Company Secretaries Act 1980: Strengthening Corporate Compliance

The company secretary (CS) is an important member of a company’s management team. A CS is in charge of a company’s compliance and legal matters. The Institute of Company Secretaries of India (ICSI) oversees and upholds CSs. All CSs are members of the ICSI.

The key responsibilities of the CS include keeping the company’s books of accounts up to date, auditing its tax returns, advising the board of directors on the legal and financial risks that the firm faces and ensuring the company complies with all applicable laws.

According to Section 205 of the 2013 Companies Act, a CS is required to perform the following duties:

• Perform all additional tasks as may be required from time to time by the company’s board of directors.
• Report the company’s compliance statement to the board of directors.
• Ensure the business complies with all secretarial requirements.
• Represent clients before various regulatory bodies and other authorities in relation to the performance of obligations under the Act.
• Assist the board of the company in managing the affairs of the company.
• Ensure effective corporate governance and best practices by guiding the board and help it comply with corporate governance standards.
• Fulfil any additional obligations outlined by the Act or regulations.

Key Provisions of the Act

The Company Secretaries Act of 1980 extends to the whole of India. Section 3 of the Act incorporates the Institute of Company Secretaries of India. The corporate body shall consist of institute members with their names entered in the Register. The Institute is said to have perpetual succession and a common seal. It also has the power to sue or to be sued in its name. It can acquire, hold, and dispose of either movable or immovable property.

According to Section 4 of the Act, the following people can have their names entered into the Register:

• Someone who has a Diploma in Company Secretaryship
• Someone who has passed the required examination and such training as may be prescribed by the Institute.
• Someone who was an associate or fellow at a dissolved company

The members must pay a fee for the addition of their names to the register. As per Section 5 of the Act, the members of the Institute are classified into two classes, namely associates and fellows. Each individual begins their Company Secretaryship as an Associate, and can be elevated to a Fellow on completing 5 years of service. An Associate uses the letters “A.C.S” after his or her name, and a Fellow uses the letters “F.C.S” after his name for identification purposes.

Council of the Institute

Section 9 of Chapter III of the Company Secretaries Act, 1980 provides for the constitution of the Council of the Institute. The council shall be in place to oversee the operations and perform duties entrusted to the Institute by or under this Act. The council consists of the following members:

• At most, 15 individuals are elected by Institute members from among Institute Fellows selected per the Institute’s rules and from any specified regional constituencies.
• No more than 5 individuals are nominated appropriately by the Central Government.

Section 12 of the Act states that at its first meeting, the Council shall elect 2 members to serve as its President and Vice-President, respectively. The Council shall select a replacement for the President or Vice-President whenever one of those positions becomes vacant. The president would be the head of the Council. The tenure of the President, as well as the Vice-President, is 1 year. They may be re-elected. In a situation in which the office of the president is vacant, the vice-president shall take up the post as the acting president until a new president is appointed.

Any member of the Council may resign at any moment by submitting a letter to the President under his hand. After the official Gazette announces the resignation, the seat of the member may become vacant. As per Section 13 of the Company Secretaries Act, 1980, If a member of the Council is found to have missed three consecutive Council meetings without sufficient cause, he/she will be assumed to have resigned from the Council and forfeited his/her position.

The person elected or nominated to fill a casual vacancy in the office of a member of the Council shall hold office until the dissolution of the Council. The vacancy may be filled by a new election from the constituency in question or by nomination by the Central Government, as applicable.

Committees of the Council

The Council consists of three major committees per Section 17 of the Act. The committees are as follows:

• An Executive Committee
• A Finance Committee
• An Examination Committee

A Professional Research and Publications Committee and a Training and Educational Facilities Committee are also constituted from among the members of the Council.

The President and Vice-President of each Standing Committee must function as ex officio members. For each committee, a minimum of three and a maximum of five additional members shall be chosen by the Council from among its members. Each committee also elects its own Chairman.

