Introduction The present Companies Act in India was enacted in 1956 and has since been amended nearly 20 - 25 times by incorporating several major and minor alterations and also effecting several deletions. Moreover, over the years hundreds of circulars and notifications have also enlarged the scope of the Act. A view has emerged that the Act in its present form is cumbersome and outdated and there is a need for a total overhaul, namely a new comprehensive law. After several earlier attempts the Companies Bill, 2011 (Bill) is on the anvil. The Government expects to table the bill in the winter session of parliament after considering the various recommendations/ amendments made by parliamentary standing committee on Finance and union cabinet. Object of the Bill In view of the changing economic and commercial environment both, national as well as global, the new law seeks to increase transparency, aims at improving corporate governance and makes independent directors more accountable, reduces gender disparity by introducing quotas for woman board members and makes rotation of auditors mandatory. The Bill has been designed mainly with the intent to modernize the structure of corporate regulation in India and to promote the development of the Indian corporate sector through enlightened regulation and good corporate governance practices. Now this write - up tries to throw light on the position of Company Secretaries under the Companies Bill, 2011 Background To create a brand new avenue for students of commerce, the Company Secretaries Act, 1980 came into effect with the intention of academically and professionally structuring the role of a Company Secretary in a commercial entity. Company Secretaries have been amongst the most valued professionals in terms of importance and impact. Despite the name the role of a Company Secretary is neither clerical or secretarial; in fact, a Company Secretary is typically a senior managerial personnel in the corporate structure ensuring efficient administration of the Company and adherence to the various compliances of the Act and finally certifying all the compliances as per applicable provisions of the Act. A Company Secretary helps the company to avoid failures in compliance which can be very debilitating. In the Companies Bill, 2011 a significant importance has been given to the Company Secretary either in employment or in practice which is more elaborated hereunder: As per clause 2(51) of the Bill, the definition of ''Key Managerial Persons'' includes a Company Secretary apart from the MD, CEO and CFO. As per Clause 203 of the Companies Bill, 2011, Company Secretaries are recognized as Whole-time Key Managerial Personnel (KMP) along with Managing Director, Chief Executive Officer, Chief Financial Officer and Managers. Appointment of Key Managerial Personnel [Clause 203 (1)] Every Company belonging to such class or classes of Companies as may be prescribed* shall have the following whole-time key managerial personnel,—
Clause 140 of the Companies Bill, 2011 -
This clause corresponds to clause 225 of the Companies Act, 1956 which is in relation to provisions for removal of auditor before the expiry of his terms. The tribunal is empowered to change the auditor of a Company in case of any fraudulent activities by auditor. A Company Secretary in practice [or] an auditor [or] a cost accountant in practice shall immediately report to the Central Government, if they in pursuance of their duties have reason to believe that an offence involving fraud is being committed against the Company.
Clause 432 of the Companies Bill, 2011, corresponds to section 10GD of the Companies Act, 1956 -
seeks to provide that a party to the proceeding may appear in person or authorize a Chartered Accountant, Cost Accountant, Company Secretary or Legal Practitioner to present the case before the Tribunal or the Appellate Tribunal.
Clause 7(1)(b) of the Companies Bill, 2011, in the form to be prescribed by Central Government -
A Company Secretary in Practice engaged in the incorporation of a Company, shall declare that all requirements of the Act and rules in respect of registration and the matters precedent or incidental thereto have been complied with.
Qualifications of President and Members of Tribunal (Clause 409)
The constitution of the Tribunal shall widen the scope of services for Practicing Company Secretaries. Amongst others, a Company Secretary in practice is eligible to become a Technical Member of National Company law Tribunal or the Appellate Tribunal, if he is in practice for at least fifteen years.
In a broader view, it is the beginning of a new era where non financial standards have been
given importance and statutory recognition along with the Financial Standards in the Companies Bill, 2011.
More particularly due recognition has been given to the Company Secretary professionals and the Institute of Company Secretaries of India. Company Secretaries are recognized as whole-time key managerial personnel to act as a vital link between the Company and its Board of Directors, shareholders, government and other regulatory authorities. The Companies Bill 2011 offers great scope for Company Secretaries not only to act as liquidator/administrator but also to represent the various stakeholders before the Tribunal. It is a complete new beginning for Company Secretary Profession as more opportunities are provided as also challenges in the proper implementation and compliance of various provisions of the Act failing which huge penalties are imposed for violation of clauses.
- Managing Director, or Chief Executive Officer or manager and in their absence, a whole-time director; and
- Company Secretary [Company Secretary here means a Member of the Institute of Company Secretaries of India.]
- on Company - not less than Rs. 1.00 Lac but which may extend to Rs. 5.00 Lac.
- every director and key managerial personnel of the Company who is in default, a penalty which may extend to - Rs. 50,000/- and with a further penalty which may extend to Rs. 1,000/- per day in case this contravention continues.
• A director and the Company Secretary, or where there is no Company Secretary, by a Company Secretary in whole-time practice.It means that now in respect of all the companies, whether private or public, listed or unlisted, if no Company Secretary is appointed by the Company, the Annual Return is compulsorily required to be signed by the Company Secretary in practice.
• Further, in case of listed companies and companies having such paid-up capital and turnover as may be prescribed, the Annual Return is also to be signed by a Company Secretary in whole-time practice certifying that the annual return states the facts correctly and adequately and that the Company has complied with all the provisions of the Act.It means, in case of a listed Company, even if the Annual Return is signed by the Company Secretary in employment of the Company, it is further required to be signed by the Company Secretary in Whole time practice.
• In relation to a One Person Company and Small Company, the annual return is required to be signed by the Company Secretary, or where there is no Company Secretary, by one director of the Company.Penal Provisions for non compliance of Clause 92 If a Company Secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be punishable with fine which shall not be less than Rs. 50,000/-, but which may extend to Rs.5.00 Lacs. Functions of a Company Secretary Through clause 205, Functions of a Company Secretary are proposed for the very first time, which shall include—
- to report to the Board about compliance with the provisions of this Act, the rules made there under and other laws applicable to the Company;
- to ensure that the Company complies with the applicable secretarial standards issued by the Institute of Company Secretaries of India (ICSI) and approved by Central Government;
- to discharge such other duties as may be prescribed.
- Every listed Company and a Company belonging to other class of Companies as may be prescribed shall annex with its Board’s report a Secretarial Audit Report, given by a Company Secretary in Practice, in such form as may be prescribed.
- It shall be the duty of the Company to give all assistance and facilities to the Company Secretary in Practice, for auditing the secretarial and related records of the Company. The Board of Directors, in their report shall explain in full any qualification or observation or other remarks made by the Company Secretary in Practice in his report.
- Professional assistance to Company Liquidator (Clause 291)