Importance of Company Secretary in Modern Business

Introduction

Meaning

According to Section 2(1) (c) of the Company Secretaries Act, 1980, company secretaries are the people who are the member of the Institute of Company Secretaries of India[1].

A Company Secretary is appointed by a company that may be a private or public organisation and holds the topmost position in the hierarchy of the managerial force and the executives in the administration. The task of the Company Secretary is to perform functions which are of administrative and governance importance in the company. He is required to advise the board of directors for smooth functioning of the company. Being an important figure his major duty is to comply with all the administrative laws of the company also known as company compliance. He is responsible for the implementation and execution of rules and regulations decided by the higher authorities of the company. A company secretary is a key person in top management who is necessary to consult while making policy decisions and certain law compliances by the directors and CEO. Under the guidance of his prominent leadership a company abides by the provisions set out in the Indian Companies Act, 2013.

Thus it can be seen how important the presence of a Company Secretary is and so he should be efficient, organised, disciplined and have some knowledge and understanding of business structure, networking and finances. The company secretary cannot be the same person as company director although in the absence of company secretary the director assumes his responsibilities. To keep intact the management of the organisation along with meeting the statutory and regulatory framework, he has to act like a backbone of the company.

In this research paper we will study about the roles and responsibilities of a Company Secretary and his importance while decision making along with a question on his presence in the board meetings.

Research Question

1. Can a board meeting be held without a company secretary?

Methodology

The type of research methodology used is a Secondary data analysis. The problem is analysed in the context of corporate importance and managerial role in a business environment. The method and design of research is Descriptive and secondary authoritative data is used.

Qualifications of a Company Secretary

According to Section 2 (24) of Companies Act, 2013, a Company Secretary must hold specific requirements laid down by the Indian Government from time to time. Furthermore, the qualifications specified by the Companies (Secretary’s Qualifications) Rules 1975 for the appointment of a CS[2].

1. The company having a paid-up capital of Rs. 50 lakhs requires the Company Secretary to be the member of the Institute of Company Secretary of India (ICSI).
2. The other types of company requires the Secretary to hold one or more of the given qualifications:
3. Has a membership of the Institute of Company Secretaries of India,
4. Has a law degree from any reputed university,
5. Has a membership of the Institute of Cost and Works Accountants of India,
6. Has a postgraduate degree in Commerce granted by any reputed university,
7. Has a diploma in Company Law from any Indian Law Institute.

Roles & Responsibilities of a Company Secretary

A Company Secretary performs various administrative and corporate governance tasks in compliance with the provisions of the Companies Act such as taxation laws, shareholder’s rights, business structure, statutory laws, industrial and economics laws applicable to the company. Thus, he acts as a link between the directors and shareholders of the company. Under the Companies Act, the role of a company secretary is threefold viz. as a statutory officer, as a coordinator and as an administrative officer if so authorized[3].

1. Role as a Coordinator
2. He ensures the effective and efficient implementation and execution of the management policies decided by the Board.
3. He acts as a communicating channel between the top management i.e. board and the executives and coordinates the actions of the executives according to the directions given by the Board.
4. The company secretary coordinates outside the organisation also and therefore his role as a coordinator has 2 aspects, namely internal and external.
5. Internally he coordinates from the Board including the Chairman and the Managing Director to various line and staff personnel, the trade unions and the auditors of the company.
6. The external role as coordinator extends to the shareholders, government organisations and the society.
7. Role as an Administrator
8. He has to ensure that the company works in accordance with the rules and regulations of the company’s policy.
9. He is the backbone of the company and formulates decisions on which the structure of the company administration is constructed.
10. He collects, surveys, interprets and assimilates information related to various aspects and departments of an organisation and thus can aid and assist the top management to establish a strong and uniform structure.
11. Since he knows every detail of the company, he has the opportunity to know the strengths and weaknesses of the functional executives and can apply them to the benefit of the company.
12. He has to ensure that the company is regularly under a detailed analysis and there is a check on the various functions, duties, decision-making and inter-relations of the departments and the employees to maintain a balanced administration.
13. Last but not the least, a company secretary has to also play the role of an administrator in the field of financial administration, office administration, personnel administration, administration of company’s properties, maintenance of corporate records and safety of personnel and property.

3. Role as a Governance Officer
4. He is the principal person to ensure corporate governance norms are being complied with.
5. Act as a secretary to the audit committee, ensure compliance with statutory filing requirements.
6. Ensure compliance with listing agreements and responsible for monitoring the transfer of shares and reporting them to the Board in its meeting[4].
7. He is the direct link between the SEBI, Stock Exchanges, Registrar of Companies etc. and the investors for effective implementation of regulatory codes and acts.
8. Ensure full disclosure of the corporate workings and dissemination of regulatory news to the stock market.
9. He acts as source for grievance redressal in matters relating to corporate governance and issues of the investors.
10. He is required to be informed about the legal and regulatory developments under the particular legislation and report them to the Managing Director/ Chief Operating Officer from time to time.
11. He is required to arrange and manage the process of conducting the Annual General or Extra Ordinary General meetings and advise the matter of concerns to be raised at the board meetings for shareholder’s support and vote.

