Documentation and Maintenance of Records – Secretarial Audit Compliance Management and Due Diligence Important Questions
Question 1.
What are the disadvantages of Electronic records?
Answer:
The followings are the disadvantages of Electronic Records:
Software risk : Storing records in an electronic document management system have a risk that since the system being no longer supported by the software company the company will cease to exist.
Format risk : When storing the records as an electronic record, a person run the risk of not being able to read them at some point.
Media compatibility : Maintaining images on media which the person can access at a later date is a big challenge. For example, the documents are also stored in floppy disks. But the floppy disk drive is no longer available.
Reliability : It’s a good idea to have most vital documents imaged but keeping a paper copy assures that the person have access to them anytime.
Portability : The portability is an advantage for digital images. It’s very easy to misplace or accidentally delete large amounts of data or to duplicated and transported outside of any organization.
Conversion expense : It’s very expensive to convert paper documents to digital images. The amount of labour it takes to prepare documents and analyze them so that they can be identified and indexed correctly is very large.
Question 2.
The Chairman of ABC Limited, a listed company seeks your opinion for framing a policy for preservation of documents to avoid stringent penal provisions for non-compliance of the provisions of the Companies Act, 2013 and the Rules made thereunder. Write a note to the Chairman : stating classification of documents under specific period of preservation with specific reference to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Answer:
To
The Chairman ABC Ltd.
Re: Classification of documents for period of preservation under SEBI (LODR) Regulations, 2015
Dear Sir,
The Legal Requirements of preservation of documents in accordance with the provisions of the Companies Act, 2013 and Regulation 9 of the SEBI (LODR) Regulations, 2015 are as under:
A. Documents whose preservation shall be permanent in nature:
- Property records including purchase and sale deeds, licences, copy-rights, patents & trademarks.
- Corporate Records including Certificate of Incorporation, Common Seal, Minutes of Board, Committee and Shareholders’ Meetings, Register of Members and other Statutory Records.
- Personal files of all live employees.
- Any other record as may be decided by the Chief Executive Officer of the Company from time to time.
B. Documents whose preservation period shall not be less than eight years after completion of the relevant transactions:
- Books of Account, Bank Statements and vouchers.
- Filings with Stock Exchanges, Registrar of Companies and other statutory authorities.
- Payroll Records, Employee deduction authorisations, attendance re-cords, employee medical records, leave records, Pension and retrial related Records, etc.
- Corporate Social Responsibility Records.
- Sponsorship Projects Records.
- Correspondence and Internal Memoranda.
- Any other record as may be decided by the Chief Executive Officer of the Company from time to time.
C. Documents whose preservation shall be for a minimum period of three years after completion of the event:
- Tender Documents
- Lease Deeds and Contracts
- Legal files
- Insurance Records including policies and claims
- All e-mail correspondence, internal & external
- Any other record as may be decided by the Chief Executive Officer of the Company from time to time.
Documents under Secretarial Standards:
- Proof of sending Notice of the meetings of the Board/Committee and General meetings and its delivery.
- Proof of sending Agenda and Notes on Agenda and their delivery.
- Proof of sending and delivery of the draft of the Resolution.
- Proof of sending draft Minutes and its delivery.
- Proof of sending signed Minutes and its delivery.
Question 3.
Draft the ‘confidentiality undertaking’ and ‘arbitration’ clauses of a non-disclosure agreement.
Answer:
Confidentiality Undertaking Clause: The Receiving Party agrees:
1. to keep confidential and not disclose to any third party, copy, reproduce reproduce, adapt, divulge, publish or circulate any part of or the whole of any Confidential Information without the prior written consent of the Disclosing Party
2. to restrict access to the Confidential Information disclosed to it under this Agreement to those of its employees and officers who need to know the same strictly for the purpose
3. not to use Confidential Information disclosed to it under this Agreement for any purpose other than the purpose
4. not to combine any part of or the whole of the Confidential Information with any other information
5. not to disclose the whole or any part of the Confidential Information to any third party without
the prior written consent of the Disclosing Party
6. prior to disclosure to such third party procuring that the third party is bound by obligations which are no less onerous than those contained in this Agreement
7. to procure that each employee -and officer to whom Confidential In-formation is disclosed under this Agreement is prior to such disclosure informed of the terms of this Agreement and agrees to be bound by them.
