A company secretary is a senior officer in a company who is responsible for ensuring that the company complies with all the relevant legal and regulatory requirements.
A company secretary is a senior officer in a company who is responsible for ensuring that the company complies with all the relevant legal and regulatory requirements. They act as an advisor to the board of directors on governance and risk management matters, as well as being responsible for the company’s administrative and secretarial duties. This blog post will discuss whether a company secretary can be appointed at the point of incorporation and the Company Secretary Appointment procedure in detail.
The process of incorporating a company involves registering the company with the relevant government agency and completing several legal and administrative tasks. One of the key decisions needed during this process is whether to appoint a company secretary.
Meaning of Company Secretary
The term “company secretary” is defined under Section 2 (24) of the Companies Act, 2013. According to this definition, a company secretary is a person who is a member of the Institute of Company Secretaries of India, as specified in Section 2(1)(c) of the Companies Act, 1980.
Appointment of Company Secretary
Section 203 of the Companies Act, 2013, along with Rules 8 and 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, state that certain companies are required to appoint a company secretary as a Key Managerial Personnel (KMP).
These companies include:
- All listed companies with a paid-up share capital exceeding Rs.10 crore.
- All public companies with a paid-up share capital exceeding Rs.10 crore.
- All private limited companies with a paid-up share capital exceeding Rs.10 crore.
- All unlisted companies with a paid-up share capital exceeding Rs.10 crore.
- In summary, a company secretary is a person who is a member of the Institute of Company Secretaries of India, and their appointment is mandatory for certain types of companies as per the Companies Act, 2013.
Procedure for Appointment of Company Secretary
The procedure for appointing a company secretary involves the following steps:
- Convene a board meeting: Issue a notice to all the directors and convene a board meeting to discuss and pass a resolution for appointing a whole-time company secretary.
- Inform the Registrar of Companies (ROC): File the necessary forms, such as MGT-14 and DIR-12, with the ROC within 30 days from the date of appointment, notifying them about the appointment of the company secretary.
- Maintain proper records: After the appointment of the company secretary, make necessary entries and maintain a proper register of directors and key managerial personnel as required by law.
- Inform the stock exchange (for listed companies): If the company’s shares are listed on a stock exchange, inform the respective exchange about the appointment of the company secretary.
It’s important to note that a company secretary cannot hold office in more than one company at the same time, except in the case of a subsidiary company where they can hold office simultaneously.
Procedure for Removal of Company Secretary/Resignation by Company Secretary
The process for removing a company secretary is as follows:
- Board resolution: The board of directors must convene a meeting and pass a resolution for the removal of the company secretary. Notice of the meeting should be given to all directors of the company.
- Recording the removal: The terms of the company secretary’s appointment, as specified in the appointment letter or agreement, must be followed and satisfied. The removal should be properly recorded in the minutes of the board meeting.
- Filing with Registrar of Companies: Within thirty days of the removal, the company must file Form DIR-12 with the Registrar of Companies (ROC), along with the prescribed filing fees. This form notifies the ROC about the removal of the company secretary.
- Inform the stock exchange (for listed companies): If the company’s shares are listed on a stock exchange, the company must inform the respective exchange about the removal of the company secretary.
- Record-keeping: The company must update its register of company secretaries to reflect the removal and any other relevant details.
- Fill the vacancy: It is important for the company to fill the vacancy of the company secretary position within six months. This can be done at a board meeting where a new company secretary is appointed.
It is advisable to consult with legal and compliance professionals from Vakilsearch for accurate and up-to-date information.
Penal Provision Relating to Failure in Appointment of Company Secretary [Section 203 of Companies Act, 2013]
If a company fails to comply with the provisions of Section 203 of the Companies Act related to the appointment of Key Managerial Personnel (KMP), the following penalties may apply:
- Penalty on the company: The company will be liable to pay a penalty of 5 lakh rupees.
- Penalty on Directors and Key Managerial Personnel: Every director and key managerial personnel of the company who is in default will be liable to pay a penalty of 50,000 rupees.
