Are company secretaries’ resignations from listed companies considered as price-sensitive information for regulatory purposes?
Certainly not if one were to go by the current Securities laws.
But such resignations could soon be considered as ‘price-sensitive’ information by SEBI, the capital market regulator.
As a regulator of the company secretaries profession, the ICSI may have a persuasive value on this issue when SEBI goes about recasting the listing agreement.
The listing agreement—which is between the stock exchange and the company—may in the coming days form part of SEBI regulations (under SEBI Act) so as to provide an adequate statutory backing to it.
This could give some teeth to the capital market regulator in acting against listing agreement violations.
Price-sensitive info
Resignation of a company secretary, who is chief governance officer and compliance officer of the company, is price sensitive information, says M.S.Sahoo, Secretary, ICSI.
As a former SEBI Wholetime Member and a fellow member of the ICSI, Sahoo would know better.
He feels the same standards of disclosure as applies to price sensitive information under the securities laws should apply to resignation of a company secretary.
A company secretary could be made explicitly responsible for implementation, not just compliance, with the relevant laws, including the listing agreement, he says.
A compliance role is more check the box (tick the box) oriented, while implementation would require adherence to not only the letter, but the spirit of the regulations.
Why the sudden focus
So why at all this sudden focus on Company Secretaries’ resignations? Or whether such information should be reckoned price-sensitive or not?
The reason is not far to see.
A spate of Company Secretaries’ resignations from listed companies in the past few months has raised several eyebrows.
With the reasons for their exits not disclosed—not yet mandatory for listed companies to disclose such resignations—stakeholders are left to their own imaginations and networks to know the truth.
Thanks to some voluntary reporting to the stock exchanges, stakeholders are faced with a tepid one line communication stating that the company secretary has resigned.
Are disclosures without reasons relevant?
So how relevant are such disclosures when reasons for resignations are not mentioned?
Should not regulators stand up and take notice? Such disclosures only tend to raise more questions than provide answers.
Is the company secretary resigning because of an aversion to the piped music played in the secretarial department or the boardroom?
Or is it because of some inter-corporate transaction advised by the promoter that could turn out to be a legal infringement?.
As an insider, only the Company Secretary—who is increasingly seen as the last port of call in the boardroom—will know best.
Frontline regulator
Sahoo points out that the role of company secretaries as the front line regulator is increasing over the years under the company law and securities laws.
It is therefore not unnatural if a few company secretaries quit because of disharmony with the employers.
The Institute of Company Secretaries of India does not have hard data to indicate such disharmony, but anecdotal evidence does not rule out this possibility, says Sahoo.
An early warning signal
S.N.Ananthasubramanian, President, ICSI, wants regulators to not only make Company Secretaries’ the nodal officer for all compliance but also stipulate that his resignation should be notified to the authorities with reasons thereof.
This could become an early warning signal to those who track companies for their governance index, says the ICSI President.
“The recent resignations are indeed disturbing but they only seem to reflect the commencement of the churning process in which corporates which do not govern themselves could well be ostracised by professionals representing a societal affront”.
With Company Secretaries’—who are increasingly seen as custodians of compliance and finer aspect of governance—seeking to don the mantle of chief governance officers, their exits from listed companies’ should indeed receive regulatory attention.
Other issues
Ananthasubramanian points out that many Secretaries' resignations reflect many latent situations: higher aspirational levels, serious reputational risks, pursuit for cleaner companies and also experience utter disregard for good governance in companies from which they have resigned.
“Companies Bill seeks to address this issue squarely- their appointment requires the board to pass a resolution and their resignation should be accepted by the Board which also has an obligation to fill in the vacancy within six months or face fine”.
Any avocation with regulatory elements needs some protection.
But ICSI would like a company secretary to be sought after for the value he brings to a company and its stakeholders rather than taking shelter under formal mechanisms of protection, says Sahoo.