8. to procure that the Confidential Information in its possession is stored securely and that physical access to it is controlled.
Arbitration Clause:
1. This agreement shall be construed in accordance with and governed by the laws of India.
2. Any dispute arising in connection with or out of the performance or the interpretation of this agreement, which the parties cannot settle, shall be finally settled by arbitration. The place of arbitration shall be at …………….. The arbitration shall be governed by the provisions of the Arbitration and Conciliation Act, 1996 and the rules made there-under.
Question 4.
As a Company Secretary, prepare an information chart to be contained in for preparing a scheme of amalgamation.
Answer:
The scheme of amalgamation to be prepared by the company should contain inter alia the following information:
1. Definitions of transferor and transferee as well as the definition of the undertaking of the transferor company.
2. Authorised, issued and subscribed capital of transferor and transferee companies.
3. Basis of scheme should be explained briefly on the recommendation of valuation report, covering transfer of assets/liabilities, specified date, reduction or consolidation of capital, application to financial institutions as lead institution for permission, etc.
4. Change of name, object and accounting year.
5. Protection of employment.
6. Dividend position and prospects.
7. Management structure, indicating the number of directors of the transferee company and the transferor company.
8. Applications under sections 230 and 232 of the Companies Act, 2013 to obtain approval from the Tribunal.
9. Expenses of amalgamation.
10. Conditions of the scheme to become effective and operative and the effective date of amalgamation.
The basis of the scheme should be framed on the reports of valuers for both the merger partner companies.
11. The underlying idea is to ensure that the scheme is just and equitable to the shareholders and employees of each of the amalgamating companies and to the public at large. It should be ensured that common yardstick is adopted for valuation of shares of each of the amalgamating company for fixing rate of exchange of shares on merger.
Question 5.
What is the purpose of Documentation?
Answer:
Following are the purpose of Documentation:
Client Service : Documentation is a tool for professionals to serve better to their clients in a timely and effective manner.
Communication : Documentation is the base for better communication between professionals. Clear, complete, accurate and factual documentation provides a reliable, permanent record of client.
Accountability : Documentation indicates professional accountability and records the work of the professional. It may be used in relation to performance management, internal inquiries, regulatory proceedings and/or legal proceedings.
Professional Responsibility : Documentation is an integral part of professional practice and forms the basis for evidence of professional conduct.
Legal Requirement : Professionals are required to make and keep records of their professional work in accordance with practice standards followed and organisational policy. However, the laws mandate specific information to be recorded and maintained.
Quality : Documentation may be used to evaluate professional practice in terms of Peer reviews, Quality reviews, audits and accreditation processes, Regulatory inspections or critical incident reviews.
Research : Documentation is a valuable source of data for researchers. It provides information to professional, evaluates client outcomes and is a concise record essential for accurate research data and evidence based practice.
Resource Management : Accurate and comprehensive documentation is a priceless source of evidence and provide basis for resource management.
Question 6.
What are the guiding principles for Good Documentation?
Answer:
The guiding principles for good documentation are as under:
- Clear
- Concise
- Complete
- Contemporary
- Consecutive
- Correct
- Comprehensive
- Collaborative
- Client Centric
- Confidential
Question 7.
Mr. Welkinson Xu want to know few examples of poor and good documentation practices to improve his skills. List out five examples of each to help him?
Answer:
List of five examples of each as guidance for Mr. Welkinson Xu are discussed below:
Five examples of Poor Documentation:
- The delegation of work is not recorded/documented.
- Recording of events is not in sequence & tabled.
- Document with errors, correction, not signed/dated, and didn’t include a reason for the correction.
- Write-over, multiple line-through and use of “White-out” or other masking device.
- Standards operating procedures as adopted by the professional is not authorised.
Five examples of Good Documentation:
- Records should be completed at time of activity or when any action is taken.
