Appointment of Company Secretary: Procedure & Need

Law says that all companies (including private companies) with a paid-up share capital of ten crore rupees or more are required to appoint a Company Secretary in full-time employment. He is an officer who is responsible for ensuring that numerous legal obligations under various Acts, including the Companies Act 2013, are met as and when they apply to a company. In this blog, we have discussed the duties, liabilities, and the procedure for the appointment of a Company Secretary.   

Who is a company secretary?

A company secretary is an officer of the company who is in charge of ensuring that the company complies with the terms of the Companies Act, 2013 and other corporate, taxes, industrial, and economic laws that apply to businesses in general. He performs supervisory functions to ensure that any possibility of negligence in the implementation of various regulations applicable to a company can be avoided. The scope of his work includes preparation of meetings, maintaining records and minutes, filing returns with ROC, assisting Board members and shareholders in carrying out their functions, etc.

As per law, a ‘Company Secretary’ is a person who is a member of the Institute of Company Secretaries of India and who is appointed as such by a company to perform the functions of a company secretary [Section 2(1)(c) the Company Secretaries Act, 1980].

Who all are required to appoint a company secretary?

Law specifies that there are certain companies that are required to mandatorily appoint a whole-time company secretary. These companies include:

• Listed companies
• Unlisted public companies having a paid-up share capital of rupees 10 crores or more
• Private companies having a paid-up share capital of rupees 10 crores or more

Functions of CS

Considering the importance of their role, it was the first time when the duties of company secretaries were laid down in company law by virtue of Section 205 of the Companies Act 2013. According to Section 205 of Companies Act 2013 read with Rule 10 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the company secretary has to discharge the below-mentioned duties and functions:

• To report to the company’s Board of Directors on conformity with the terms of this Act, rules, and other laws applicable to the company
• To guarantee that the company adheres to the relevant secretarial standards
• To offer the company’s directors the advice they need to carry out their duties, responsibilities, and powers
• To assist in the convening of meetings, to attend Board, Committee, and General meetings, and to record the minutes of these meetings
• To seek approvals from the Board of Directors, general meeting, government, and any other authorities as may be needed under the provisions of the Companies Act 2013
• To help the Board members in the conduct and management of the company’s affairs
• To help and advise the Board in maintaining effective corporate governance and in compliance with the corporate governance standards and best practices
• To represent the company before many regulators, Tribunal, and other authorities under the Companies Act in connection with the performance of various functions under the Act
• To fulfill such other obligations as may be assigned by the Board from time to time
• To fulfill any other obligations as may be prescribed under the Act or Rules

Procedure for the Appointment of Company Secretary

The below-mentioned procedures must be followed in order to appoint a full-time company secretary.

Step 1

Advertise the position, gather applications, conduct interviews, shortlist candidates for the position, and finalize the terms of employment.

Step 2

Call a Board meeting after notifying all of the company’s directors in accordance with Section 173 of the Act. Place the proposal for appointing a Company Secretary on the agenda of the board meeting, with the details of the individual finalized, and pass a resolution appointing the company secretary and confirming the terms and conditions of his appointment.

Step 3

Once the appointment is made, it is necessary to file a return of appointment of Company Secretary in Form DIR-12 with the ROC. DIR-12 must be filed within thirty days from the date of the appointment or the date of joining the office. Further, in the case of public companies, a copy of the Board Resolution appointing the Company Secretary must also be filed in Form MGT-14 accompanied by such fee as specified in Companies (Registration of Offices and Fees) Rules, 2014.

Step 4

It must be ensured that a Company Secretary cannot hold office in more than one company at the same time unless it is a subsidiary company.

Step 5

Next, it is important to make entries in the Register of Directors and Key Managerial Personnel as laid down under Section 170 of the Companies Act 2013.

Step 6

If the company is listed, intimation is to be given to the Stock Exchange(s).

Step 7

Because Key Managerial Personnel are considered to be a “related party” as defined in Section 2(76) of the Act, check to see if the company secretary so appointed is engaged in any related party transactions as outlined in Section 188 of the Act. If the answer is yes, then you must follow the regulations in this regard.

Liabilities of Company Secretary

Apart from general secretarial duties such as organizing Board and general meetings, maintaining minutes of meetings, documenting approved share transfers, coordinating with directors and shareholders, keeping statutory records, filing required returns with the ROC, and so on, the Companies Act 2013 has also specified other duties and liabilities of Company Secretary, some of which are as follows:

• Declaration of requirements of registration: According to Section 7(1)(b) of the Companies Act 2013, a company is established by submitting a duly signed MOA & AOA, as well as a declaration in a prescribed form, that all requirements of the Act and rules for company registration have been met. An advocate, a CA, a cost accountant, or a company secretary in practice who is engaged in the creation of the company, as well as a person specified in the articles as a director, manager, or secretary of the entity, can sign such declaration.
• Signing share certificates: Share certificates for the company shall be signed by two directors or by a director and the Company Secretary if the company has appointed one.
• The signing of annual return u/s 92: A director and the Company Secretary must sign the annual return before it can be filed with the Registrar of Companies. If the company does not have a Company Secretary, the return might be signed by a Company Secretary in practice.
• The signing of financial statements under Section 134(1): The financial statements, including consolidated financial statements, must be signed on behalf of the Board by the company’s chairperson, if he has been authorized to do so by the Board, or by two directors, one of whom must be the managing director, if any, and the company’s Chief Executive Officer, Chief Financial Officer, and Company Secretary, if they have been appointed.
• Appear on behalf of the company: According to Section 432 of the Act, a Company Secretary can represent the company in front of the National Company Law Tribunal (NCLT).
• Compliance Officer in listed companies: In accordance with clause (1) of Regulation 6 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a listed company is mandatorily required to appoint a Company Secretary to act as ‘Compliance Officer’ and ensure conformity with all the relevant rules & regulations applicable to the listed company.
• Demat shares: In the case of Demat shares, the Company Secretary is responsible for coordinating with the depository and the stock exchange.
• Secretarial audit: A Company Secretary in practice must conduct a Secretarial Audit for the companies listed in Section 204 of the Companies Act, 2013, as supplemented by Rule 9 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and submit a Secretarial Audit Report in Form MR-3. The Company Secretary in practice is responsible for auditing the company’s secretarial and other associated records.
• Additional duties: In addition to his statutory responsibilities, the company secretary is frequently entrusted with extra responsibilities such as legal, personnel, financial, and even general administration.

It might be noted that under company law, a Company Secretary has been defined as an ‘Officer in default’ along with managing director, manager, or whole-time director, etc. Hence, he may be punished for violation of the provisions or any offenses committed under the Companies Act. He may also be held liable in the capacity of Key Managerial Personnel (KMP) of the company under various provisions of the Act.

Conclusion

As we have seen that the appointment of Company Secretary is needed for a certain class of companies. Even when a company does not fall under the criteria to appoint a CS, it may still engage the services of a CS for ensuring compliance with various laws.

Further, a company secretary, like any other employee, is subject to removal or dismissal. Because a company secretary is appointed by the Board of Directors, the Board of Directors of a company has the power to remove him or terminate his employment at any moment, for any reason or no reason. However, principles of natural justice such as show-cause notice, hearing, and reasoned order must be followed.

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