KMP Series – 2
Key Managerial
Personnel (KMP)
An individual
appointed under Section 203 of the Companies Act 2013 shall be considered as
“Key Managerial Personnel” for the purposes relating to a Company, subject to
the provisions of the Companies Act 2013. (Read previous article on KMP by clicking here)
Whole Time Company
Secretary
In simple
words, a Whole Time Company Secretary (CS) is a professional appointed by a
Company as per the Companies Act 2013 to ensure that the Company complies with applicable
laws. Section 2(24) defines Company
Secretary as follows-
"Company
secretary" or "Secretary" means a company secretary as defined
in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act,
1980 (56 of 1980) who is appointed by a company to perform the functions of a
company secretary under this Act”
Clause (c) of
sub-section (1) of section 2 of the Company Secretaries Act, 1980 reads as
follows-
"Company
Secretary" means a person who is a member of the Institute”.
Here,
“Institute” mean Institute of Company Secretaries of India (ICSI) constituted
by the Company Secretaries Act, 1980, in order to regulate and develop
profession of Company Secretaries. He/
She should have cleared CS Final exams of Company Secretaryship course and
completed requisite training as per ICSI curriculum. He should hold membership
number/ certificate (ACS/FCS) from ICSI.
Which Company should appoint a “Whole Time Company Secretary”?
The following
Companies shall mandatorily appoint Whole Time CS –
· Every listed company;
· Every public limited company having paid up capital of
10 crore or more;
· Every private limited company having paid up capital
of 10 crores or more.
Procedure for Appointment
As per the
provisions of the Companies Act 2013, CS has to be appointed by Board of
Directors (on recommendation made by Nomination & Remuneration Committee,
in case the Company has such a committee) by passing a resolution to the
effect. Appointment letter/ employment agreement need to be prepared and
executed between the Company and the candidate. Requisite e-forms
need to be filed with Registrar of Companies (MCA) to record the same. A
Company Secretary of a holding company can also be appointed as Company
Secretary in a subsidiary Company in accordance with section 203.
Duties/ Role of Whole time CS
In the light of the provisions of the
Companies Act 2013, functions of Company Secretary shall include,—
(a) to report to the Board about
compliance with the provisions of this Act, the rules made thereunder and other
laws applicable to the company;
(b) to ensure that the company
complies with the applicable secretarial standards;
(c) to provide to the
directors of the company, collectively and individually, such guidance as they
may require, with regard to their duties, responsibilities and powers;
(d)
to facilitate the convening of meetings and attend Board, committee and general
meetings and maintain the minutes of these meetings;
(e) to obtain
approvals from the Board, general meeting, the government and such other
authorities as required under the provisions of the Act;
(f) to represent
before various regulators, and other authorities under the Act in connection
with discharge of various duties under the Act;
(g) to
assist the Board in the conduct of the affairs of the company;
(h) to
assist and advise the Board in ensuring good corporate governance and in
complying with the corporate governance requirements and best practices; and
(i) to
discharge such other duties as have been specified under the Act or rules; and
(j) such
other duties as may be assigned by the Board from time to time.
However, his/her role is
not limited to aforesaid statutory aspects alone.
He could be entrusted with
any other additional role based on his experience, additional qualifications
and skill set in finance, legal, HR etc. In many companies CS is associated
with Legal department, Finance Department, HR Department, Forex etc in addition
to the Secretarial/Compliance department.
Compliance Officer
As per regulation 6 of SEBI (LODR)Regulation 2015 Listed
Companies shall appoint a qualified Company Secretary as its “Compliance
Officer”.
The
compliance officer of the listed company shall be responsible for-
(a)
ensuring conformity with the regulatory provisions applicable to the listed
entity in letter and spirit.
(b)
co-ordination with and reporting to the Board, recognised stock exchange(s) and
depositories with respect to compliance with rules, regulations and other
directives of these authorities in manner as specified from time to time.
(c)
ensuring that the correct procedures have been followed that would result in
the correctness, authenticity and comprehensiveness of the information,
statements and reports filed by the listed entity under these regulations.
(d)
monitoring email address of grievance redressal division as designated by the
listed entity for the purpose of registering complaints by investors:
Role
of CS in Corporate Governance
As you might be aware,
the Institute of Company Secretaries of India (ICSI) has set its mission as
follows-
“To develop high
callibre professionals facilitating good corporate governance”
ICSI
is taking lot of efforts to develop professional skills in Company Secretaries
to ensure good corporate governance.
Corporate
Governance is all about being fair and transparent in all transactions by
implementing sound corporate governance practices and staying accountable to
the stakeholders for its actions. An investor or stakeholder of a Company is a
beneficiary of good corporate governance. The Company is not expected make
profits by doing business, but it should be able to build trust and confidence
among all category of stakeholders namely customers, investors, banks,
government, employees etc which elevate the company to next level. Without any
doubt we could say that “Compliance” is one of the keys to improve the
corporate governance score of a Company.
An
organization having a CS will be able to ensure good corporate governance by
complying with applicable laws and reap the benefits in present and future. But
the organization and departments should extend their co-operation and
willingness to be molded according to the advice/ guidance given by the CS.
Organizations should try to induce CS qualified candidates into its activities
where they wish to bring “changes” that would increase value and improve brand
image of the organization among its stakeholders.
Liability
A
CS who is occupying the post of Key Managerial Personnel in accordance with
Section 203 of the Companies Act 2013, should very careful and diligent while
performing his duties as he could be held liable for non-compliances/defaults
in his Company. He/She could be made liable as “Officer who is in default” as
defined in 2(60) of the Act. He/ She should exercise adequate care while
certifying returns of his/her company and ensure that the details submitted is
correct and complete to the best of his/knowledge and belief.
Conclusion
Over
many year CS has become an attractive employment opportunity irrespective of
the responsibility and risks associated with it. CS has earned title of
“multifaceted professional” during past many years as he/ she is expected to ensure
compliance with corporate laws (Company law, FEMA, SEBI compliance etc in true
letter and spirit) along with other laws applicable to his/her respective
Company. Lets hope that CS would be entrusted with more duties and powers and
more statutory protection would be given to them by the Government in future.
(Read my previous article on KMP by clicking here)
Ref:
The Companies
Act 2013
SEBI LODR
Regulations 2015
Disclaimer: The views expressed here are based on author’s understanding of the provisions of the applicable laws. Kindly refer concerned Act/Rules/Regulations mentioned herein for more clarity.