- Superseded documents should be retained for a specific period of time.
- Concise, legible, accurate and traceable.
- Clear examples.
- Don’t assume knowledge.
Question 8.
What do you understand by Document Management System (DMS)? List out few advantages of DMS?
Answer:
The term “document management system” can be defined as the software that controls and organizes documents of an organization. It incorporates document and content capture, workflow, document repositories and output systems, and information retrieval systems.
Few advantages of DMS:
- Ease in Audit trail.
- Document Version Control.
- Roll-back options/Retrieve option.
- Annotation and Stamps.
- Locking and unlocking of Document.
- Simultaneous editing.
- Tracking on check-in/check-out by various officers.
Question 9.
Discuss advantages of “Electronic Records”?
Answer:
Following are advantage of “Electronic Records”:
Cost Effective : Storing and maintaining records in digital form is much cheaper than in any other format. With the increase in the technology advancement, the Digital media costs drop every day.
Ease of use : It’s very easy to locate and share electronic documents through Computers aid searching now-a-days the process of filing doesn’t exist anymore.
Labour savings : With electronic documents all the steps like filing collating, stapling etc. can be automated and that labour completely disappears.
Search ability : Electronic documents can be made searchable by doing OCR of a document and make the whole text keyword searchable. That is not possible with paper documents.
Portability : It’s very easy to transport electronic documents. No more boxes of records and trucks and semi-trucks to haul records archives.
Version tracking : In case of the version tracking it is very easy with electronic documents, making it easy to see who has made changes to a document, when they made those and what the document looked like before the change.
Question 10.
Discuss disadvantages of “Electronic Records”?
Answer:
Following are disadvantages of “Electronic Records”:
Software risk: Storing records in an electronic document management system have a risk that the system being no longer supported by the software company. The company will cease, to exist and the documents will be locked in an unsupported system resulting in payment of conversion costs to recover them.
Format risk: When storing the records in electronic format the risk – of not being able to read them at some point exists.
Example : Some of the software are become the standard storage format now-a-days like PDF, JPEG, etc., but there is a risk that such software will cease to exist, be purchased or no longer support PDF format, and then it will be difficult in the future to read those PDF documents.
Media compatibility : Maintenance of images in a good, viable format, and have to maintain those images on media that the person can access. Overcoming those problems is always a risk with electronic documents.
Reliability : Paper is an agnostic format. All person needs to have is a light source and some eyes to be able to read paper. It’s a good idea to have most vital documents imaged, but keeping a paper copy assures that the person have access to them anytime. A person should keep a paper copy of vital documents – deeds, corporate documents-stored in a safe off-site location.
Question 11.
Difference between Virtual and Physical Data Room?
Answer:
Following are difference between Virtual and Physical Data Room as discussed below:
| Basis of Distinction | Physical Data Room | Virtual Data Room |
| Form of documents | Papers, files, boxes or other tangible thing. | Electronic/Digital/soft copies of documents including video/audio documents. |
| Security of documents | Lies with the integrity of person who is in charge of the data room. | More secured through specific login id and password. In addition facilities like internet fire walls are there. |
| Required Time for creation of data room | Longer time required | Can be created within 48 hours once demands of prospective bidders are identified. |
| Convenience | Searching the documents is time consuming. | More convenient as it enables multiple bidders to review documents at the same time with search facility also. |
| Accessibility to data room | Restricted Timings to access data. | Data accessed any time. |
| Facility to restrict access of specific document | Difficult to implement any restriction | Restricted access. |
| Ability to Copy | Possible | Not possible always. |
| Cost | Cost is high because of reasons like | Cost is Low as the documents can be viewed from any location with internet security. |
Question 12.
List out ten basic rules that serve as general guidelines in structuring folder and file names.
Answer:
The ten basic rules that could serve as a general guideline m structuring folder and file naming are:
- Avoid extra long folder names and complex hierarchical structures but use information-rich filenames instead.
- Put sufficient elements in the structure for easy retrieval and identification but do not overdo it.
- Use underscore as element delimiter. Do not use spaces or other characters.
- Use the hyphen to delimit words within an element or capitalize the first letter of each word within an element.
