Position of Company Secretaries under the Companies Bill, 2011
November 1, 2012
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 A view has emerged that the Act in its present form is cumbersome and outdated and there is a need for a total overhaul, namely a new comprehensive law.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,—
- 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)
- Clause 140 of the Companies Bill, 2011 -
- Clause 432 of the Companies Bill, 2011, corresponds to section 10GD of the Companies Act, 1956 -
- Clause 7(1)(b) of the Companies Bill, 2011, in the form to be prescribed by Central Government -
- Qualifications of President and Members of Tribunal (Clause 409)