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 A view has emerged that the Act in its present form is cumbersome and outdated and there is a need for a total overhaul, namely a new comprehensive law.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
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,—
* Sub-clause (1) of clause 203 proposes to empower the Central Government to prescribe class or classes of companies who shall be required to have whole-time key managerial personnel.
Every Company Secretary being a KMP shall be appointed by a resolution of the Board which shall contain the terms and conditions of appointment including the remuneration. If the vacancy in the office of KMP is created, the same has to be filled up by the Board at a meeting of the Board within a period of six months from the date of such vacancy [clause 203(2) & (4)].
Provisions of penalty for non-appointment of Company Secretary
Earlier, the penalty for non-appointment of Company Secretary(CS) was Rs. 500/- per day. But considering the importance of appointment of Company Secretary, the Companies Bill, 2011 propose penalty for non-appointment of CS as follows:
Provisions for signing the Annual Return of a Company as per Clause 92 of the Companies Bill, 2011
A much detailed role has been proposed for Company Secretaries both in employment and in practice through clause 92 of the Companies Bill, 2011.
As per clause 92 of the new Companies Bill, 2011, every Company shall prepare its Annual return in the prescribed format containing the particulars as they are at the close of the financial year similarly to previous Section 159 of the Companies Act, 1956.
Now the Annual Return is required to be signed by:
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.
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.
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—
For the first time, the secretarial standards have been introduced and provided statutory recognition [refer clause 118 (10) & 205]. This shows that the law makers are quite serious regarding the position of Company Secretaries in the corporate and this is the reason why major responsibilities are prescribed for Company Secretaries in the Companies Bill, 2011.
For the Growth of the profession it is really a good and welcome approach from the Government.
Introduction of Secretarial Audit
Based on the recommendations made by , the Parliamentary Standing Committee Secretarial Audit has been introduced in pursuant to clause 204 of the Companies Bill, 2011, the provisions of the Secretarial Audit are as follows:
Penalty: If a Company or any officer of the Company or the Company Secretary in Practice, contravenes the provisions of this clause, the Company, every officer of the Company or the Company Secretary in Practice, who is in default, shall be punishable with fine which shall not be less than Rs. 1.00 Lac but which may extend to Rs. 5.00 Lac. Introduction of Secretarial Audit proves that Government is serious about good Corporate Governance.
That is why Secretarial Audit is made mandatory by an independent professional i. e. Company Secretary in Practice which is a very healthy move for good governance and for the profession of Company Secretary.
Some other provisions giving recognition to the profession of Company Secretaries
The Company Liquidator may, with the sanction of the Tribunal, appoint one or more professionals including Company Secretaries to assist him in the performance of his duties and functions under the Act.
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.
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.
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.
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.