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Appointment of Company Secretary Companies Act 2013

Legal Raasta
30th May 2019
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The Appointment of Company Secretary (CS) has been made mandatory under the Companies Act 2013 for a few categories of companies. Mainly among the category are listed companies or company with a paid-up capital of over Rs. 5 Crore.


Who is a Company Secretary?


Company Secretary is a member of the (ICSI) Institute of Company Secretary of India. He has to be appointed by the company to perform the functions of the Company Secretary.


Essentially, Company Secretary is an employee with advisory powers. The term "whole-time secretary" itself indicates that the Company Secretary must be in the employment of the company. His advice is sought to carrying out general administrative tasks. He is consulted in the decision-making process framing various policies of the company. He helps determine the lawful suggestions of policy decisions.


In fact, he is the only outsider who is required to be present at the Board meetings.


Companies required to appoint Company Secretary


The Companies Act mandates that all companies having a minimum paid-up share capital of Rs. 5 crore, along with all listed companies, need to appoint the following whole-time key managerial personnel (KMP):


  1. MD (Managing Director), CEO (Chief Executive Officer), Manager, or, in their absence, a whole-time director,
  2. CS (Company Secretary),
  3. CFO (Chief Financial Officer).


Responsibilities of Company Secretary


The Company Secretary is responsible for:


  • Organizing Board of Directors Meetings,
  • Keeping the Board Members updated about their legal responsibilities,
  • Organize General Meetings,
  • Registration of Shares, Shareholders and communicating with them,
  • Issuing of Shares, Capital and Restructuring,
  • Formulating and certifying Memorandum and Articles of Association,
  • Complying with the requirements of the Stock Exchange,
  • Ensuring that the company and the directors comply with the specified legal framework,
  • Corporate Governance,
  • Complying with the relevant legalities during Acquisitions, Disposal and Mergers,
  • Maintenance and appropriate disclosure of Company Records, Statutory Registers, Accounts and other books,
  • Ensuring that the dividends are distributed diligently,
  • Representation of the company in the legal documents,
  • Safe custody of the Company seal,
  • Ensuring that the administration is carried out efficiently and complying to the relevant legal modules,
  • Other responsibilities as may be relevant to his position.


Authority of the Company Secretary


The Company Secretary, appointed as per the Companies Act 2013, has the power to:


  • Attend various meetings of the company shareholders or board of directors,
  • Authenticate the proceedings of meetings and other documents on behalf of the company, in situations where the common seal isn’t mandatory,
  • Sign a contract or an agreement on behalf of the company as its principal officer. This authority is subject to the powers of the delegation of the Board,
  • Empowered to supervise, control or directing a branch, office or employee(s),
  • Issue guidelines to a branch, office or employee(s) in compliance with the legal terms,
  • As per the Companies Act, he is a preferential creditor and can claim legal dues accordingly, in case of winding up,
  • Ask for indemnity for any loss suffered by him in the course of discharging his duties,
  • He can become a Director of the company with the prior permission of the Board,
  • Report Compliances or non-compliance of the company.


Limitations to his Authority


The Company Secretary cannot:


  • Enter into or put his signature on a contract on behalf of the company, without receiving specific authorization from the Board of Directors,
  • Register or Transfer shares without the authority from the Board of Directors,
  • Borrow money in the name of the company,
  • Acknowledging a debt against any suit filed in opposition to the company.
  • Call meetings related to 3rd parties.


Process of Appointment of Company Secretary under the Companies Act 2013


  • Call for a Board meeting. The notice for this meeting must include that appointment of Company Secretary is to be discussed, as per the Companies Act 2013. The Terms and Conditions of such an appointment. Along with the other matters that are to be discussed during that meeting.
  • The person proposed to be appointed as the Company Secretary is required to give his consent in writing.
  • Once the Board Resolution is cleared, a Form MGT-14 is to be filed within 30 days of the passing of Board Resolution along with the CTC and Consent Letter.
  • In the case of listed companies, inform the Stock Exchange, where the shares of the company are listed, that such a board meeting is going to take place. This must be done prior to the date when this meeting is to be held.
  • Update this Stock Exchange, within 15 minutes of the board meeting closure, about the result. This is to be done by mail or fax.
  • The details about the appointed Company Secretary must be filed with the relevant Registrar of Companies (ROC) within 30 days of the appointment. Form DIR-12 is the appropriate form to File ROC Compliance in this regard.
  • Pay the fees as applicable with the Form DIR-12.
  • Enter the requisite details in the Register of Directors or Secretaries.


Time Duration concerning the Appointment 


As per the Companies Act 2013, no time limit has been provided as to when the Company has to appoint a Company Secretary as KMP. However, it would be beneficial if the Secretary is appointed in the first board meeting itself, occurring after the enforcement of such a provision.


A newly incorporated company may complete this essential process at its very first board meeting.


Relevant Offences & Penalties 


The Companies Act 2013 has laid down the regulations and provisions regarding the appointment of the Company Secretary. Failure on the companies behalf to comply with such provisions will lead to penalties.


As a result of non-compliance, the company will be levied with fine not be less than Rs. 1 lakh up to a maximum of Rs. 5 lakh. Together with a fine of up to Rs. 1,000 per day, levied on every Director and KMP, in default, during the period of such contravention.

 

This article is presented to you by Reema, on behalf of LegalRaasta. A prominent name in the field of CS & CA service providers. To have a complete overview of the assistance on offer, do visit the website.

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