Stressed co. secretaries quit

Over 120 CS resign in just 3 months as cos grapple with governance lapses and other tricky issues RAJESH MASCARENHAS MUMBAI



    Most of them are quintessential backroom boys whose jobs are to keep companies they work for on the right side of law. And, it’s they who often end up paying an immediate price when employers indulge in sharp practices. The quiet exit of these professionals from listed companies in recent times bear out the truth.

They are the company secretaries (CS), more than 120 of whom have resigned in just three months as one after another small and mid-sized firm grappled with governance lapses and other tricky issues. Only a few of them are lucky enough to move on to greener pastures.

As companies hold back information, dress up books, sidestep rules, dodge taxes, accumulate debts, face downgrades and trip on the compliance minefield, CS are the first casualty. “Under the securities law and Companies Act 1956, CS has statutory obligations and his role goes beyond the company,” said MS Sahoo, secretary, The Institute of Company Secretaries of India, a statutory body in India that develops and regulates the profession.

Many of them call it a day as they can no longer handle the stress. “Many a times due to statutory disclosures, a CS gets into a conflict with the management and some times this conflict goes beyond repair. But the recent resignations are not alarming considering the number of people in the profession.”

“Over the past quarter, we have witnessed a steady increase of requirements from mid-sized corporates for company secretarial talent at the group level,” said Kanwardeep Singh, managing partner — industry practice at Vito India, a leading executive search firm. “Clients are upgrading their legal and secretarial teams and talent that has exited voluntarily are looking at even setting up their own CS practice.” There are about 25,000 registered CS in the country, many of them are working for closely-held companies. They liaison between board of directors, stakeholders, banks and regulatory authorities like Sebi, RoC, RBI, I-T, IRDA and stock exchanges, and are responsible for disseminating regulatory information. Besides, their role in fulfilling compliance is as important as the managing director or any other senior executive.

According to information shared with the stock exchange, companies where the CS have resigned include S Kumars Nationwide, Birla Power, Varun Industries, Opto Circuit, Muthoot Finance, ABG Shipyard, Ramsarup Industries, among others. However, these companies did not spell out the reason for the resignations. A few professionals who spoke to ETon condition of anonymity dwelt on the conflicts they are subject to. One of them, who resigned last month from a Bangalore-based small-cap technology company, said: “The company did not pay tax for the past two years, disputing all demands raised by the I-T department. This has caused considerable problem with tax officers summoning me every other day to answer their queries. After a point, I decided to quit.” Another person who was forced to quit from a medical device company said: “While most of these companies are listed, the mindset of promoters is very different… They want to do things their way and want the CS to find out a way to comply with the regulations, who are often left with no choice, but to follow the diktat. In many cases, such resignations are followed by a crash in stock prices.”

According to a securities lawyer, in some cases the CS and independent directors have left simultaneously, which is an indication of some trouble in the company. “As a corporate governance practice, companies should cite reasons for their resignations, but hardly any company does that,” he said.

rajesh.mascarenhas @ timesgroup.com