A fund is established under the management and control of the Council, into which all funds (including grants and donations received by the Council) are paid and from which all costs, including any donations made and liabilities properly incurred by the Council, are covered. The Council is required to keep accurate records of the fund, separating capital from revenue in the manner specified. By the provisions of Section 18 of the Act the Council may invest any funds currently in the credit of the fund in any government or other securities approved by the Central Government.

ICSI

ICSI is the only recognised professional organisation in India that develops and regulates the field of CSs and is a prestigious national professional organisation established by the Company Secretaries Act of 1980, a legislation passed by Parliament. ICSI is governed by the Ministry of Corporate Affairs of the Indian government. The Institute offers students enrolled in the CS Course a top-notch education and upholds the highest standards for CS Members. ICSI has more than 65,000 members and almost 2.5 lakh students.

The Motto of the Institute of Company Secretaries is to abide by the law and to speak the truth. Developing professionals of high calibre who facilitate good corporate governance is the primary mission of the institute.

Vision of the ICSI

The 2022 vision of the Institute aims to focus on enhancing the quality of all the verticals of the ICSI including revamping both its products as well as services. To satisfy the expectations of the stakeholders, the syllabus, education mode, examination, training, skills, knowledge updation, and ethics should be upgraded and upscaled. This vision is intended to play its expected role in nation-building through imparting knowledge, empowering youth, women empowerment, sustainable governance, and strengthening the economy.

The vision aims to:

• Give direction, a clear path, and goals that must be attained in a specific amount of time
• Translate individual vision into group vision
• Guarantee continuity of agenda and goals
• Prevent priority deviance and changes in leadership.

Thus, the vision of the ICSI can be summarised as wanting to be a global leader in the promotion of good corporate governance.

ICSI has 72 Chapters spread out across India in addition to its headquarters in New Delhi and four regional offices in Chennai, Kolkata, Mumbai, and New Delhi.

Register of the Members of the Institute

Chapter IV of the Company Secretaries Act, 1980 details the register of members of the Institute of Company Secretaries. As per Section 19 of the Act, a register of the institute’s members should be maintained by the institute’s council, which was set up for managing the affairs of the institute and discharging functions assigned to it.

The following information regarding every member must be present in the register:

• Proof of their holding a certificate of practice
• The date when their name was included in the register
• Domicile
• Date of birth
• Professional as well as residential address
• Full name
• Academic qualifications
• Any other prescribed particulars

On their name being included in the Register, each institute member is required to pay a yearly membership fee as may be established by notification by the Council. Such fee must not exceed the amount of Rs. 5000. This section provides that the Council must publish a list of Institute members by the first day of April of every year in the manner that may be prescribed. Additionally, it must transmit a copy of that list to any member who requests it.

Removal of a Member from the Register

Section 20 of the Act details the reasons and procedures to be followed for removing a member from the register. The name of any member who has passed away is removed from the register.

The member also has the power to request the removal of his name from the register. Any member who has become subject to disabilities such as – is of unsound mind, is an undischarged insolvent, or has been convicted by a competent court of an offence involving moral turpitude – will have his name removed from the register.

Such action may be taken even if the member has not paid any prescribed fee required to be paid by him. The council may revoke this decision on receiving a receipt of payment of the arrears of the annual fee and entrance fee along with any additional fee. Additionally, the name of any member whose membership in the Institute has been terminated by an order issued following this Act shall be removed from the Register by the Council.

Penalties Under the CS Act

Chapter VII of the Act details penalties that can be prescribed for violating the provisions of the Act. As per Section 24 of the Act, any member who uses the designation CS without authorisation shall be punished with a maximum fine of Rs 1000. In the case of a second conviction, the punishment shall be imprisonment which may extend to 6 months or a fine extending to Rs. 5000 or both.

As per the Act, a company cannot practise as a Company Secretary irrespective of whether it is incorporated within or outside India. Section 26 states that if the provision above is contravened, the punishment shall be Rs. 1000 for a first offence and Rs. 5000 for a recurring offence.

