RoleRole,, RecognitionRecognition and and ChallengesChallenges of of Company Secretaries under the Company Secretaries under the

Companies Bill, 2012Companies Bill, 2012

SANJAY GROVERSANJAY GROVERSANJAY GROVER & ASSOCIATESSANJAY GROVER & ASSOCIATES

COMPANY SECRETARIESCOMPANY SECRETARIES

RoleRole&&

RecognitionRecognition

Define to Define to PerformPerform {Clause 2(24)}{Clause 2(24)}

““Company secretaryCompany secretary”” or or ““secretarysecretary”” means a company means a company secretary as defined in secretary as defined in clause clause ((cc) of sub) of sub--section (section (11) of ) of section 2 of the Company section 2 of the Company Secretaries Act, 1980Secretaries Act, 1980 who is who is appointed by a company appointed by a company to to perform the functions of a perform the functions of a company secretarycompany secretary under under this Act.this Act.

The functions of the company The functions of the company secretary shall secretary shall includeinclude (Clause 205)(Clause 205)

to report to the Board about to report to the Board about compliance with the compliance with the provisions of this Actprovisions of this Act, the rules made there , the rules made there under and under and other laws applicable other laws applicable to the to the company;company;to ensure that the company to ensure that the company complies with the complies with the applicable secretarial standardsapplicable secretarial standards;;to to discharge such other duties discharge such other duties as may be as may be prescribed. prescribed.

Appointment of KMP (Clause 203)Appointment of KMP (Clause 203)

Every company belonging to such class or classes Every company belonging to such class or classes of companies as may be prescribed shall have of companies as may be prescribed shall have the following wholethe following whole--time key managerial time key managerial personnelpersonnel--

managing director, or Chief Executive managing director, or Chief Executive Officer or manager and in their absence, a Officer or manager and in their absence, a wholewhole--time director;time director;company secretarycompany secretary; and; andChief Financial Officer :Chief Financial Officer :

Beginning of aBeginning of a NEW PATHNEW PATH

Introduction of Introduction of Secretarial AuditSecretarial Audit(Clause 204)(Clause 204)

Secretarial Audit for bigger companiesSecretarial Audit for bigger companies

Every listed company and a company belonging to other class Every listed company and a company belonging to other class of companies as may be prescribedof companies as may be prescribed shall annex with its shall annex with its BoardBoard’’s report a s report a Secretarial Audit Report, given by a Secretarial Audit Report, given by a Company Secretary in PracticeCompany Secretary in Practice, in such form as may be , in such form as may be prescribed.prescribed.

It shall be the duty of the company to give all assistance and It shall be the duty of the company to give all assistance and facilities to the Company Secretary in Practice, for auditing thfacilities to the Company Secretary in Practice, for auditing the e secretarial and related records of the company.secretarial and related records of the company.

The Board of Directors, in their report The Board of Directors, in their report shall explain in full shall explain in full any qualification or observation or other remarks any qualification or observation or other remarks made made by the Company Secretary in Practice in his report.by the Company Secretary in Practice in his report.

Annual Returnis not just a

Annual Return (Clause 92)Annual Return (Clause 92)

Every company shall prepare a return (hereinafter Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of containing the particulars as they stood on the close of the financial year regarding the financial year regarding ………………. and . and signed by a signed by a director and the company secretary, or where director and the company secretary, or where there is no company secretary, by a company there is no company secretary, by a company secretary in practicesecretary in practice::

Provided that in relation to Provided that in relation to One Person Company and One Person Company and small companysmall company, the annual return shall be signed by , the annual return shall be signed by the the company secretarycompany secretary, or where there is no company , or where there is no company secretary, by the director of the company.secretary, by the director of the company.

DonDon’’t be in Hastet be in Haste

The annual return, filed by a The annual return, filed by a listed listed company or, by a company having such company or, by a company having such paidpaid--up capital and turnover as may be up capital and turnover as may be prescribedprescribed, shall be certified by a , shall be certified by a company secretary in practicecompany secretary in practice in the in the prescribed form, stating that the annual prescribed form, stating that the annual return discloses the facts correctly and return discloses the facts correctly and adequately and that the company has adequately and that the company has complied with all the provisions of this complied with all the provisions of this ActAct..

