Know if Company secretary (CS) is required for your Company
Company secretaries work in a strategic and influential way to ensure that a company operates within the law. They need to ensure that a company complies with financial and legal requirements, as well as maintaining its high standards of corporate governance.
A company secretary is a senior position in a private sector company or public sector organization. As they have such important role in a top management of the company, their appointment is covered under the Companies Act, 2013.
Who is a Company Secretary?
As per the Companies Act, 2013 company secretary” or “secretary” means a company secretary as defined in section 2(1)(c) of the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a company secretary under this Act.
Company Secretary is a member of the (ICSI) Institute of Company Secretary of India. He has to be appointed by the company to perform the functions of the Company Secretary. He is consulted in the decision-making process framing various policies of the company. He helps determine the lawful suggestions of policy decisions.
What are the responsibilities of a Company Secretary?
The secretary so appointed is responsible for:
- The efficient administration of the company, especially with respect to the compliance aspects.
- Keeping the Board Members informed of their legal responsibilities.
- Representing the company for legal documents.
- Ensuring that the company and its directors operate within the specified legal framework.
- Registering and communicating with shareholders.
- Ensuring the proper remittance of dividends.
- Maintenance of company records.
- Organizing the meeting of the Board of Directors.
- Organizing General Meetings.
- Formulating the Memorandum and Articles of Association
- Meeting the requirements of the Stock Exchanges.
- Issuing of Share, Capital and Restructuring.
- Pursuing acquisitions, disposal and mergers.
- Corporate Governance.
- Other relevant responsibilities.
Is a Company Secretary a KMP in a company?
According to Section 203 of the Companies Act, 2013, it is necessary for a certain class of companies to appoint the whole time key managerial personnel. The following Key Managerial Personnel (KMP) are as follows:
- Managing Director (MD), Chief Executive Officer (CEO), Manager, or, in their absence, a whole-time director
- CS (Company Secretary)
- CFO (Chief Financial Officer).
Hence, this makes the appointment of whole-time Company Secretary mandatory and he/she is to be considered as the KMP of the company.
Which companies need to appoint a Whole Time Company Secretary?
Following Companies need to appoint a whole time company secretary, mandatorily:
- All Listed Companies
- Public Companies which have Rs. 10 Crore or more paid-up share capital
- Private Companies which have Rs. 10 Crore or more paid-up share capital
Hence, every company which has a paid-up share capital of Rs 10 Crore or more is mandatorily required to appoint the whole time CS (Company Secretary).
Is any penalty applicable if such appointment is not made?
- Any company which is mandatorily required to appoint a Company Secretary (CS) and who fails to make such appointments shall be liable to a penalty of Rs 5 lakh.
- Every director and key managerial personnel of the company who is in default shall be liable to a penalty of Rs 50,000
- If the default is a continuing one, a further penalty of Rs 1000 for each day after the first during which such default continues but not exceeding Rs 5 lakh is imposed.
Does the Company Secretary face any restriction in the company?
A Company Secretary shall not:
- Sign/Agree to a contract on the Company’s behalf, except on the endorsement of the Board of Directors.
- Borrow money in the name of the company.
- Call meetings connected with third parties.
- Acknowledge a debt against the suit filed against the company.
- Register or transfer shares without the endorsement of the Board of Directors.
Is any Time frame for Appointment specified?
Though no specific time-frame has been assigned for the appointment of a Company Secretary, Companies are advised to appoint a Company Secretary as KMP in the very next Board Meeting that falls after the enforcement of this provision; the newly incorporated companies may do so at its first board meeting.
What is the process of appointment of a Company Secretary?
- A Company Secretary could be appointed by passing a Board Resolution for this purpose.
- Before such an appointment, the Board members must endorse the terms and conditions of the appointment, and the Company Secretary must issue a Witten Consent for the role.
- If appointed, the details of the appointed CS (and other KMP’s) must be furnished in the register of the Key Managerial Personnel (KMP) and submitted to the Registrar of Companies (ROC).
- These details are to be furnished and submitted within 30 days of such appointment in Form DIR-12.
- Form MGT-14 must be filed within 30 days of the passing of Board Resolution with the Cost to Company (CTC) and Consent Letter.
Can a Company Secretary (CS) resign from the company?
- Yes, a CS can resign from the company he/she is appointed in. A Company Secretary can resign anytime from the company after giving a notice as well as reason.
- The company will then take the required steps for such resignation.
- The resulting vacancy should be filled-up by the Board at a Board meeting within 6 months from the date of such vacancy.
Can a Company Secretary (CS) be removed from the company?
- A CS can be removed/dismissed like other employees. Since he is appointed by Board, the removal can also be only by Board.
- The removal has to be in accordance with the employment agreement. A resolution from the Board would be necessary for removal.
- There is a need for clear and sufficient reason for removal. Principles of natural justice need to be followed. A Secretary appointed for a fixed period can also be removed.
- If a Secretary resigns or is removed, the change must be filed with ROC within 30 days.
Can a Company Secretary (CS) conduct Secretarial Audit?
- Conducting Secretarial audit is mandatory for certain companies under the Companies Act.
- Earlier only public companies having a paid-up share capital of Rs. 50 crore or more; or turnover of Rs. 250 crore or more were covered under the Secretarial Audit criteria.
- Now in addition to this, every company (including a private company) having outstanding loans or borrowings from banks or public financial institutions of Rs. 100 crore or more shall also need to get Secretarial Audit Report from a Company Secretary in Practice.