This blog examines the role of a Corporate Secretary in India and whether it is mandatory for companies to have one. We explore the legal requirements and companies exempted from having a Corporate Secretary, as well as the advantages of having one, such as compliance with legal and regulatory requirements, good corporate governance, risk management, improved communication, professional expertise, and increased credibility.
In India, the concept of a Corporate Secretary has gained significant importance in recent years. By implementing the Companies Act 2013 and other regulatory guidelines, companies must have a Corporate Secretary to ensure compliance with legal requirements and maintain good corporate governance. However, there still needs to be more clarity among many business owners about whether having a Corporate Secretary is mandatory for their company. This blog will explore the legal requirements for a Corporate Secretary in India, the exemptions for certain companies, and the advantages and disadvantages of having a Corporate Secretary. By the end of this blog, you will clearly understand the importance of having a Corporate Secretary for your company.
Definition of Corporate Secretary
A Corporate Secretary, or Company Secretary, is a senior-level officer responsible for ensuring that a company complies with legal and regulatory requirements. They act as the bridge between the board of directors, shareholders, and other stakeholders.
Roles and Responsibilities of a Corporate Secretary
The roles and responsibilities of a Corporate Secretary can vary based on the size and type of the company. Some of the key responsibilities include:
- Ensuring compliance with legal and regulatory requirements
- Maintaining corporate records and filings
- Managing board meetings and preparing minutes of the meetings
- Facilitating communication between the board of directors and other stakeholders
- Providing advice and guidance on corporate governance and legal matters
- Managing shareholder meetings and proxy voting
- Ensuring the company’s policies and procedures align with corporate governance principles.
Qualifications of a Corporate Secretary
To become a Corporate Secretary in India, one must have a professional degree or diploma in Company Secretaryship from the Institute of Company Secretaries of India (ICSI). They must also pass the ICSI Professional Programme Examination and complete mandatory training. A Corporate Secretary must possess strong knowledge of legal and regulatory requirements, corporate governance principles, and business management skills. They must have excellent communication and interpersonal skills to manage communication between various stakeholders.
Legal Requirements for Corporate Secretary in India
A. Companies Act 2013
Under the Companies Act 2013, every company with a paid-up share capital of Rs. 10 crores or more must have a full-time Company Secretary. This applies to all companies, including private, public, and listed companies.
B. SEBI Regulations
The Securities and Exchange Board of India (SEBI) mandates that every listed company must have a qualified Company Secretary. The Company Secretary is responsible for ensuring compliance with SEBI regulations and managing communication with stock exchanges and regulatory authorities.
C. Listing Agreement Requirements
The listing agreement between the company and the stock exchange requires appointing a Company Secretary. The Company Secretary is responsible for ensuring the company complies with the listing agreement’s provisions.
D. MCA Guidelines
The Ministry of Corporate Affairs (MCA) has issued guidelines requiring certain companies to have a Company Secretary. For example, all public limited companies must have a Company Secretary, regardless of their paid-up share capital.
Companies Exempted from having a Corporate Secretary
- One-Person Company
A One Person Company (OPC) is exempt from having a Company Secretary. An OPC is a company where only one person holds all the shares and is the sole director.
- Small Companies
Small companies are exempt from having a full-time Company Secretary. A small company is defined as a company with a paid-up share capital of up to ₹10 lakhs and turnover of up to ₹50 crores.
- Start-ups
Start-ups are exempt from having a full-time Company Secretary for the first year of their incorporation. However, they must appoint a Company Secretary after the first year if they meet the paid-up share capital criteria.
- Private Companies
Private companies with a paid-up share capital of less than ₹10 crores are not required to have a full-time Company Secretary. However, they must appoint a Company Secretary if they meet the following conditions:
- The company is a subsidiary of a public company
- The company has a turnover of ₹50 crores or more
- The company’s outstanding loans, debentures, and deposits exceed ₹100 crores.
Advantages of having a Corporate Secretary
A. Compliance with Legal and Regulatory Requirements
A Corporate Secretary is crucial in ensuring that the company complies with legal and regulatory requirements. They keep track of changes in laws and regulations and ensure that the company’s policies and procedures align with them.
B. Good Corporate Governance
A Corporate Secretary manages board meetings and ensures that the board of directors follows good corporate governance practices. They advise the board on legal and regulatory matters and facilitate communication between the board and other stakeholders.
C. Risk Management
A Corporate Secretary helps the company manage its risks by ensuring that it has appropriate policies and procedures. They keep track of potential risks and advise the board on mitigating them.
D. Improved Communication
A Corporate Secretary acts as a bridge between the board of directors, shareholders, and other stakeholders. They facilitate communication between these groups and ensure that their concerns are addressed.
E. Professional Expertise
A Corporate Secretary is a qualified professional with expertise in legal and regulatory matters, corporate governance, and business management. Their knowledge and skills help the company navigate complex legal and regulatory requirements and manage risks effectively.
F. Increased Credibility
Having a Corporate Secretary adds to the company’s credibility and demonstrates its commitment to good corporate governance. This can help the company attract investors and build trust with stakeholders.
Disadvantages of Not Having a Corporate Secretary
A. Non-Compliance with Legal and Regulatory
Requirements Not having a Corporate Secretary increases the risk of non-compliance with legal and regulatory requirements. This can result in penalties, legal disputes, and company reputation damage.
B. Poor Corporate Governance
With a Corporate Secretary, the board of directors may have access to expert advice on legal and regulatory matters. This can lead to poor corporate governance practices, damaging the company’s reputation and eroding shareholder trust.
C. Risk Management
Challenges The absence of a Corporate Secretary can create risk management challenges for the company. The board may need to clearly understand potential risks and how to manage them, which can result in significant losses.
D. Communication Gaps
Communication between the board of directors, shareholders, and other stakeholders may become cohesive with a Corporate Secretary. This can lead to misunderstandings, conflicts, and mistrust.
E. Lack of Professional Expertise
Not having a Corporate Secretary means that the company may not have access to the professional expertise needed to navigate complex legal and regulatory requirements. This can result in missed opportunities, legal disputes, and reputational damage.
F. Reduced Credibility
The absence of a Corporate Secretary can reduce the company’s credibility in the eyes of investors, customers, and other stakeholders. This can make it harder for the company to attract funding and grow its business.
Conclusion
In conclusion, while certain companies in India are exempt from having a Corporate Secretary, there are clear advantages to having one in terms of compliance, governance, risk management, and communication. Not having a Corporate Secretary can lead to non-compliance with legal and regulatory requirements, poor corporate governance practices, and communication gaps, among other challenges.
At Vakilsearch, we offer Corporate Secretarial Services to help companies comply with legal and regulatory requirements and effectively manage their governance, risk, and compliance challenges. Our team of qualified professionals can provide expert advice on legal and regulatory matters, manage board meetings, and facilitate communication between the board and other stakeholders. We can also help companies maintain their statutory records, file necessary forms and returns, and ensure compliance with SEBI, MCA, and other regulatory requirements.
By availing of our Corporate Secretarial Services, companies can focus on their core business activities while ensuring that their governance, risk, and compliance needs are met effectively. Contact us today to learn more about our services and how we can help your company.
