Company Secretary as Whole Time KMP

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.