Advantages - APPOINTMENT OF WHOLE TIME COMPANY SECRETARY
Advantages - APPOINTMENT OF WHOLE TIME COMPANY SECRETARY
Short Summary:
In this Flash editorial, the auditor begins by referring the provisions
of section 203 of Companies Act, 2013 and Section 383A of Companies Act, 1956 concerning
to the whole time Company Secretary of the Company also makes an endeavor to
light up on provisions of penalty on non appointment Company Secretary via
decided case laws. The main thrust of the article, conversely, is upon the
provisions of section 203(1) of Companies Act, 2013 read with rule 8 and 8A of Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 which deals
with requirements of appointment of Company Secretary and most hot case laws
decided by the Bengaluru Benche of National Company Law Tribunal in the case of
[1]CARMELS AISA HOLDINGS PRIVATE LIMITED.
Introduction:
Thus far, as per section
383A of Companies Act, 2013 every company having paid-up share capital of
Rs. 5 crore shall have a whole-time secretary. Due to implementations of
new sections and rules of Companies Act, 2013 following Companies are required
to appoint whole time Company Secretary.

Who is Company Secretary?
COMPANY SECRETARY: As per Section 2 sub
section 24 of Companies Act, 2013
Company Secretary‖ or ―secretary‖ means a company secretary as
defined in clause (c) of sub-section (1) of section 2 of the Company
Secretaries Act, 1980 who is appointed by a company to perform the functions of
a Company Secretary under
this Act;
As per Company
Secretary Act, "Company Secretary"
means a person who is a member of the Institute of Company Secretary of India.
DESIGNATION OF COMPANY
SECRETARY:
Companies Act, 2013: As per Section 2(51) Company Secretary in Companies Act, 2013
Company Secretary will be designated as “Key
Managerial Personnel”.
The Act has substantially
strengthened the role and position of the company secretaries. In particular,
it considers a company secretary as key managerial personnel. While this is
expected to enhance the position of a company secretary, it also casts
responsibility on them for due compliance with the provisions of law. It should
also be noted that for non-compliance of the provisions of law, he is also an
“officer-in-default” thus, subject to liability under relevant penal provisions.
Penalty – non appointment
of CS:-
If a company contravenes the
provisions of this section, the company shall be punishable with fine which
shall not be less than one lakh rupees but which may extend to five lakh rupees
and every director and key managerial personnel of the company who is in
default shall be punishable with fine which may extend to fifty thousand rupees
and where the contravention is a continuing one, with a further fine which may
extend to one thousand rupees for every day after the first during which the
contravention continues.
Rulling by NCLT:
In NCLT
ruling u/s 383A (new section 203), the Bengaluru bench of NCLT, ('the Bench')
thereof passed an order on 15th December 2016 on the question on Non
appointment of Whole Time Company Secretary.
This case involved non
compliance of provisions of Companies Act, regarding of non appointment of
Company Secretary. The Company approached the erstwhile CLB and the present
NCLT Bengaluru to compound the offence committed u/s 383A.
It was argued by the petitioner Company that even
though it had appointed many company secretaries, they left the company in
search of green pastures due to this company is not able to get full time
secretary during the intervening period.
Here, after analyzing
the provisions of the Companies Act, 2013, the NCLT held:
Decision of the Bench
As the suo motto
application is filed by the Company and they argued that company took earnest
efforts to appoint a Company secretary and are using the services of practicing
company secretary. The NCLT doesn’t accepted the argument and impose the
penalty of amounting Rs. 472,675 on the company and its directors.
Analysis of situation
of appointment of Company Secretary:-
As per act, it is mandatory for the some Companies to appoint Company
Secretary. But Companies evade appointing Company Secretary to set aside the
cost by giving the fake reasons like: Non avaibility of Company
Secretary, Company Secretaries left the company in search of green pastures as
there is less work in the company etc.
As it bestow us immense pleasure to share that ICSI has by now achieved
the milestone of 50,000 associate Company Secretary. Therefore, the forged argument
of non avaibility of Company Secretary is not justifiable.
Many time Companies try to give reason for non appointment of Company
Secretary by states the facts i.e. there is limited work in the Company, Limited
Compliances in the Company therefore there is no need to appoint the Company
Secretary in the Company etc. This reason is not justifiable.
Companies should understand that Company Secretary is not a factor of
cost for the Companies, they doesn’t fill role of clerk there are many
advantages of Company secretary. The company secretary of a company makes sure
that the company is legal obligations under corporate legislation are complied
with.
v Helpful
in Strong Commercial Benefits- Strong Commercial
Benefit can result if a company has a good company secretary. If you have a
good company secretary, your company will probably achieve a higher valuation.
Now the question will come into mind how the
valuation of Company will increase by appointment of Company Secretary? When a
purchaser and investor invest in the Company the psychological and
commercial issues at play a crucial role.
A canny investor will check each key
element of that deal. That checking process will flow easily if there are good
records and a documented history of sound corporate governance. Even if that
does not result in extra money, it will certainly eliminate many reasons where
a deal could be derailed or destroyed.
You wouldn’t go to a doctor, dentist or
accountant who doesn’t keep up to date so it shouldn’t be any different with
boards. Company Secretary is key person for Updation of the legal compliance
and advice to Board.
v Benefits
to Stakeholder: It is not just about new
investors either. Other stakeholders also benefit if the company is a well runs
enterprise. Each shareholder has a strong interest; a right in fact, to know
the company is being run in strict compliance with the Shareholder Agreement That is a fundamental investment right and an obligation of the board.
Well-informed stakeholders, whether they
are board members or shareholders, mean there is less chance of conflict and
disputation. All eyes can remain on your sales and revenue goals if
distractions are reduced.
v Corporate
Governance: Good corporate
governance is key to ensuring that the company runs as it should and the
interests of the shareholders are properly protected. Professionally delivered
company secretarial services will ensure that the director’s decisions and
their engagement with the shareholders is run, not just legally, but as a
matter of best practice.
Proof of functional governance will
provide investor comfort. Investors will appreciate that good company records
are indicative of good administration and decision making.
v
Major Role of Company Secretary: - The company secretary is an adviser to the chair and the board on a
company’s values, purpose, and governance framework. It involves strategic
thinking around why and how the company is doing business and the compliance
procedures needed to ensure it operates in accordance with its values. Duties
include maintaining company registers, ensuring filings are made promptly and
on time with Companies House, keeping the minutes of board and committee
meetings, and ensuring director service contracts are up to date.
v What
are the biggest benefits of employing a company secretary? Having access to a governance, risk and compliance professional –
someone with a grounding in finance, risk, strategy and law, and an
understanding of the law of meetings.
It’s easy to think of some meetings as a
doddle, but sometimes they go wrong or unexpected things happen. Agenda-setting
can be viewed as a bureaucratic function but it actually needs some thought,
and so do meeting minutes – it’s important to remember that one day those minutes
may be read by a judge in a court of law.
Conclusion:
The Companies
which stay away from to appointment of Company Secretary have suffered the loss
of an independent thinker someone with a sharp focus on the way the company
does business. Good Companies has recognized the value of a company secretary.
A Company
Secretary being multidisciplinary professional renders services in different-2
field like: Corporate Governance, Secretarial Services, Corporate Laws
Advisory, Representation Services, and Financial Market Services etc.
The role of
company secretaries varies hugely from company to company and they can often
end up being a lot broader than the above, but irrespective of their eventual
role there are inevitably key to the successful running of a company.
A company
secretary is a valuable employee so should be cherished.

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