- Elements should be ordered from general to specific detail of importance as much as possible.
- The order of importance rule holds true when elements include date and time stamps. Dates should be ordered. Time should be ordered. Example : For Date(s): YYYYMMDD, DDMMYYYY, YYYYMM. For Time – Hour, Minutes, Seconds.
- Personal names within an element should have family name first followed by first names or initials.
- Abbreviate the content of elements whenever possible.
- An element for version control should start with V followed by at least 2 digits and should be placed as the last most elements.
- Prefix the names of the pertinent sub-folders to the file name of files that are being shared via email or portable storage devices.
Question 13.
Write Short Note on: “Key Concepts governing the care of records and archives*’.
Answer:
The care of records and archives is governed by three key concepts as follows:
1. Keeping together:
- The records must be kept together according to the department/Section responsible for their creation or accumulation, in the original order established at the time of their creation.
- This gives them their ‘evidential’ nature and distinguishes them from other kinds of information.
- This is true for paper-based records as well as the electronic records.
2. Ensure life cycle: Every records follow a ‘life-cycle’, in that they are created, used for so long as they have continuing value and then disposed of by destruction or by transfer to an archival institution.
Every record pass through three main phases:
- Current phase : In the current phase, they are used regularly in the conduct of current business and maintained in their place of origin or in the file store of an associated records office or registry.
- Semi-current phase : In the semi-current phase, they are used infrequently in the conduct of current business and are maintained in a records center.
- Non-current phase : In the non-current phase, they are destroyed unless they have a continuing value which merits their preservation as archives in an archival institution.
3. Record Preservation:
The care of records and archives is that the care should be managed through a coherent and consistent range of actions from the development of record-keeping systems, through the creation and preservation of records to their use as archives.
The concept suggests that four actions continue or reappear throughout the life of a record: i.e.,
- Identification of records
- Intellectual control
- Provision of access
- Physical control.
Question 14.
What are the required factors needed to be considered for preparation of the preservation and archival policy of the Company?
Answer:
The following factors need to be considered in the preparation of the preservation and archival policy of the company:
1. Analysis and Restructuring Existing Systems:
- Reviewing and revising legislation and policies
- Reviewing and revising organizational policies and structures
- Determining resource requirements, such as facilities and staffing
- Developing strategic and business plans.
2. Organizing and Controlling Records:
- Building sound record-keeping systems
- Managing the creation, maintenance, and use of files
3. Providing Physical Protection for Records:
- Implementing and maintaining preservation measures
- Developing emergency plans to protect records.
- Identifying and protecting vital records.
4. Managing Records in Records Centres:
- Developing and maintaining records centre facilities.
- Transferring, storing, and retrieving records according to disposal schedules.
- Disposing of records as indicated by the schedules.
5. Managing Archives:
- Acquiring and receiving archives.
- Arranging and describing archives according to archival principles.
- Providing public access to the archives.
6. Supporting and Sustaining the Program:
- Promoting records services to the government and the public.
- Promoting education for records and archives personnel.
- Developing and expanding the records and archives professions.
Question 15.
Comment on given statement: “To assure the best quality of documents, it is to be assured that sufficient records are maintained to furnish evidence of the activities affecting quality”.
Answer:
To assure the best quality of documents, it is to be assured that sufficient records are maintained to furnish evidence of the activities affecting | quality. The records should incorporate the following:
- Operating logs : The names of the individuals who all have worked on the same documents.
- Results of reviews : The recording of the changes suggested by each reviewer and basis of the rejection on Non-agreement.
- Inspections : List of individuals who have access of the records and have inspection rights of the same.
- Monitoring of work performance : Ease in the monitoring of work performed by the person to whom the file is shared.
- Information analyses : Provide ease in the Information system of the organization and tracking of files.
Thus, every record must be well managed in order to ensure that they are protected for both administrative purposes and to serve as evidence of the organization’s work. .
Question 16.
List out documents whose preservation shall be permanent in nature.
Answer:
Documents whose preservation shall be permanent in nature:
- Property records including purchase and sale deeds, licences, copy-rights, patents & trademarks.