Return to be filed with RegistrarReturn to be filed with Registrar(Clause 93) (Clause 93) Every listed company Every listed company shall file a return in the shall file a return in the prescribed form with prescribed form with the Registrar with the Registrar with respect to change in the respect to change in the number of shares held number of shares held by promoters and by promoters and top top ten shareholdersten shareholders of of such company, within such company, within fifteen days of such fifteen days of such change. change.

Who are Who are

SHAREHOLDERSSHAREHOLDERS

Company Secretary as an Company Secretary as an EXPERTEXPERT

““ExpertExpert”” includes an engineer, a valuer, a chartered includes an engineer, a valuer, a chartered accountant, a accountant, a company secretarycompany secretary, a cost accountant , a cost accountant and any other person who has the power or authority to and any other person who has the power or authority to issue a certificate in pursuance of any law for the time issue a certificate in pursuance of any law for the time being in force; {Clause 2(38)}being in force; {Clause 2(38)}

WHAT THE WHAT THE ““EXPERTEXPERT”” CS CAN CS CAN DO/ADVISEDO/ADVISEAdvise on Matters to be stated Advise on Matters to be stated

in prospectusin prospectusAdvise on Amalgamations/ Advise on Amalgamations/

ArrangementsArrangementsAdvise Company AdministratorAdvise Company AdministratorAct as member of SFIOAct as member of SFIOAct as Mediator & Conciliator Act as Mediator & Conciliator Professional assistance to Professional assistance to

Company Liquidator Company Liquidator Advise on other applicable lawsAdvise on other applicable laws

Appearance before NCLT/NCLATAppearance before NCLT/NCLAT(Clause 432)(Clause 432)

Enhanced Role/Recognition of CSEnhanced Role/Recognition of CS

Technical member of NCLT/ NCLAT:Technical member of NCLT/ NCLAT:CS in practice for at least 15 yrs. eligible for CS in practice for at least 15 yrs. eligible for appointment.appointment.NCLT/NCLAT: A person of proven ability/ integrity/ NCLT/NCLAT: A person of proven ability/ integrity/ standing having special knowledge/experience of not standing having special knowledge/experience of not less than 15 yrs for NCLT (25 yrs for NCLAT) in law, less than 15 yrs for NCLT (25 yrs for NCLAT) in law, industrial finance, industrial management/ industrial finance, industrial management/ administration/ reconstruction, investment, administration/ reconstruction, investment, accountancy, labour matters/ other disciplines related accountancy, labour matters/ other disciplines related to management/ conduct of affairs/ revival/ to management/ conduct of affairs/ revival/ rehabilitation/ winding up.rehabilitation/ winding up.

Enhanced Role/Recognition of CS Enhanced Role/Recognition of CS Report on Annual General Meeting (Clause 121)Report on Annual General Meeting (Clause 121);;Mandatory preparation of a consolidated financial Mandatory preparation of a consolidated financial statement of the company and of all the subsidiaries statement of the company and of all the subsidiaries and the word and the word ““subsidiarysubsidiary”” shall include associate shall include associate company and joint venture. (Clause 129) company and joint venture. (Clause 129) BoardBoard’’s Reports Report has been made more informative and has been made more informative and extensive disclosures. (Clause 134) extensive disclosures. (Clause 134) (Role of CS has (Role of CS has become wide)become wide)Financial statement to be signed byFinancial statement to be signed by managing director managing director and the CEO, if he is a director in the company, the and the CEO, if he is a director in the company, the Chief Financial Officer and the company secretary of the Chief Financial Officer and the company secretary of the company (Clause 134)company (Clause 134)

DirectorsDirectors’’ Responsibility StatementResponsibility Statementshall, intershall, inter--alia, state that alia, state that --

The directors had The directors had devised devised proper proper systems to ensure systems to ensure compliance with the compliance with the provisions of all provisions of all applicable lawsapplicable laws and and that such systems were that such systems were adequate and operating adequate and operating effectively. effectively. (Clause 134 (5)(f)}(Clause 134 (5)(f)}

Enhanced Role/Recognition of CSEnhanced Role/Recognition of CSIn case of Winding up In case of Winding up (Clause 275)(Clause 275)::

Provisional/ Company Liquidator to be appointed from a Provisional/ Company Liquidator to be appointed from a panel maintained by Central Govt. consisting of names panel maintained by Central Govt. consisting of names of CS/ other professionals or firms/ bodies corporate of CS/ other professionals or firms/ bodies corporate having such professionals or having a combination of having such professionals or having a combination of such professionals;such professionals;

In case of Revival/ Rehabilitation In case of Revival/ Rehabilitation (Clause 258)(Clause 258)::Interim/company administrator to be appointed by Interim/company administrator to be appointed by Tribunal from a databank maintained by Central Govt. Tribunal from a databank maintained by Central Govt. consisting of names of CS/other professionals. consisting of names of CS/other professionals. Company Secretary can also act as receiver of company.Company Secretary can also act as receiver of company.

