Legal Framework Governing Company Secretaries

Company Law – CS Executive Programme

CS Executive Company Law : A profession is all that you need to hold yourself high. Does all jobs termed as profession? What does the term infer on and unique feature to get differentiated from a job/employment. The significance is that, a Job is a role/ work that a person undertakes and perform in a society whereas, a Profession is a vocation founded upon specialized educational training.

A professional is one who earns his/her living from performing an activity that requires a certain level of education, skill or training. There is typically a requirement to have a defined standard of competency, expert knowledge or education at the same time adhering to codes of conduct and ethical standards. It is widely related to professionals who serve the vital aspect of protecting the interest of the public at large.

Now getting into the need for professionals in corporate regime, the recent turbulence in the corporate ethics has quivered the trust of stakeholders of the company. There is a desperate demand for exhibiting the corporate credibility and transparency by the company in their business conduct and managing affairs. There is also a need to retain the confidence of various stakeholders.

Considering the business priorities that keep the top-level management occupied, the task of managing the governance needs to be borne by some highly qualified and competent professionals. Here comes the role of a Company Secretary (CS) to fit in this position.

Earlier, the role of a company secretary was limited to providing assistance to the board of directors and managing administrative affairs of the company. In the recent past, the scope of their roles and responsibilities has expanded exponentially. Apart from their traditional tasks, company secretaries act as Those Charged with Governance. A CS not only hold a high position in the management hierarchy but also vested with accountability to those within and outside your organisation.

Today the importance of CS, makes the profession into a Corporate Supernova.

HISTORY OF REGULATORY FRAMEWORK

In the era of post-independence when the territory realized the business growth, it required a legal framework to have a firm hand over the business. It was one such necessity that brought in Companies Act, 1956. Apparently the need for a professional who can drive this firm had in corporate was also realized.

At the inception, the Department of Company Affairs introduced examinations to qualify the Government Diploma in Company Secretaryship (GDCS), which marked the beginning of the profession of Company Secretaries in an organized manner. Later in the rouse of substantial increase in the number of candidates for GDCS, theInstitute of Company Secretaries of India was set up and registered as a Section 25 under of the Companies Act, 1956 on 4th October, 1968(i.e. not for profit company) with its registered office located at NewDelhi. This is nothing but the Section 8 Company under the Companies Act, 2013.
Following this, the scope of Company Secretaries Examination and allied matters were taken over by theInstitute with effect from 1st January 1969. Subsequently in 1980, the Government moved the Company Secretaries Bill, 1980 to convert the Institute into a statutorybody.

This marked the profession of Company Secretaries has an important role to play in the introduction of professionalism in the area of corporate management. The legal framework broadly consists of the following:

• The Company Secretaries Act, 1980
• The Company Secretaries Regulations, 1982

KNOWING BASICS

Under Company Secretaries Act, 1980, “Company Secretary” means a personwho is a member of the Institute of Company Secretaries of India.

As per Companies Act, 2013, ‘CompanySecretary’ or ‘Secretary’ means a Company Secretary as defined Company Secretaries Act, 1980 who is appointed by a company to perform the functions of the Company Secretary under the Companies Act, 2013.

COUNCIL OF THE INSTITUTE:

Section 9 of the Company Secretaries Act, 1980 envisages that there shall be a Council of the Institute for the management of the affairs of the Institute and for discharging the functions assigned to it by or under this Act.It also set outs out the composition and eligibility which is not much of relevance to our course curriculum.

TYPE OF MEMBERSHIP:

Associate: Any person whose name is entered in the Register of members maintained by Institute of Company Secretaries of India shall be deemed to have become an Associate and he shall be entitled to use the letters “A.C.S.” after his name to indicate that he is an Associate as long as his name remains so entered.

Fellow: A person, being an Associate who has been in continuous practice in India as a Company Secretary for at least five years and a person who has been an Associate for a continuous period of not less than five years and who possesses such qualifications or practical experience equivalent to the experience normally acquired shall, on payment of fees, be entered in the Register as a Fellow.

In Practice: A member is entitled to continue the practice of Company Secretary, only after obtaining a Certificate of Practice.

DEEMED TO BE IN PRACTICE:

A member of the Institute shall be deemed “to be in practice” when, individually or in partnership with one ormore members of the Institute in practice or with members of other recognized professions, he, in consideration of remuneration received or to be received,—

• engages himself in the practice of the profession of Company Secretaries to, or in relation to, any company; or
• offers to perform or performs services in relation to the promotion, forming, incorporation, amalgamation, reconstruction, reorganization or winding up of companies; or
• offers to perform or performs such services as may be performed by—

—– anauthorised representative of a company with respect to filing, registering, presenting,attesting or verifying any documents (including forms, applications and returns) by or on behalfof the company
—– a share transfer agent,
—– an issue house,
—– a share and stock broker,
—– a secretarial auditor or consultant,
—– an adviser to a company on management, including any legal or procedural matters
—– issuing certificates on behalf of, or for the purposes of, a company; or

• holds himself out to the public as a Company Secretary in practice; or
• renders professional services or assistance with respect to matters of principle or detail relating to the practice of the profession of Company Secretaries; or
• renders such other services, are or may be rendered by a Company Secretary in practice;

REGISTERATION OF MEMBERS:

The Council shall maintain Register of the members of the Institute.The Register shall include all particulars about every member of the Institute, namely:—

• full name, date of birth, domicile, residential and professional addresses of the member
• the date on which his/her name is entered in the Register;
• his/her qualifications;
• whether he/she holds a certificate of practice; and
• any other particulars which may be prescribed.