- Corporate Records including Certificate of Incorporation, Common Seal, Minutes of Board, Committee and Shareholders’ Meetings, Register of Members and other Statutory Records.
- Personal files of all employees.
- Any other record as may be decided by the Chief Executive Officer/Managing Director/Whole-time Director of the Company from time to time.
Question 17.
List out documents whose preservation shall not be less than eight years after completion of relevant transaction.
Answer:
Documents whose preservation period shall not be less than eight years after completion of the relevant transactions:
- Books of Account, Bank Statements and vouchers.
- Filings with Stock Exchanges, Registrar of Companies and other statutory authorities.
- Payroll Records, Employee deduction authorisations, attendance re-cords, employee medical records,
- leave records, Pension and retrial related records, etc.
- Corporate Social Responsibility Records.
- Sponsorship Projects Records.
Question 18.
List out documents whose preservation shall not be for a minimum period of three years after completion of Event.
Answer:
Documents whose preservation shall be for a minimum period of three years after completion of the event:
- Tender Documents
- Lease Deeds and Contracts
- Legal files
- Insurance Records including policies and claims.
- Any other record as may be decided by the Chief Executive Officer
- Managing Director/Whole-time Director of the Company from time to time.
Documents under Secretarial Standards:
- Proof of sending Notice of the meetings of the Board/Committee and General meetings and its delivery.
- Proof of sending Agenda and Notes on Agenda and their delivery.
- Proof of sending draft Minutes of the Board/Committee and its delivery.
- Proof of sending signed Minutes of the Board/Committee and its delivery.
Question 19.
What are the factors to be considered for Setting up Data Room?
Answer:
The following factors should be considered while setting up Data Room:
Humidity : An excess of humidity creates fungus and produces a proliferation of corrosive insects. The lack of humidity, on the other hand, produces brittle and fragile sheets of paper. A controlled humidity between 3096 and 4096 is the best standard for preservation.
Temperature : The lower is the temperature the better is for preservation of Records. However, suggested to maintain normal temperature in the record room which is required for comfortable standard for human beings in public places.
Light : Light has a considerable impact on document’s preservation. The visible light to the human eye along with the infrared or ultraviolet radiation could cause damages.
Question 20.
Write Short Note on: “Personal Data Protection Bill, 2019”.
Answer:
1. The Personal Data Protection Bill, 2019 was introduced in Lok Sabha by the Minister of Electronics and Information Technology, Mr. Ravi Shankar Prasad, on December 11, 2019. The Bill seeks to provide for protection of personal data of individuals and establishes Data Protection Authority for the same.
2. The Bill governs the processing of personal data by:
- Government
- Companies incorporated in India.
- Foreign companies dealing with personal data of individuals in India.
3. The Bill allows processing of data by fiduciaries only if consent is provided by the individual. However, in certain circumstances, personal data can be processed without consent. These include:
- if required by the State for providing benefits to the individual
- legal proceedings
- to respond to a medical emergency.
Question 21.
List three documents which are primarily considered as confidential and need complete privacy in case of any business house.
Answer:
For any business house the following three documents are primarily considered as confidential and need complete privacy:
- Customer’s & Employees’ Information.
- Office Plans, Office IDs and Internal Procedure Manuals.
- Contracts and Commercial Documents and Trade Secretes.
Question 22.
Enumerate the procedures adopted by company for protection of confidential information.
Answer:
The Company may adopt the following procedures for protecting confidential information:
- All confidential documents should be stored in locked file cabinets or rooms and these documents are accessible only to those who are having authorisation to use such documents.
- All electronic confidential information should be protected via firewalls, encryption and passwords.
- Employees should clear their desks of any confidential information before going home at the end of the day.
- Employees should refrain from leaving confidential information visible on their computer monitors when they leave their work stations.
- All confidential information, whether contained on written documents or electronically, should be marked as “confidential”.
- All confidential information should be disposed off properly.
- Employees should refrain from discussing confidential information in public places.
- Employees should avoid using e-mail to transmit certain sensitive or controversial information.