Implementation of Scheme of Implementation of Scheme of mergermerger {Clause 232(7)}{Clause 232(7)}

Every company in relation to which the order is Every company in relation to which the order is made shall, until the completion of the scheme, made shall, until the completion of the scheme, file a statement in such form and within such file a statement in such form and within such time as may be prescribed with the Registrar time as may be prescribed with the Registrar every year duly certified by a every year duly certified by a company company secretary in practicesecretary in practice or other professionals or other professionals indicating whether the scheme is being complied indicating whether the scheme is being complied with in accordance with the orders of the with in accordance with the orders of the Tribunal or not. Tribunal or not.

Role/ Recognition in IncorporationRole/ Recognition in Incorporation

A declaration, in the prescribed form, required to be filed A declaration, in the prescribed form, required to be filed with the Registrar with the Registrar at the time of registration of a at the time of registration of a company company that all the requirements of the Act in respect of that all the requirements of the Act in respect of registration and matters precedent or incidental thereto registration and matters precedent or incidental thereto have been complied with, will be required to signed by have been complied with, will be required to signed by both both ––

A person named in the articles as a director, manager or A person named in the articles as a director, manager or secretary of the companysecretary of the company

AndAndBy By company secretary in practice company secretary in practice or other professional, or other professional, who is engaged in the formation of the company. (Clause who is engaged in the formation of the company. (Clause 7)7)

Commencement of businessCommencement of businessA company having a share capitalA company having a share capital shall not commence shall not commence any business or exercise any borrowing powers unlessany business or exercise any borrowing powers unless——

(a) a (a) a declarationdeclaration is filed by a director in such form is filed by a director in such form and verified in such manner as may be prescribed, with the and verified in such manner as may be prescribed, with the Registrar that every subscriber to the memorandum has Registrar that every subscriber to the memorandum has paid the value of the shares agreed to be taken by him and paid the value of the shares agreed to be taken by him and the paidthe paid--up share capital of the company is not less than up share capital of the company is not less than five lakh rupees in case of a public company and not less five lakh rupees in case of a public company and not less than one lakh rupees in case of a private company on the than one lakh rupees in case of a private company on the date of making of this declaration; anddate of making of this declaration; and

(b) the company has filed with the Registrar a (b) the company has filed with the Registrar a verification of its registered office as provided in subverification of its registered office as provided in sub--section (2) of section 12.section (2) of section 12.

Statutory RecognitionStatutory Recognition of of Secretarial Standards Secretarial Standards {Clause 118 (10)}{Clause 118 (10)}Every company shall Every company shall observe Secretarial observe Secretarial Standards with respect to Standards with respect to General and Board Meetings General and Board Meetings specified by the Institute of specified by the Institute of Company Secretaries of Company Secretaries of India (ICSI) and approved India (ICSI) and approved by the Central Government.by the Central Government.

LetLet’’s Explore New Avenuess Explore New Avenues

Company Secretary as an Internal Company Secretary as an Internal Auditor Auditor

Such class or classes of companies as may be Such class or classes of companies as may be prescribed shall be required to appoint an prescribed shall be required to appoint an internal auditor, who shall either be a chartered internal auditor, who shall either be a chartered accountant or a cost accountant, or accountant or a cost accountant, or such other such other professional as may be decided by the professional as may be decided by the Board Board to conduct internal audit of the functions to conduct internal audit of the functions and activities of the company. (Clause 138and activities of the company. (Clause 138))

TAKE THIS OPPORTUNITYTAKE THIS OPPORTUNITY

Challenge : to be ProChallenge : to be Pro--activeactive

CS to report to the CS to report to the Board about compliance Board about compliance with the provisions of with the provisions of this Act, the rules made this Act, the rules made there under and there under and other other laws applicable laws applicable to the to the company (Clause 205)company (Clause 205)

