COMPANY SECRETARIES IN COMPANIES BILL, 2011

CS. Bilu Balakrishnan

COMPANIES BILL, 2011

Corporate Affairs Minister, Mr Veerappa Moily introduced the Companies Bill, 2011 on Wednesday the 14th December, 2011 in Parliament Lok Sabha. The Bill was cleared by the Cabinet on November 24, 2011.

The Bill aims at the modernisation of corporate regulation. It will herald an era of e-governance, enhanced accountability, and corporate social responsibility (CSR) among companies registered in the country. Several corporate governance and disclosure norms were included in the Bill to avoid recurrence of corporate scandals such as the alleged accounting fraud by the promoters of the erstwhile Satyam Computer in 2009. Additional disclosure norms for companies, mandatory rotation of auditors and audit firms, regulation of related-party transactions, protection of minority shareholders, provision for class action suits, enhancement of penalties and a mandatory slot for a woman director on company boards are all new proposals included in the Bill. The New Companies Bill, 2011 have 29 Chapters & 448 Sections

COMPANY SECRETARIES & COMPANIES BILL, 2011

The Company Secretary (CS in short) profession has lot more in the new Bill. This presentation intents to have a birds eye view of what is in the cards for the CS profession.

Views / Comments: newcompanylaw@ciermail.com Presentation Series 01 on New Company Law in India

This presentation includes the major provisions pertaining to company secretary profession, and a comparison with the provisions of existing Companies Act 1956 vis--vis Companies Bill 2011 All contents prepared from the proposed Companies Bill, 2011 as introduced in Parliament. Please refer to any updates from time-to-time.

This presentation document is Open Source, any individual can host the same in websites / blogs. Alteration of this presentation in any form is an offence, and an infringement of the copyright of the author. Copyright 2011 Corporate Intelligence Education & Research (CIER)
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CS IN DEFINITIONS
Definition of CS: 2 (24) company secretary or secretary means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a company secretary under this Act; Definition of CS in Practice: 2 (25) company secretary in practice means a company secretary who is deemed to be in practice under sub-section (2) of section 2 of the Company Secretaries Act, 1980; Definition of Expert: 2 (38) expert includes an engineer, a valuer, a chartered accountant, a company secretary, a cost accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force;

CS IN DEFINITIONS (CONT.)
Definition of Key Managerial Personnel: 2 (51) key managerial personnel, in relation to a company, means (i) the Chief Executive Officer or the managing director or the manager; (ii) the company secretary; (iii) the Chief Financial Officer if the Board of Directors appoints him; and (iv) such other officer as may be prescribed;

CS IN DEFINITIONS (CONT.)
Definition of Key Managerial Personnel: 2 (51) key managerial personnel, in relation to a company, means (i) the Chief Executive Officer or the managing director or the manager; (ii) the company secretary; (iii) the Chief Financial Officer if the Board of Directors appoints him; and (iv) such other officer as may be prescribed;

CS ROLE IN INCORPORATION & PROSPECTUS DOCUMENT OF A COMPANY

7. (1) There shall be filed with the Registrar within whose jurisdiction the registered office of a company is proposed to be situated, the following documents and information for registration, namely: (a) the memorandum and articles of the company duly signed by all the subscribers to the memorandum in such manner as may be prescribed; (b) a declaration in the prescribed form by an advocate, a chartered accountant, cost accountant or company secretary in practice, who is engaged in the formation of the company, and by a person named in the articles as a director, manager or secretary of the company, that all the requirements of this Act and the rules made thereunder in Respect

26. (1) Every prospectus issued by or on behalf of a public company either with reference to its formation or subsequently, or by or on behalf of any person who is or has been engaged or interested in the formation of a public company, shall be dated and signed and shall (a) state the following information, namely: (i) names and addresses of the registered office of the company, company secretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, if any, underwriters and such other persons as may be prescribed;

CS ROLE IN ANNUAL RETURN OF A COMPANY

92. (1) Every company shall prepare a return (hereinafter referred to as the annual return) in the prescribed form containing the particulars as they stood on the close of the financial year regarding and signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice: Provided that in relation to One Person Company and small company, the annual return shall be signed by the company secretary, or where there is no company secretary, by the director of the company. (2) The annual return, filed by a listed company or, by a company having such paid-up capital and turnover as may be prescribed, shall be certified by a company secretary in practice in the prescribed form, stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act. . (6) If a company secretary in practice certifies the annual return otherwise than in conformity with the requirements of this section or the rules made thereunder, he shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

COMPLIANCE WITH SECRETARIAL STANDARDS OF THE ICSI

118. (1) Every company shall cause minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot and every meeting of its Board of Directors or of every committee of the Board, to be prepared and signed in such manner as may be prescribed and kept within thirty days of the conclusion of every such meeting concerned, or passing of resolution by postal ballot in books kept for that purpose with their pages consecutively numbered (8) Where the minutes have been kept in accordance with sub-section (1) then, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and the resolutions passed by postal ballot to have been duly passed and in particular, all appointments of directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid. . . (10) Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government.