If the default continues over time, an additional penalty of 1,000 rupees per day may be imposed for each day after the first day during which the default continues. However, the total penalty for the continuing default should not exceed 5 lakh rupees.
Companies need to comply with the provisions of Section 203 to avoid penalties and ensure adherence to the legal requirements regarding the appointment of KMPs.
Roles and Responsibilities of a Company Secretary
As per Section 205 of the Companies Act, the Company Secretary (CS) appointed by a company is required to perform the following functions:
- Report to the Board of Directors: The CS must report to the board of directors on the compliance statement of the company. This includes providing updates and information regarding the company’s compliance with various legal and regulatory requirements.
- Ensure Compliance with Secretarial Standards: The CS is responsible for ensuring that the company complies with all secretarial standards. Secretarial standards are guidelines issued by the Institute of Company Secretaries of India (ICSI) that prescribe best practices and procedures for secretarial and corporate governance matters.
- Perform Other Duties: The CS is also required to perform any other duties as prescribed by the board of directors from time to time. These duties may include tasks related to corporate governance, legal compliance, board meetings, record-keeping, and other company-specific requirements.
Duties of a Company Secretary
Rule 10 of the Companies (Appointment and Qualification of Secretary) Rules, 2014 provides the specific duties of a Company Secretary (CS), which are as follows:
- Provide Guidance to Directors: The CS must provide guidance and support to the company directors regarding their powers, duties, and responsibilities. This includes advising them on legal and regulatory matters, corporate governance practices, and compliance requirements.
- Convene and Maintain Minutes of Meetings: The CS is responsible for facilitating the convening of meetings, including general meetings, board meetings, and committee meetings. They also attend these meetings and maintain accurate minutes, recording the discussions, decisions, and actions taken during the meetings.
- Obtain Approvals: The CS is required to obtain necessary approvals from general meetings, board meetings, government authorities, and other relevant entities as mandated by the provisions of the Companies Act. This involves ensuring compliance with legal requirements for various company matters.
- Representation before Regulators and Authorities: The CS represents the company before regulators, government authorities, and other entities as required under the Companies Act. They act as a liaison between the company and these authorities in matters related to compliance and legal obligations.
- Assistance in Company Affairs: The CS assists the company board in the conduct of the company’s affairs. They provide support in decision-making processes, policy formulation, and strategic planning to ensure the smooth functioning of the company.
- Corporate Governance Compliance: The CS advises and assists the board in complying with corporate governance requirements. They ensure that the company follows best practices and maintains transparency, accountability, and ethical standards in its operations.
- Other Duties: The CS also performs any other duties specified under the Companies Act or its rules. This may include tasks related to statutory filings, maintenance of registers and records, compliance with secretarial standards, and any additional responsibilities assigned by the board.
Entitlements of a Company Secretary
A Company Secretary may do the following:
- Control, direct, and supervise his or her employees and subordinate offices.
- As a principal officer, sign any contract/agreement on behalf of the company, subject to the Board’s delegation of powers.
- On behalf of the company, issue guidelines to employees.
- Attend shareholder and Board of Directors meetings.
- Claim legal dues as a preferential creditor of a company in the process of liquidation.
- Where the common seal is not required, sign and authenticate meeting proceedings and other documents on behalf of the company.
- Be the company’s compliance officer and concise keeper.
Restrictions on a Company Secretary
A Company Secretary is not permitted to:
- Sign/agree to a contract on behalf of the company, unless the Board of Directors approves.
- Borrow money in the company’s name.
- Call meetings with third-party participants.
- Recognise a debt owed to the company as a result of the lawsuit.
- Register or transfer shares without the Board of Directors’ approval.
Mandatory Appointment
All listed companies and other companies with a paid-up share capital of Rs. 5 crores or more are required by the Companies Act to appoint a specified list of full-time Key Managerial Personnel (KMP), which includes a Company Secretary. Its ranks should include the following KMPs:
- Managing Director/Chief Executive Officer/Manager (and in their absence, a whole-time director).
