Position of company secretary under companies bill 2011

Dear All,

We are aware about the introduction of Companies Bill, 2011 in the Loksabha on 14th December, 2011. A simple effort has been made from my side to analyze the Companies Bill, 2011, keeping in view the career interests of Company Secretaries.

Before starting the same please have a look at the analysis of Companies Bill, 2011 shared day before yesterday in Caclubindia. This analysis is available at the link mentioned below:

Analysis of the Companies Bill, 2011

In Caclubindia I have also shared a post immediately after the introduction of Companies Bill, 2011 regarding the provision which makes the appointment of Company Secretary compulsory and put them in the bracket of Key managerial Personnel (KMP). This post is available at the link below:

Very Good News for Company Secretaries

Position of Company Secretaries under Companies Bill, 2011

Now let’s discuss the position of Company Secretaries in the Companies Bill, 2011:

In clause 203 of the Companies Bill, 2011, the Company Secretaries are recognized as whole-time key managerial personnel along with Managing Director, Chief Executive Officer and managers. Also Companies Bill, 2011 has made the appointment of Company Secretary mandatory.

As per clause 203 of Companies Bill, 2011, every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—

1. Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; and
2. Company Secretary [Company Secretary here means a Member of the Institute of Company Secretaries of India.]

1. Inclusion of Company Secretaries in the definition of Key Managerial Personnel

Companies Bill 2011, also provides the definition of Key Managerial Personnel under Clause 2(51) of the Bill, which is as follows:

“Key Managerial Personnel”, in relation to a company, means—

(i) the Chief Executive Officer or the managing director or the manager;

(ii) the Company Secretary;

(iii) the Chief Financial Officer if the Board of Directors appoints him; and

(iv) such other officer as may be prescribed;

The definition of “Expert” given in clause 2(38) also includes Company Secretaries.

Under section 383A of the Companies Act, 1956, a defence of “poor economic condition” was available regarding non-appointment of company Secretary. By Companies Bill, 2011, the same defence has been removed. Now a company falling in the criteria to appoint CS, cannot escape its liability to appoint a company Secretary just because poor economic condition.

Earlier the penalty for non-appointment of company Secretary was Rs. 500 per day.

But considering the appointment of company Secretary important, Companies Bill, 2011 propose the penalty for non-appointment of CS as follows:

1. On company – one lakh rupees which may extend to five lakh rupees.
2. On every director and KMP who is in default – 50,000 rupees and 1,000 rupees per day if contravention continues.

A much detailed role has been proposed for company secretaries in employment and in practice as well through clause 92 of the Companies Bill, 2011.

As per clause 92 of the new Companies Bill, 2011, every company shall prepare its Annual return in the prescribed form containing the particulars as they stood on the close of the financial year regarding just like previous Section 159 of the Companies Act, 1956.

New Signing provisions at a glance:

Now Annual Return is required to be signed by:

(i) A director and the Company Secretary, or where there is no Company Secretary, by a Company Secretary in whole-time practice.

It means that now in respect of all the companies, whether private or public, listed or unlisted, if no Company Secretary is appointed by the company, the Annual Return is compulsorily required to be signed by the Company Secretary in practice.

(ii) In case of listed companies and companies having such paid-up capital and turnover as may be prescribed, the Annual Return is also to be signed by a Company Secretary in whole-time practice certifying that the annual return states the facts correctly and adequately and that the company has complied with all the provisions of the Act, in the prescribed form.

It means, in case of a listed company, even if the Annual Return is signed by the Company Secretary in employment of the Company, it is further required to be signed by the Company Secretary in Whole time practice.

Also, in case of a company having such paid up capital and turnover as may be prescribed and even if the company is not listed, the Annual Return is required to be signed by the Company Secretary in whole time practice in addition to the Company Secretary in employment.

(iii) In relation to a One Person Company and Small Company, the annual return is required to be signed by the Company Secretary, or where there is no Company Secretary, by one director of the company.