MANDATORY APPOINTMENT OF COMPANY SECRETARY AS A KEY MANAGERIAL PERSONNEL

203. (1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel, (i) managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; and (ii) company secretary: Provided that unless the articles of such a company provide otherwise, an individual shall not be the chairperson of the company as well as the managing director or Chief Executive Officer of the company at the same time. (2) Every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration. (3) A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time: Provided that nothing contained in this sub-section shall disentitle a key managerial personnel from being a director of any company with the permission of the Board: (4) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy 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.

SECRETARIAL AUDIT FOR BIGGER COMPANIES

204. (1) Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Boards report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed. (2) It shall be the duty of the company to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company. (3) The Board of Directors, in their report made in terms of sub-section (3) of section 134, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report under sub-section (1). (4) If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.

FUNCTIONS OF A COMPANY SECRETARY

205. (1) The functions of the company secretary shall include, (a) to report to the Board about compliance with the provisions of this Act, the rules made thereunder and other laws applicable to the company; (b) to ensure that the company complies with the applicable secretarial standards; (c) to discharge such other duties as may be prescribed. Explanation.For the purpose of this section, the expression secretarial standards means secretarial standards issued by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved by the Central Government. (2) The provisions contained in section 204 and section 205 shall not affect the duties and functions of the Board of Directors, chairperson, managing director or whole-time director under this Act, or any other law for the time being in force.

COMPANY SECRETARY IN MERGERS & AMALGAMATION

232. (1) Where an application is made to the Tribunal under section 230 for the sanctioning of a compromise or an arrangement proposed between a company and any such persons as are mentioned in that section, and it is shown to the Tribunal . . (7) Every company in relation to which the order is made shall, until the completion of the scheme, file a statement in such form and within such time as may be prescribed with the Registrar every year duly certified by a chartered accountant or a cost accountant or a company secretary in practice indicating whether the scheme is being complied with in accordance with the orders of the Tribunal or not.

COMPANY SECRETARY AS A TECHNICAL MEMBER OF NATIONAL COMPANY LAW TRIBUNAL (NCLT)

409 (3) A person shall not be qualified for appointment as a Technical Member unless he (a) has, for at least fifteen years been a member of the Indian Corporate Law Service or Indian Legal Service out of which at least three years shall be in the pay scale of Joint Secretary to the Government of India or equivalent or above in that service; or (b) is, or has been, in practice as a chartered accountant for at least fifteen years; or (c) is, or has, been, in practice as a cost accountant for at least fifteen years; or (d) is, or has been, in practice as a company secretary for at least fifteen years; or (e) is a person of proven ability, integrity and standing having special knowledge and experience, of not less than fifteen years, in law, industrial finance, industrial management or administration, industrial reconstruction, investment, accountancy, labour matters, or such other disciplines related to management, conduct of affairs, revival, rehabilitation and winding up of companies; or (f) is or has been for at least five years, a presiding officer of a Labour Court, Tribunal or National Tribunal constituted under the Industrial Disputes Act, 1947.

MAJOR COMPARISON OF PROVISIONS RELATING TO COMPANY SECRETARY IN COMPANIES ACT, 1956 AND COMPANIES BILL, 2011

Companies Act 1956

Companies Bill, 2011

Definition of CS in Sec.2 (45)

Definition of PCS in Sec.2(45A)

Definition of CS in Clause 2 (24) more simple and specific

Definition of PCSP in Clause 2 (25) Conceptually No change Appointment dealt in Clause 203 as a Key Managerial Personnel Certain classes of companies limit will be notified in Rules No exemption route A more managerial position with statutory backup Company Penalty of Rs.1,00,000 to Rs.5,00,000; Director & every Key Managerial Personnel - Penalty of Rs.50,000, and for continuing offence Penalty of Rs. 1,000 per day. Secretarial Audit mandatory for all listed companies, and such other companies to be prescribed (Cl.204) All companies shall comply with Secretarial Standards of ICSI relating to Board & General Meeting (Cl.118(10))

Appointment dealt in Sec.383A Appointment limit Rs.5 Cores paid-up capital Appointment exemption route available A statutory position Penalty for non-appointment of secretary Rs.500 per day

No provision for Secretarial Audit No provision for compliance with Secretarial Standards of ICSI

Companies Act 1956

Companies Bill, 2011

Annual Return Signing by a director and a Secretary, if any. And if there is no secretary then by two directors.

Annual Return to be signed by a director and the company secretary, or where there is no company secretary, by a company secretary in practice:

Companies having a minimum paid-up capital and up to Rs.5 cores a Compliance Certificate from PCS is required.

Concept of Compliance Certificate from practicing company secretary re-casted in a new form clubbed with Annual Return Certification of a listed company and such other companies as may be prescribed. 92 (2) The annual return, filed by a listed company or, by a company having such paidup capital and turnover as may be prescribed, shall be certified by a company secretary in practice in the prescribed form, stating that the annual return discloses the facts correctly and adequately and that the company has complied with all the provisions of this Act.

No express certification in Mergers & Amalgamation Compliance with Scheme

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

COMPANY SECRETARIES IN COMPANIES BILL, 2011

CS. Bilu Balakrishnan

Copyright 2011 Corporate Intelligence Education & Research (CIER) Views / Comments: newcompanylaw@ciermail.com

Presentation Series 01 on New Company Law in India