SEBI disqualified 3 lakhs directors

Why SEBI disqualified 3 lakhs directors

The recent disqualification of 3 lakhs directors, deletion of 2 lakh companies by Ministry of Corporate Affairs and compulsory delisting of 200 companies by Bombay Stock Exchange rattled corporate India forcing all Board Members, Senior Management and Auditors to re-check the compliance status of their companies. It clearly comes out that the non-compliance forcing regulator can take such a strong action.

Large and mid-size corporates often implement ERPs spending lakhs and crores, but still miss out of many critical areas of businesses are untouched by technology. Though Finance remains the key focus while implementing ERPs to automate various aspects, however, functions like Compliance, Secretarial and Legal are not touched by any of the ERP players. Imagine these functions are equally crucial for any business, however, technology acceptance level for these functions is almost zero. Everyone understands at back of their mind that cost of compliance is far cheaper than cost of non-compliance, however, a continuous run for ambitious growth, profitability, revenue always keeps the Management, Board Members and Heads of these functions take technology adoption for Compliance, Secretarial and Legal function as the last priority.

Possibly businesses and leadership still feel that these are knowledge functions hence do not need technology, however, in today`s world, you need technology in every part of the business.

It has been observed that CEOs, CFOs and Chief Compliance Officers of large and mid-size corporates do not have a list of compliances in the form of technology and dashboard. These businesses let respective departments manage respective compliances with overall supervision and guidance by Chief of Compliances resulting in certain compliance’s being missed out and suddenly there is notice coming from regulator asking for explanation, penalty and at times businesses run the risk of losing their license. This proactive measure by regulators is forcing businesses to re-think technology adoption strategy and moving towards adopting technology solutions for corporate functions like Compliance, Secretarial, Legal and Tax.

Solutions like Compliance Management System, Secretarial Automation Software, Paperless Board Meeting Solution, Contract Management System and Litigation Management System are nowadays a necessity for all businesses.

Another possible risk listed companies run is maintaining physical documentation for circulating Board Meeting papers or sending documents on email IDs of Directors / their secretaries (these are free emails subscriptions run the risk of hacking). These documents are either sent through office boys in physical spiral bound papers and books or through emails, which definitely run the risk of crucial information of company secrets, financials, competitive information at the mercy of the office boy and expectation that everyone keeps Board Papers in a safe place. This may not hold true all the time and it leads to leaking of company confidential information to competition, employees or third party which can be misused and attract various penal provisions including strong action by Stock Exchanges and SEBI. A paperless board meeting solution hosted on Company`s own server can solve this problem and allow Board Members, Company Management and Company Secretary to have a Secure and Safe environment to exchange information, views and records of all Board Meetings.

Imagine a company having more than 100 legal contracts covering more than 50{e2c1e7703bf7b6642b5af6e60324f3a1752447b5447bd7c54193dc70712531ff} of their revenue and do not have a tracking mechanism. This can lead the company in a situation where a client’s contract expires and your payment is stuck or the customer comes back with a price reduction request impacting your business and profitability. A situation may arise wherein legal contracts, agreements and Purchase Order signatory and control is decentralized and suddenly the management gets a legal notice invoking open indemnity of a contract signed by someone in the company without knowledge of Legal Dept. A technology solution, awareness, and technology-based work-flow will help businesses manage their legal contract execution systematically.

All these technologies are not part of any of ERP software/system and hence CEOs and CTOs should look for tech solutions outside ERPs to enable technology in Legal, Compliance and Secretarial function. 

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