Unpaid Dividend

If shareholders are not paid the remaining amount of dividend by a company, then this must be mentioned in the website of the company. After paying the initial amount of dividend the unpaid dividend has to be paid within a period of 90 days. Information regarding the name and address regarding the shareholders must be stated on the website.

A company that is going for an Initial Public Offer (IPO) has to provide information regarding the IPO on the website. Apart from this it must provide information regarding its dividend distribution policy. This is considered as a mandatory website disclosures as the information is related to the issue of shares to the public.

Section 135 (4)(a) along with Rule 9 of Companies( Corporate Social Responsbility Policy) Rules-CSR Requirements

If the net worth and turnover of a company is more than a particular amount, they have to take part in corporate social responsibility activities (CSR). Such activities are charitable in nature and have to be mentioned in the report. In the report the following have to be mentioned:

  • Whether there is compliance with the laws related to CSR or Not
  • Reasons for not being compliant also have to be stated

CSR disclosures are mandatory website disclosures as the main priorities of CSR are targeted towards charity and other development activities.

Section 136(1) a of the Companies Act 2013 along with Regulation 47 of the SEBI LODR Regulations 2015

All the financial reports and information regarding the accounts have to be disclosed on the website of the company.  This would apply to a company that has its shares listed in the stock exchange. Any subsidiaries of the parent company also have to publish such information on the website of each subsidiary. In case of contravention of the above laws and rules a fine of Rs 25000 would be imposed. Any event of further contravention would attract further penalty.  Financial information is crucial to the shareholders and stakeholders of the company, hence disclosing such information are considered as mandatory website disclosures.

Section 149/ 149 (8) of the Companies Act 2013 along with Rule 13(2) Companies (Appointment and Qualification of Directors) Rules 2014

SEBI LODR Regulation 30 Para A of Part A Schedule III – Appointment of Directors

Recruitment of directors must be placed on the website of the company. This must be done before seven days of the general meeting.

When it comes to independent directors all public companies, require to have an independent director. The code of independent directors considers that all appointments regarding independent directors have to be mentioned in the website of the company. This provision regarding change of directors would also be applicable to key managerial persons of the company.

Section 168 of the Companies Act along with Rule 15 (Companies (Appointment and Qualification of Directors) Rules, 2014- Directors Resignation

When a director resigns from the company, then such notice of resignation must be intimated to the registrar. The intimation must be made within 30 days of the resignation. This must be made in form DIR 12. Also such notice must be published in the website of the company

Section 177(10) along with Rule 7 Chapter XII & Information to investors (Regulation 85 of the SEBI LODR September, 2015) – Responsibility of the Audit committee for Companies that have their shares listed in recognised stock exchanges

This will apply to companies that have borrowed money or have accepted some form of deposit from the public should have some form of mechanism which addresses stressed situations for victimisation of persons. This information will also have certain grievance mechanisms listed. The every mechanism regarding the vigilance mechanism has to be provided in the website. Vigilance mechanisms are mandatory website disclosures by companies.

Section 230 (3) (11)(12) Merger/ Acquisition or Arrangement along with Regulation 30 Para A of Part A of Schedule III of The SEBI LODR September, 2015

When the arrangement or compromise or a merger situation is considered then such notice has to be provided to a committee of creditors or the creditors who have significant interest in such merger. Mandatory website disclosures are required for a company when merging with another is required. For companies that have securities listed in a stock exchange, these documents would be sent to the SEBI and also uploaded on the website.

Regulation 23 of the SEBI LODR Regulation- RPT (Related Party Transactions)

Any form of related party transactions must be disclosed on the website of the company.

Regulation 46 of SEBI LODR Regulation Website

Companies that have their shares listed on a Stock Exchange have to mandatorily have a full functioning website. It has to have information regarding the key management personnel, financial requirements of the company, Details of the directors and shareholders, Details of any change in the directors of the company. These details are mandatory website disclosures.

Therefore the company has to comply with the requirement of the above disclosures. In case there is no compliance with the above mandatory website disclosures then there are stringent penalties under the concerned laws.

Conclusion

The previous company law did not have many requirements for mandatory website disclosures to be made by the company. Because of the large amount of corporate scandals the Government of India brought out the present company law. The company’s act 2013 has mandatory website disclosures. These mandatory website disclosures are to ensure there is proper standards of transparency and governance are maintained at an internal level and external level of the organisation. If a company does not follow the compliances related to disclosures, then strict action would be taken against the company and the people involved in controlling the company. Therefore the company has to follow mandatory website disclosures as per the Companies Act 2013 and the SEBI LODR regulations 2015.

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Varun Hariharan

Varun Hariharan has completed the Legal Practice Course from BPP Law School, Manchester. He has a Masters in Commercial and Corporate Law from the Queen Mary University of London and LLB Honours from Bangor University, UK. He specialises in law related to corporate, artificial intelligence and technology law.

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