- Company Secretary
- Chief Financial Officer (CFO)
Time-frame for Appointment
While the Companies Act does not specify a specific time frame for the appointment of a Company Secretary (CS), it is advisable for companies to appoint a CS as a Key Managerial Personnel (KMP) at the earliest opportunity. The Companies Act emphasizes the importance of having a CS by requiring certain categories of companies to appoint a CS as a mandatory requirement.
Format of the Board Resolution
“RESOLVED THAT pursuant to provisions of section 203 of Companies act 2013 and Rule 8 and Rule 8A of Companies appointment & remuneration of Managerial Personnel Rules 2014), Mr……………………………….. company secretary (ACS/FCS no …………..) be and is hereby appointed as the whole time Company Secretary of the company with effect from (date) on such terms and conditions as decided and agreed by and between the Board and Company Secretary.”
“FURTHER RESOLVED THAT Mr………………………… director of the company be and is hereby authorised to file necessary eforms and documents with Registrar of the Company and to do all other such acts. deeds and things which are necessary to give effect to above resolution.”
Legal Requirements for Appointing a Company Secretary
In most jurisdictions, it is a legal requirement for companies to appoint a company secretary. The eligibility criteria for a company secretary vary from country to country but typically include requirements around age, residency, and professional qualifications.
Advantages of Appointing a Company Secretary at the Point of Incorporation
Appointing a company secretary at the point of incorporation can have a number of advantages for the company. Firstly, it ensures the company has a senior officer in place from the start who can help with compliance and governance issues. Secondly, it can help establish good governance practices from the outset, which can positively impact the company’s reputation and performance.
Disadvantages of Appointing a Company Secretary at the Point of Incorporation
There are also potential drawbacks to appointing a company secretary at the point of incorporation. Firstly, it can be expensive, particularly for small companies with limited budgets. Secondly, suppose the company is not yet fully formed. In that case, the company secretary may not fully understand the company’s operations and may be unable to perform their duties effectively.
Alternatives to Appointing a Company Secretary at the Point of Incorporation
If a company chooses not to appoint a company secretary at the point of incorporation, several alternative options are available. For example, the company can appoint a company secretary at a later stage or outsource the role to a third-party provider. However, it is important to note that these options may not provide the same governance and compliance support as an in-house company secretary.
Conclusion
In conclusion, while there are both advantages and disadvantages to appointing a company secretary at the point of incorporation, companies should generally do so if possible. By appointing a company secretary from the start, companies can ensure that they have a senior officer in place who can help with compliance and governance issues and establish good governance practices from the outset. Ultimately, the decision of whether to appoint a company secretary at the point of incorporation will depend on the individual circumstances of the company. Vakilsearch is an online legal services platform that offers a range of legal services to individuals and businesses in India. One of the key services provided by Vakilsearch is assistance with company incorporation, including help with appointing a company secretary.
FAQs
How is the first company secretary appointed?
The first company secretary is typically appointed by the board of directors of the company. The appointment is made by passing a resolution in a board meeting.
Who should appoint a full-time company secretary?
The appointment of a full-time company secretary is typically made by the board of directors of the company. They are responsible for ensuring compliance with the Companies Act and other relevant laws and regulations.
How long does it take to appoint a company secretary?
The time taken to appoint a company secretary can vary depending on factors such as the availability of suitable candidates, the internal processes of the company, and any legal requirements. Generally, the appointment process can take a few weeks to a couple of months.
Can a company secretary be appointed as a director?
Yes, a company secretary can be appointed as a director if they meet the eligibility criteria and fulfill the requirements specified in the Companies Act. However, it is important to note that the roles and responsibilities of a company secretary and a director are distinct and separate.
Is appointment of company secretary is compulsory?
The appointment of a company secretary is mandatory for certain categories of companies as per the Companies Act, such as all listed companies, public companies with a paid-up share capital of more than Rs. 10 crore, and private companies with a paid-up share capital of more than Rs. 10 crore. However, it is not compulsory for all companies to appoint a company secretary.