Section 28 of the Company Secretaries Act mentions that all the employees of a company can be held vicariously liable if the said company commits an offence. However, any secretary, director, manager, or other officers of the company will not be held guilty if they are able to prove that they were not in knowledge of the commission of the offence.

Signing documents without being a member of the Institute is strictly penalised. Such an offender is punished with a fine that measures between Rs. 5000 and Rs. 1,00,000. In the case of a subsequent conviction, they may be punished with a fine between Rs. 10,000 and Rs. 2,00,000 or with imprisonment which may extend to 1 year. This is given in Section 27 of the Act.

Awarding any degree, diploma, or certificate that suggests competence in company secretaryship is a punishable offence. Additionally, a name or common seal similar to the Institute’s cannot be used to deceive the public. According to Section 25 of the Act, a fine which may extend to Rs. 1000 shall be applied, and a fine of Rs. 5000 or imprisonment, which may extend to 6 months or both is applied in case of a second conviction.

The Company Secretaries (Amendment) Act, 2006

The Company Secretaries (Amendment) Act came into existence on 17 March 2006. A multitude of modifications were made to the pre-existing legislation. Changes made to the Act are as follows:

• As per Section 4 of the Act, when a fee of Rs. 3000 is paid, the individual who has passed the examination and completed training will be entered into the Register.
• As per Section 5, an Associate is elevated to a Fellow after completing 5 years of service as a Company Secretary. Such changes will be made only after a fee of not more than Rs 5000 is paid.
• As per Section 9, the members of the Institute elect 15 Fellows and the Central Government nominates 5 members to the Council.
• As per Section 10, the Council members can be re-elected and re-nominated if they have not held office for more than two consecutive terms.
• As per Section 10A, a period of 30 days is provided to any person who wants to submit a grievance application regarding election results. The complaint is to be submitted to the Secretary of the Institute.
• As per Section 10B, disputes are to be decided by a tribunal. The tribunal comprises a presiding officer and two other members, and the Central Government sets it up.
• As per Section 15B, universities established by law can impart education covered by academic courses of the institute. However, the universities must ensure that any degree or diploma they bestow on students should not resemble those awarded by the Institute of CSs.

Functions of the Council

According to Section 15, the functions of the Council are as follows:

1. The Council prescribes fees for the enrollment examination of candidates
2. The Council recognises enrollment on the basis of foreign training and qualification.
3. The Council levies fees from examinees and members.
4. The Council provides financial assistance for research in matters of interest to CSs.
5. The Council enables the functioning of the Quality Review Board.
6. The Council approves academic courses and their syllabuses.
7. Qualifications required for entry in the Register are prescribed by the Council.
8. The council prescribes the guidelines for granting or refusal of certificates of practice.
9. The status and standard of professional qualifications of members of the Institute are regulated and maintained by the council.
10. The council oversees the functioning of the Appellate Authority, the Board of Discipline, the Director (Discipline), and the Disciplinary Committee.

Functions of the Institute

According to Section 15A, the functions of the Institute are as follows:

1. The training of students is regulated by the institute.
2. Fees are collected from examinees and members by the Institute.
3. The Institute will oversee the publication of periodicals and books relating to the management of companies and the maintenance of a library.
4. The Institute can decide whether certificates of practice are to be granted or refused.
5. The Institute conducts enrollment examinations of candidates.
6. The Institute maintains a register of persons with the qualifications to practise as CSs.
7. The Institute is also responsible for removing and restoring names to the register.
8. The Institute conducts elections for the Council.

Conclusion

A CS is a member of the company’s compliance team specialising in law and a deciding authority with regard to corporate governance, securities legislation, and capital market issues. CSs are in charge of advising the board of directors on ensuring good corporate governance. They can be held accountable for the company’s full compliance with all regulations. Additionally, they fill in the shoes of the company’s corporate strategist and manager.

All Company Secretaries must comply with the provision of the Company Secretaries Act 1980. This article has explained in detail the roles, responsibilities, and duties of a CS and the Institute of Company Secretaries of India as per the Act.