Emergence of Company Secretary as a Governance Officer

The position of the Company Secretary was a very underrated and non-recognised position in the company. But with the emergence of corporate governance the role of company secretary has transformed to that of a governance officer and has paramount importance with relation to corporate legal management. The role as Governance Officer originated with the representation of Company Secretaries Group to the Cadbury Committee of United Kingdom in the year 1992[5].

The Group was of the view that the Company Secretary should be responsible for the management and proper administration of the company through his personal conduct and the company’s compliance with the corporate governance laws internally and externally. He should be associated with various committees such as audit, remuneration and any committee which has the power to take decisions on behalf of the board. The Group realised and observed that the Directors and the Company Secretary are the important officers in a company and therefore they are the pillars of corporate governance[6]. The company secretary has many legal and administerial duties due to which he is answerable to the Board of Directors primarily and can also be held accountable for company’s failure to abide by the corporate rules. Thus, he shares a fiduciary relationship with the shareholders of the company and is liable to advise the directors and non-executive functionaries in decision-making and policy implementation areas.

This established the legally and formally role of Company Secretary as Governance Officer.

The recognition of Company Secretary as a Key Managerial Personnel

As per section 2(38) of Companies Act, 2013, Company Secretary has been recognised as an expert and as per section 2(51), he has been designated as Key Managerial Personnel.

This is because he is a person of importance and carries out duties of an expert in the corporate governance region along with sharing the responsibilities of the directors and performing advisory functions for the smooth functioning of a company. Therefore, he has the biggest authority concerning the management of the organisation.

According Section 203 of the Companies Act, 2013 it is important for certain companies to appoint the whole time Key Managerial Personnel who are as follows:

• Managing Director or CEO
• Company Secretary, and
• Chief Financial Officer

The following companies need to appoint a whole time Company Secretary:

1. All Listed Companies.[7]
2. Public Companies which have Rs. 10 Crore or more paid-up share capital[8].
3. Every other Company which have Rs. 5 Crore or more paid-up share capital[9].

Functions of a Company Secretary

According to Section 205 of the Companies Act, 2013 the company secretary has the following functions to discharge:

1. To report to the board about the compliance status of the corporate law and governance rules.
2. To provide the directors and executives with assistance and advice that they need to discharge their duties, responsibilities and powers.
3. To take approvals from the Board, the government authorities and such related personnel as mentioned in the provisions of the Act.
4. To arrange and facilitate the Board, general and committee conferences and take notes of the minutes of these meetings[10].
5. To advise and assist the board with such corporate governance laws and secretarial standards in yielding the best results and practises.

Board Meetings

Meaning

According to Section 173 of the Companies Act, 2013 it is mandatory to hold a meeting at frequent intervals for the smooth and effective working for both public and private companies and whether it is a case of a small company or one person company.

The highest authority in an organisation is that of the board of directors which are responsible for taking the important decisions of the company along with managing its affairs and therefore to discuss some valid points for the day to day functioning and major decisions it is important to organise such meetings.

Convening and Proceedings of the Meeting

1. A notice is to be given to the directors and the members of the company about the venue, time, date and agenda of the meeting.
2. The quorum for the board meeting must be minimum that is 1/3rd of a total number of directors.
3.  All directors are required to actively participate in the meeting if not physically present then through a video conference for the decision making.
4. There must be proper authority for convening the meeting which is usually the Company Secretary but in his absence any predetermined authority will conduct the meeting.
5. The meeting must always be conducted in the presence of a chairman of the board.

Duties of a Company Secretary for facilitating a Board Meeting

The burden of organising a meeting whether a general or an annual board meeting lies on the Company Secretary. He has to prepare certain things for the process and keep records of the formal address in minutes and remember the important follow ups for later discussions. Therefore he has secretarial work before, during and after the board meeting discussed as below.

Before the Meeting

1. The secretary is expected to make arrangements for the venue of the meeting including date, time and ensuring that the location is appropriate for the meeting.
2. The secretary must prepare a formal notice to be circulated to inform the board members, directors and other participants about the meeting.
3. The secretary in consultation with the chairperson prepares the agenda of the meeting and ensures that the agenda is not overloaded.
4. The secretary collects important items required during the meeting which may include stationery, minutes, files, attendance registers etc.
5. The secretary is responsible for collecting the minutes and deciding whether they should be formal or brief and obtaining statements from the members who would be absent for the meeting but will contribute to the success of the meeting[11].

