ICSI's representation in case of Section 383A
Dear Professional Colleague,
As you are all aware, the Companies Bill 2008 was re-introduced as the Companies Bill, 2009 in the Budget Session of Parliament on 3rd August, 2009. Some members have since expressed concern that section 383A of the Companies Act, 1956 does not find place in the Companies Bill, 2009.
The provisions contained in the Companies Bill, 2009 with regard to the profession of Company Secretaries are enlisted below in brief:
1. Key Managerial Personnel (Clause 178)
(a) Definition
· As per clause 178, every company belonging to such class or descripttion of companies as may be prescribed shall have Whole-Time Key Managerial Personnel (KMP).
A Company Secretary is a KMP, as defined in clause 2(zza):
· Clause 2 (zza) -
“Key Managerial Personnel, in relation to a company, means—
(i) the Managing Director, the Chief Executive Officer or the Manager and where there is no Managing Director or Manager, a whole-time director or directors;
(ii) the Company Secretary; and
(iii) the Chief Financial Officer;”
This means, a Company Secretary has been recognized as a Key Managerial Personnel along with the Chief Executive Officer and Chief Financial Officer and is required to be appointed in every company belonging to such class or descripttion of companies as may be prescribed.
· No qualification has been prescribed for appointment of CFO whereas for appointment as a Company Secretary, the person has to be a Member of the Institute of Company Secretaries of India.
(b) Manner of Appointment
· Every Company Secretary being a Key Managerial Personnel is to be appointed by a resolution of the Board which shall contain the terms and conditions of appointment including the remuneration.
(c) Vacancy
· If any vacancy in the office of Key Managerial Personnel is created, the same shall be filled up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.
(d) Defence
· The defences available at present under section 383A of the Companies Act, 1956 for non-appointment of a Company Secretary have been done away with.
(e) Penalty
· If a company does not appoint a Company Secretary, the penalty proposed is :
On company – one lakh rupees
On every director and KMP who is in default – 25,000 rupees for each such default.
2. Annual Return (Clause 82)
· The scope of Annual Return has been widened. It now includes, besides the existing disclosures, the disclosures related to Corporate Governance practices in the company as well as certification of compliances and disclosures. Further the Annual Return of every company is now required to be signed by a Director and a Company Secretary, or where there is no Company Secretary, by a Company Secretary in whole-time practice.
It means that the annual return of every company, whether private or public, listed or unlisted, (except one person and small companies), will be required to be signed by either Company Secretary in employment or the Company Secretary in practice.
· 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, that in case of a listed company, even if the Annual Return is signed by the Company Secretary in employment of the Company, it will further be 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 even if the company is not listed, the Annual Return will also be required to be signed by the Company Secretary in whole-time practice. Further the Company Secretary in whole-time practice will not only certify that the annual return states the facts correctly and adequately but also that the company has complied with all the provisions of the Act i.e. give a compliance certificate.
· In relation to a One Person Company and Small Company, the annual return is to be signed by the Company Secretary, or where there is no Company Secretary, by one director of the company.
· Clause 82(2) provides that an extract of the Annual Return shall form part of Board’s Report.
3. Recognition to Secretarial Standards (Clause 107)
Clause 107 of the Companies Bill makes it mandatory for every company to observe such Secretarial Standards as may be prescribed with respect to General and Board Meetings.
If implies that due processes as laid down in the Secretarial Standards will have to be followed thereby enhancing the role of Company Secretaries.
4. Report on General Meetings (Clause 109)
Every listed public company shall prepare in the prescribed manner a report on each Annual General Meeting which shall be filed with the Registrar within 30 days of the conclusion of the AGM.
For the first time, the concept of Report on AGM has been introduced in respect of listed public companies which enhances the role of Company Secretaries whether in employment or in practice.
5. Registered Valuers [Clause 219(2)]
Company Secretaries along with other professionals have been recognized for being appointed as registered valuers.
6. Appointment as Administrator (Clause 234)
Company Secretaries along with other professionals have been recognized for being appointed as Interim/Company Administrator from the panel to be maintained by the Central Government, in respect of rehabilitation of revival and sick companies.
7. Company Liquidators (Clause 250)
Company Secretaries have been recognized to be appointed as Provisional Liquidator or the Company Liquidator, from a panel to be maintained by the Central Government.
8. Professional assistance to Company Liquidator (Clause 266)
The Company Liquidator may, with the sanction of the Tribunal, appoint one or more professionals including Company Secretaries to assist him in the performance of his duties and functions under the Act.
9. Qualifications of Tribunal (Clause 370)
A Company Secretary in practice is eligible to become a Technical Member of National Company law Tribunal, if he is practising for at least twenty years.
10. Adjudication of penalties (Clause 413)
Clause 413 provides for appointment of adjudicating officers for adjudging penalty under the provisions of Companies Bill. The adjudicating officer shall have power by an order to impose penalty on the company and the officer who is in default for non-compliance or default after giving a reasonable opportunity of being heard. Any person aggrieved by an order will have a right to prefer an appeal to the Regional Director.
This would greatly enhance role of Company Secretaries both in employment as well as in practice as they would be called upon to represent the companies before the Registrar/Regional Director in such matters.
11. Enhancement of Penalties
The Companies Bill, 2009 has proposed enhanced penalties with maximum and minimum quantum of penalty for each offence with deterrence for repeated defaults. This would result in better compliance of law by companies through more and more reliance on services of professionals like Company Secretaries.
12. Duties and Liabilities of Directors
The role and responsibility of the directors are proposed to be specifically laid down. With the duties and responsibilities specifically attached to them, the directors would look forward to the advice and assistance of professionals like Company Secretaries in the discharge of their duties.
13. Enhanced Disclosures
To promote good governance, detailed disclosures are contemplated under the Act, for compliance of which the companies would look forward to professionals including Company Secretaries.
14. Insolvency, Rehabilitation, Liquidation and Winding Up
Revised framework for regulation of mergers and amalgamations, insolvency, rehabilitation, liquidation and winding up of companies offers great scope for Companies Secretaries not only to act as liquidator/administrator but also to represent the various stakeholders before the Tribunal.
After introduction of Companies Bill, 2009, the Council has constituted Core Groups of Experts for carrying out detailed examination of the all clauses of the Bill and in particular with reference to the profession of Company Secretaries.
Suggestions have also been invited from all Members on the Companies Bill, 2009 vide e-mail dated 10th August, 2009.
If you wish to seek any clarification or give suggestions, you may send at secretary @ icsi.edu.
We wish to assure all Members that the Council of Institute, besides sending written memoranda containing suggestions of Institute on the Bill, will also reiterate its views before the Parliamentary Standing Committee while tendering oral evidence.
CAclubindia