Other applicable laws Other applicable laws

Are not countlessAre not countless Be focusedBe focused

Be AlertBe AlertIf any auditor, cost accountant or company secretary in If any auditor, cost accountant or company secretary in practice do not comply with the provisions of subpractice do not comply with the provisions of sub--section section (12), he shall be punishable with fine which shall not be (12), he shall be punishable with fine which shall not be less than less than one lakh rupees but which may extend to one lakh rupees but which may extend to twentytwenty--five lakh rupeesfive lakh rupees. {Clause 143(15)}. {Clause 143(15)}

Notwithstanding anything contained in this section, if an Notwithstanding anything contained in this section, if an auditor of a company, auditor of a company, in the course of the performance in the course of the performance of his dutiesof his duties as auditor, as auditor, has reason to believehas reason to believe that an that an offence involving fraud is being or has been committed offence involving fraud is being or has been committed against the company by officers or employees of the against the company by officers or employees of the company, he shall immediately report the matter to the company, he shall immediately report the matter to the Central Government within such time and in such Central Government within such time and in such manner as may be prescribed. {Clause 143(12)}manner as may be prescribed. {Clause 143(12)}

CHALLENGESCHALLENGES

Officer who is in defaultOfficer who is in default means any of the following means any of the following officers of a company {Clause 2 (60)}, namely:officers of a company {Clause 2 (60)}, namely:

WholeWhole--time director;time director;

Key managerial personnel which includes Key managerial personnel which includes Company Company SecretarySecretary;;

Where there is no key managerial personnel, such director Where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and or directors as specified by the Board in this behalf and who has or have given his or their consent in writing to the who has or have given his or their consent in writing to the Board to such specification, or all the directors, if no Board to such specification, or all the directors, if no director is so specified;director is so specified;

Compounding of Offence Compounding of Offence (Clause 441)(Clause 441)Name of Authority Offence punishable with

Regional Director or any officer authorized by the Central Government

fine only and does not exceed five lakh rupees

Tribunal fine only and exceed five lakh rupees

Permission from Special Court Imprisonment or fine,

Imprisonment or fine or with both

Any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.

ComplianceCompliance versus versus CompoundingCompounding

Hefty PenaltiesHefty PenaltiesCompliance is a better Compliance is a better option.option.

Public Deposits accepted before the Public Deposits accepted before the commencement of this Act commencement of this Act (Clause 74)(Clause 74)

If a company fails to repay the deposit or part thereof or If a company fails to repay the deposit or part thereof or any interest thereon within the time specified and the any interest thereon within the time specified and the interest due, be punishable with fine which interest due, be punishable with fine which shall not be less shall not be less than one Crore rupees than one Crore rupees but which may but which may extend to ten Crore extend to ten Crore rupees rupees and and every officer of the company who is in every officer of the company who is in default shall be punishable with imprisonment default shall be punishable with imprisonment which may extend to seven years or with fine which which may extend to seven years or with fine which shall not be less than twentyshall not be less than twenty--five lakh rupees but five lakh rupees but which may extend to two crore rupees, or with which may extend to two crore rupees, or with bothboth..

Prohibition on insider trading of Prohibition on insider trading of securitiessecurities (Clause 195)(Clause 195)

No person including any director or No person including any director or key key managerial personnelmanagerial personnel of a company shall of a company shall enter into insider trading.enter into insider trading.If any person contravenes the provisions of this If any person contravenes the provisions of this section, he shall be punishable with section, he shall be punishable with imprisonment for a term which may extend to imprisonment for a term which may extend to five years or with fine which five years or with fine which shall not be less shall not be less than five lakh rupees but which may extend to than five lakh rupees but which may extend to twentytwenty--five crore rupees or three times the five crore rupees or three times the amount of profits made out of insider trading, amount of profits made out of insider trading, whichever is higher, or with bothwhichever is higher, or with both..

Punishment for false statement Punishment for false statement (Clause 448)(Clause 448)Save as otherwise provided in this Act, if in any Save as otherwise provided in this Act, if in any return, report, certificate, financial statement, return, report, certificate, financial statement, prospectus, statement or other document required prospectus, statement or other document required by, or for, the purposes of any of the provisions of by, or for, the purposes of any of the provisions of this Act or the rules made there under, any person this Act or the rules made there under, any person makes a statementmakes a statement--which is false in any material particulars, knowing it to be which is false in any material particulars, knowing it to be

false; orfalse; orwhich omits any material fact, knowing it to be material,which omits any material fact, knowing it to be material,

he shall be liable under section 447.he shall be liable under section 447.

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