While a task can be delegated, the responsibility or consequence arising from that task can never be, as the delegator pays the price for its non-performance or wrong-performance. This point needs reiteration especially in the case of MBP-1, where Directors give the details of the companies and firms in which they are interested-in for it to be recognized as a related party. Given the current climate of stringent regulatory enforcement in corporate law today, any company or firm that is missed out in this form has major implications, as it will result in violation of sections 184 and 188.
For the Director who signs an incomplete or incorrect statement, the penalty as per provisions of section 184 (4) is imprisonment which may be extended to one year or with fine which may be extended to Rs.1 lakhs or both. Further under section 188 the Company is also subject to penalties for violation of related party transactions specified in Section 188 of the Companies Act, 2013 which deals with related party transaction. This stringent penal provisions for violation, is as detailed here:
- For unlisted companies -fine of a minimum of Rs.25,000 which may extend to a maximum of Rs.5 lakhs,
- For listed companies- Imprisonment for a term which may extend to one year or monetary penalty which is the same as for an unlisted entity, or with both
More by convention, many Company Secretaries in filling up MBP-1, a form that lists out all the entities in which the director has an interest have been performing the job of a personal secretary as it requires complete knowledge of all the activities of the director. Despite their good intent and desire to help, they could be causing serious problems to the individual director and the company due to their knowledge being incomplete or not up to date.
Added to this, when a competent person presents a document for review and signature, the director may also not be giving it the attention it requires resulting in incomplete statements being filed with the company, with a great cost to both the company and the individual director.
Taking a cue from the CEO and CFO Certification of the financial statements required for a listed entity, the director signing MBP-1 form, could be required to give an undertaking containing the following assertions:
‘I, (name of the director) hereby certify that
- I have reviewed all the information contained in this form and confirm that it is updated reflecting all my investments and appointments, and
- That there is no information that is missing which is required to be included in this form.’
Finally, a change in law will remain only on paper if behaviors do not change. The place where the behavior needs to start changing is that of the company secretaries who need to start acting as professional company secretaries and not as an extension of personal secretaries of their Directors.