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Appointment of Company Secretary

Appointment of Company Secretary

Appointment of Company Secretary

The Companies Act of 2013 mandates the appointment of a Company Secretary (CS) for certain classes of companies. This article is an in-depth account of this provision.

Who is a Company Secretary?

A Company Secretary is a member of the Institute of Company Secretary of India (ICSI). The secretary so appointed is responsible for:

  • The efficient administration of the company, especially with respect to the compliance aspects.
  • Keeping the Board Members informed of their legal responsibilities.
  • Representing the company for legal documents.
  • Ensuring that the company and its directors operate within the specified legal framework.
  • Registering and communicating with shareholders.
  • Ensuring the proper remittance of dividends.
  • Maintenance of company records.
  • Organizing the meeting of the Board of Directors.
  • Organizing General Meetings.
  • Formulating the Memorandum and Articles of Association
  • Meeting the requirements of the Stock Exchanges.
  • Issuing of Share, Capital and Restructuring.
  • Pursuing acquisitions, disposal and mergers.
  • Corporate Governance.
  • Other relevant responsibilities.

Entitlements of a Company Secretary

A Company Secretary may:

  • Supervise, control and direct his/her employees and subordinate offices.
  • Sign any contract/agreement on behalf of the company as a principal officer, subject to the powers of the delegation of the Board.
  • Issue guidelines to the employees on behalf of the company.
  • Attend meetings of the shareholders and the Board of Directors.
  • Claim legal dues as a preferential creditor of a company while winding up.
  • Sign and authenticate the proceedings of meetings and other documents on behalf of the company where the common seal isn’t required.
  • Be the compliance officer and concise keeper of the company.

Restrictions on a Company Secretary

A Company Secretary shall not:

  • Sign/Agree to a contract on the Company’s behalf, except on the endorsement of the Board of Directors.
  • Borrow money in the name of the company.
  • Call meetings connected with third parties.
  • Acknowledge a debt against the suit filed against the company.
  • Register or transfer shares without the endorsement of the Board of Directors.

Mandatory Appointment

The Companies Act makes it compulsory for all listed companies and other companies with a paid-up share capital of Rs. 5 crores or more to appoint a specified list of full-time Key Managerial Personnel (KMP), which includes a Company Secretary. The following KMPs should be a part of its ranks:

  • Managing Director/Chief Executive Officer/Manager (and in their absence, a whole-time director).
  • Company Secretary
  • Chief Financial Officer (CFO)

Time-frame for Appointment

Though no specific time-frame has been assigned for the appointment of a Company Secretary, Companies are advised to appoint a Company Secretary as KMP in the very next Board Meeting that falls after the enforcement of this provision; the newly incorporated companies may do so at its first board meeting.

Process of Appointment

A Company Secretary could be appointed by passing a Board Resolution for this purpose. Before such an appointment, the Board members must endorse the terms and conditions of the appointment, and the Company Secretary must issue a Witten Consent for the role. If appointed, the details of the appointed CS (and other KMP’s) must be furnished in the register of the Key Managerial Personnel (KMP) and submitted to the Registrar of Companies (ROC). These details are to be furnished and submitted within thirty days of such appointment in Form DIR-12. Moreover, Form MGT-14 must be filed within thirty days of the passing of Board Resolution with the CTC and Consent Letter.

Note – if any such companies are listed, the details of appointment must be intimated to all the Stock Exchanges where the company’s securities are listed.

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.”

Offences and Penalties

If a company fails to appoint a Company Secretary, or for that matter any KMPs, it would be liable to remit a fine of not less than INR one lakh but restricted to INR five lakhs. In addition to this, every director and KMP of the Company would be punished with a fine of INR 1000 for every day of such default.