During the Meeting

1. The secretary may help the chairman during the meeting by assisting him about the important information related to the agenda and highlighting certain issues.
2. The secretary must know who all are going to attend the meeting and ensure that the people who are present have signed the attendance register.
3. The secretary reads the minutes of the last meeting and it is his duty to keep the record of the minutes of the current meeting since it is important for the business records.
4. The decisions and concluding statements of the meetings are recorded by the secretary.
5. The secretary reads all the reports and correspondences, the statements of the absentee members to the participants of the meeting.

After the Meeting

1. The most important task of the secretary after the meeting is to prepare the minutes and send it to the chairman for the approval.
2. The secretary has to file all the relevant documents of the meeting in order to keep them safe.
3. The secretary distributes the minutes to all the members of the meeting after approval from the chairman.
4. The secretary ensures that all the documents, reports and items go back to their original places in the office used for the meeting after it is over.
5. The secretary points out the actions in the minutes for the attendees which are needed to be put in action.

Analysis

After an in-depth study about the roles and responsibilities of Company Secretary and what position it holds in the Companies Act, 2013 currently, one thing is clear that the part played by him is of utmost importance for the governance of the company and its organisational success. The performance of his duties have been regarded equal to that of the Board of Directors and executives since he has the advisory powers concerning them. The Company Secretary was usually considered an insignificant personality until the emergence of corporate governance. Although now he is the Key Managerial Personnel, one amongst the highest authorities in the company. He has the tasks of managing the company by complying with the corporate laws and rules, the failure of which can result in legal consequences dealt by him individually along with a fine on the company. He is a person responsible for maintaining the image of the company to the external environment and the interpersonal relations with other companies. Combining all of this his parameters should be expanded to ensure efficient and proper governance.

The research question could now be answered properly after knowing all the aspects of the Company Secretary’s job and value. The answer will be that a board meeting must be attended by the company secretary although it is not mandatory but for the smooth process of the meeting it is required. The function and duties of the secretary begins even before the meeting and he is vital for the success of the same. Even after the meeting his work continues for the actions to be taken pertaining to the agenda of the meeting and he ensures that the goals are achieved before the next one. The secretary is a pivotal point in the company and the members work with efficiency and effectively through his directions.

Therefore not only his presence is required for the board meeting and he is the only outsider there since his decisions are in close proximity to that of the board of directors but the companies are required to appoint a company secretary as a key managerial personnel under section 203 otherwise they have to bear the consequences of the same.

Conclusion & Suggestions

A Company Secretary is imperative for the growth and development of a company and is the link between inside and outside of the organisation. Therefore there must be some changes or alterations in the scope and role of his duties in order to enhance the governance of the company and for better outcomes in future.

Here are some suggestions for the same:

1. The role of the company secretaries must be straightforward and defined while reporting to only single authority i.e. the chairman.
2. The ambit of his responsibilities must have a discretionary capacity and he should demonstrate accountability of his decisions.
3. The job profile of the company secretary and his value needs to be raised among the board members.
4. Mentoring and training of the junior staff for the same role must be effective and needs to be improved.
5. The best qualified professionals from ICSA must be placed to fulfil the duties and best suit the requirements of the board members.

To carry out a wide variety of tasks on which the success of a company is dependent it is important that a Company Secretary is an organised, disciplined, highly qualified, knowledgeable and an expert in the concerned business for the upliftment of the company, to increase the profits of its investors, benefit the shareholders and a leader in the industry.

References:

[1]The Company Secretaries Act, 1980.

[2] ICSI, The Journal for Governance of Professionals, 49 CS 1, 1-132 (2019).

[3]Indian Companies Act, 2013.

[4]Clause 47, Listing Agreement of Stock Exchanges.

[5]D.S. Mitchell, Submission to the Cadbury Committee on the role of the Company Secretary in Corporate Governance, 16 JAS 118, 118-126 (2019).

[6]Devendra. Jarwal, The Role of Company Secretary as Governance Officer, SSRN, Nov. 2013, at 84-90.

[7]Rule 8, Companies Appointment & Remuneration of Managerial Personnel Rules, 2014.

[8]Id. at 4.

[9] Rule 8 A, Companies Appointment & Remuneration of Managerial Personnel Rules, 2014.

[10] S. Venkatasubramanian, & R. Arya, A Study of Company Secretary under Companies Act, 2013, 119 IJPAM 1861, 1861-1870 (2018).

[11] Nick. Price, How a Company Secretary Should Prepare for a Board Meeting, BOARD EFFECT (June 24, 2020 10:30 PM), https://www.boardeffect.com/blog/company-secretary-prepare-board-meeting/.