Checklist For Maintenance And Inspection of Documents In Electronic Form


Section 120 of the Companies Act, 2013 (the Act) provides for maintenance of documents in electronic form. The provisions also provide for inspection of documents maintained in electronic form. It states that any document, record, register, minutes, etc. that are required to be kept by a company or allowed to be inspected or copies to be given to any person by a company under the Act, may be kept or inspected or copies given, as the case may be, in electronic form.

Section 2(36) of the Act relates to the definition of “document” which includes summons, notice, requisition, order, declaration, form and register, whether issued, sent or kept in pursuance of the Act or under any other law for the time being in force or otherwise, maintained on paper or in electronic form. The term “records” means any register, index, agreement, memorandum, minutes or any other document required by the Act or the Rules made thereunder to be kept by a company. Therefore, such documents and records can also be maintained in electronic form.

This article is a compilation and analysis of the relevant provisions relating to maintenance and inspection of documents in electronic form. The article also contains the checklist on maintenance of such documents and records. The company shall ensure compliance of the following provisions:

(1) Applicable provisions.—Section 120 of the Act read with Rules 27, 28, 29 and 30 of the Companies (Management and Administration) Rules, 2014.

(2)?Applicability.—Every listed company or a company having not less than 1000 shareholders, debenture-holders and other security holders, may maintain its records, as required to be maintained under the Act or Rules made thereunder, in electronic form. The Ministry of Corporate Affairs in the Rules has clarified that in case of existing companies (i.e. companies as on 1-4-2014), the said data may be converted from physical mode to electronic mode within 6 months from the date of notification of provisions of Section 120 of the Act (this is a transition provision).

(3) Maintenance of records in electronic form.—The records in electronic form shall be maintained in such manner as the Board of Directors of the company may think fit. The records shall be maintained in the following manner:

(i) Records are maintained in the same formats and in accordance with all other requirements as provided in the Act or Rules made thereunder.

(ii) Information as required under the provisions of the Act or the Rules made thereunder should be adequately recorded for future reference.

(iii) Records must be capable of being readable, retrievable and reproducible in printed form.

(iv) Records are capable of being dated and signed digitally wherever it is required under the provisions of the Act or the Rules made thereunder.

(v) Records, once dated and signed digitally, shall not be capable of being edited or altered.

(vi) Records shall be capable of being updated, according to the provisions of the Act or the Rules made thereunder, and the date of updating shall be capable of being recorded on every updating.

(4) Security of records maintained in electronic form.—Managing Director, Company Secretary or any other director or officer of the company as the Board of Directors may decide, shall be responsible for the maintenance and security of electronic records.

(5) Role of the person who is responsible for the maintenance and security of electronic records.—The person who is responsible for the maintenance and security of electronic records shall:

(i) provide adequate protection against unauthorised access, alteration or tampering of records:

(ii) ensure against loss of the records as a result of damage to, or failure of the media on which the records are maintained:

(iii) ensure that the signatory of electronic records does not repudiate the signed record as not genuine:

(iv) ensure that computer systems, software and hardware are adequately secured and validated to ensure their accuracy, reliability and consistent intended performance:

(v) ensure that the computer systems can discern invalid and altered records:

(vi) ensure that records are accurate, accessible, and capable of being reproduced for reference later:

(vii) ensure that the records are at all times capable of being retrieved to a readable and printable form:

(viii) ensure that records are kept in a non-rewritable and non-erasable format like pdf version or some other version which cannot be altered or tampered:

(ix) ensure that at least one backup, taken at a periodicity of not exceeding one day, are kept of the updated records kept in electronic form, every backup is authenticated and dated and such backups shall be securely kept at such places as may be decided by the Board:

(x) limit the access to the records to Managing Director, Company Secretary or any other director or officer or persons performing work of the company as may be authorised by the Board of Directors in this behalf:

(xi) ensure that any reproduction of non-electronic original records in electronic form is complete, authentic, true and legible when retrieved:

(xii) arrange and index the records in a way that permits easy location, access and retrieval of any particular record: and

(xiii) take necessary steps to ensure security, integrity and confidentiality of records.

Few of the points are very important from the perspective of corporate secretarial compliance. The duty of the company is prescribed by defining the role of the person who is responsible for the maintenance and security of electronic records. The responsible person shall provide necessary steps to ensure security, integrity and confidentiality of records. There should be adequate protection against unauthorised access, alteration or tampering of records. The person concerned shall also take efforts to avoid any loss of the records. The computer systems, software and hardware are adequately secured and the computer systems can distinguish between invalid and altered records. The records are accurate, accessible, and capable of being reproduced for reference later. The records are at all times capable of being retrieved to a readable and printable form. The provisions provide for at least one backup to be taken at a periodicity of not exceeding 1 day.

(6) Inspection and copies of records maintained in electronic form.—Where a company maintains its records in electronic form, any duty (as provided by the Act or Rules made thereunder) to make those records available for inspection or to provide copies of the whole or a part of those records, shall be construed as a duty to make the records available for inspection in electronic form or to provide copies of those records containing a clear reproduction of the whole or part thereof, as the case may be on payment of not exceeding Rs 10 per page.

Gaurav N Pingle, Practising Company Secretary, Pune. He can be reached at gp@csgauravpingle.com.

 

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