This article on ‘Website Disclosure Under the Companies Act, 2013‘ was written by Swaroopa Royadu, an intern at Legal Upanishad.
Introduction
This article is about website disclosure under the Companies Act, 2013. The article covers legislation governing website disclosure, what kind of information should be disclosed on the website by a company, why the information should be disclosed, and many other aspects related to website disclosure by the company.
What is a Company?
A company is a voluntary association of people, with the common objective to make a profit. The company is an artificial person created by the law with a separate legal entity, a common seal, and perpetual succession.
The Companies Act, 1956 was replaced by the Companies Act, 2013 to meet the changing needs of companies, investors, shareholders, and the public. One of the objectives of the companies Act, 2013 is to protect investors, shareholders, and other people who are interested in a company from fraudulent activities by the company and to have transparency in every transaction.
What is a Website?
In simple words, the website is a page (web page) or group of connected pages, that consists of information on a particular topic or subject that is published by the same person or organization, or company on the internet.
Reasons for disclosing websites by companies
With the increased use of the internet over decades, the internet has become one of the primary sources of information in our day-to-day life. Similarly, one can collect information about the company by accessing its website. But, how can one determine that the information on a particular website is genuine, updated, and reliable? What if the company hides any information or showcases old records on its website? To overcome these problems and to have transparency in business, the Companies Act, 2013 mandated the disclosure of websites. The Act also clearly specifies which information is mandatory for a company to mention on its website.
Legislation governing website disclosure
- Security Exchange Board of India Listing [obligation and Disclosure Requirements] Regulation 2015.
- The Companies Act, 2013.
- Security Exchange Board of India [Prohibition of insider Training] Regulation 2015.
What information should be disclosed on the website according to The Companies Act, 2013:
Information that is to be mandatorily disclosed by the Company is based on the type of Company.
- Private Company: Mandatory information that a private company should disclose on its website includes disclosing of:
- The annual report under section 92 of the Companies Act, 2013.
- Corporate social responsibility policy under section 135 of the Companies Act, 2013.
- Notice of General Meeting under section 101 read with rule 18 of Companies (Management and Administration) Rules 2014.
- Notice of Resignation of Director under section 168 read with rule 15 of Companies (Appointment and Qualification) Rule 2014.
- Details of unpaid dividend.
- Appointment of independent director.
- Notice of candidature of a person for directorship.
- Private Company: Along with the information that the private company provides, the public Company should also disclose the following information according to the provision of The Companies Act, 2013. Other information that should be published includes changes in objects of business, voting by electronic means, circular of deposits from the public, closure of register of members, shareholders or debenture holders, a notice of postal ballot, details of unpaid dividends, details of Remuneration and nomination policy, details of vigil mechanism, terms of appointment of independent director, any agreements of a company must be published in the website, a notice of resignation from the director is also considered as one of the important information that needs to be published in the website.
- Listed companies: Listed companies are governed by the Companies Act, 2013, and the security exchange board of India (Listing obligation and Disclosure Requirements) Regulations, 2015. The information that is to be disclosed includes details of business activities, the appointment of an independent director, financial statement and consolidated financial statement, disclosure related to party transactions, event information, annual report, dividend distribution policy, shareholding pattern, and many more.
- A company that runs the online business: Companies that carry business online have to follow certain rules and regulations under section 12 of the Companies [Incorporation]Rule, 2014 concerning the disclosure of website information. The information to be disclosed includes the Company’s Name, Address of the registered office, phone and fax number, corporate Identity number, email Id, and the name of the person who handles grievances by the customers.
Issues
Having a website for every company is not mandatory. But, if a company has a website, then disclosing the information as per the Companies Act, 2013 is mandatory. There are no specific provisions in the Act that deal with punishments or penalizing the defaulter. However, Section 450 of the Companies Act, 2013 specifies the penalty for the person who defaults in following the provision of this Act. Some of the issues associated are:
- Companies may not follow the rules because there is no specific punishment or penalty for not publishing the mandatory information on the website.
- There are no specific bodies to monitor whether the companies are actually following the rules and regulations framed by the Act.
- Corruption is another problem. The chances of taking a bribe and allowing the companies to operate without disclosing the necessary information are other problems.
- Failure to update information, and delay in changing the information as and when needed results in giving wrong information to the public.
Analysis of the issue
The Companies Act must specify the exact punishment for not following the rules and regulations of the Act with respect to the disclosure of the website. Committees can be made to check whether the companies are following the guidelines specified in the Act.
Conclusion
The Internet is one of the sources these days for the company to get a wider market. People rely on the information provided on the website to make business or invest in the company. Following the provisions of the Companies Act, 2013, and disclosing all mandatory information on the website will make the transactions more transparent and reduces the chances of Fraudulent activity by the companies.
Reference
- “Website disclosure as per Companies Act and SEBI listing obligations and disclosure requirements’’ – Retrieved https://aracs.in/website-disclosures-as-per-companies-act-and-sebi-listing-obligations-and-disclosure-requirements-lodr-2015/
- Website disclosure under companies Act – retrieved https://cleartax.in/s/website-disclosures-companies-act-2013#:~:text=The%20Companies%20Act%202013%20mandates,case%20of%20any%20grievances%2Fqueries
- Deepali Yadav, (02/November/2021) “Regulatory framework for website disclosure to be made by listed companies in India” https://blog.ipleaders.in/regulatory-framework-for-website-disclosures-to-be-made-by-listed-companies-in-india/
- “Disclosures on website by private limited company” https://aracs.in/wp-content/uploads/2021/09/Disclosure-to-be-made-on-website-by-private-company.pdf