The Council shall cause to be published in the list of members of the Institute as on the 1st day of April ofeach year. Every member of the Institute shall, on his name being entered in the Register, pay annual membership fee as may be decided by the council from time to time.

REMOVAL FROM THE REGISTER OF MEMBERS:

• The Council may remove from the Register the name of any member of the Institute in the following cases —
  who is dead; or
• from whom a request has been received to that effect; or
• who has not paid any prescribed fee required to be paid by him/ her or
  who is found to have been subject at the time when his name was entered in the Register, or who at anytime thereafter has become subject, to any of the disabilities or who for any other reason has ceased to be entitled to have his name borne on the Register.

The Council shall remove from the Register the name of any member in respect of whom an order has been passed under this Act removing him from membership of the Institute.

DISCIPLINARY MECHANISM

Considering the significance that the Company Secretary professional plays in the Corporate Regime, the need for the best practices, code of conduct and disciplinary mechanism is a much needed regulatory requirement. Accordingly the member of the Institute is subject to the Disciplinary mechanism provided for under Chapter V of the Company Secretaries Act, 1980 (the Act).

DISCIPLINARY DIRECTORATE

Section 21 of the Company Secretaries Act, 1980 provides for the establishment of a Disciplinary Directorate headed by an officer of the Institute designated as Director (Discipline) and such other employees for making investigations in respect of any information or complaint received by it. On receipt of any information or complaint along with the prescribed fee, the Director (Discipline) shall arrive at a prima facie opinion on the occurrence of the all egedmis conduct. The Disciplinary Directorate shall follow such procedure as may be specified to make in vestigations under the Act.

Where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the First Schedule, the matter shall be placed before the Board of Discipline.
Where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the Second Schedule or in both the Schedules, the matter shall be placed the Disciplinary Committee.

Board of Discipline

The Board of Discipline shall be constituted by the Council of the Institute under section 21A of the Company Secretaries Act, 1980. The Board of Discipline shall follow summary disposal procedure in dealing with all the cases before it. Where the Board of Discipline is of the opinion that a member is guilty of a professional or other misconduct mentioned in the First Schedule, it shall afford to the member an opportunity of being heard before makingany order against him and may thereafter take any one or more of the following actions, namely:—

• reprimand the member;
• remove the name of the member from the Register up to a period of three months;
• Impose such fine as it may think fit which may extend to rupees one lakh.

The Director (Discipline) shall submit before the Board of Discipline all information and complaints where he/she is of the opinion that there is no prima facie case and the Board of Discipline may, if it agrees with theopinion of the Director (Discipline), close the matter or in case of disagreement, may advise the Director (Discipline) to further investigate the matter.

DISCIPLINARY COMMITTEE

According to Section 21B a Disciplinary Committee shall be constituted by the Council. The Disciplinary Committee shall consist of the President or the Vice-President of the Council as the Presiding Officer and two members to be elected from amongst the members of the Council and two members to be nominated by the Central Government from amongst the persons of eminence having experience in the field of law, economics, business, finance or accountancy:

The Council may constitute more Disciplinary Committees as and when it considers necessary. The Disciplinary Committee, while considering the cases placed before it, shall follow such procedure as may be specified.

Where the Disciplinary Committee is of the opinion that a member is guilty of a professional or other misconduct mentioned in the Second Schedule or both the First Schedule and the Second Schedule, it shall afford to the member an opportunity of being heard before making any order against him and may thereafter take any one or more of the following actions, namely:—

• Reprimand the member;
• Remove the name of the member from the Register permanently or for such period, as it thinks fit;
• impose such fine as it may think fit, which may extend to rupees five lakhs.

Authority, Disciplinary Committee, Board of Discipline and Director (Discipline) to have powers of civil court

Section 21C provides that for the purposes of an inquiry under the provisions of this Act, the Authority, the Disciplinary Committee, Board of Discipline and the Director (Discipline) shall have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, in respect of the following matters, namely:—

• summoning and enforcing the attendance of any person and examining him on oath;
• the discovery and production of any document; and
• receiving evidence on affidavit.

Note – For the purposes of above sections, “member of the Institute” includes a person who was a member of the Institute on the date of the alleged misconduct although he has ceased tobe a member of the Institute at the time of the inquiry.

APPEAL TO AUTHORITY

Under section 22A of the Act the Appellate Authority constituted under sub-section (1) of section 22A of the Chartered Accountants Act, 1949, shall be deemed to be the Appellate Authority for the purposes of this Act,subject to certain modifications.

Accordingly, any member of the Institute aggrieved by any order of the Board of Discipline or the Disciplinary Committee imposing on him any of the penalties referred to in section 21A and section 21B, may withinninety days from the date on which the order is communicated to him, prefer an appeal to the Authority:

The Director (Discipline) may also appeal against the decision of the Board of Discipline or the Disciplinary Committee to the Authority if so authorised by the Council, within ninety days. However, the Authority may entertain any such appeal after the expiry of the said period of ninety days, if it is satisfied that there was sufficient cause for not filing the appeal in time.

The Authority may, after calling for the records of any case, revise any order made by the Board of
Discipline or the Disciplinary Committee may —

• confirm, modify or set aside the order
• impose any penalty or set aside, reduce, or enhance the penalty imposed by the order;
• remit the case to the Board of Discipline or Disciplinary Committee for such further enquiry as theAuthority
• considers proper in the circumstances of the case; or
• pass such other order as the Authority thinks fit.

Provided that the Authority shall give an opportunity of being heard to the parties concerned before passingany order.

CERTAIN PROVISIONS RELATING TO MISCONDUCT

Professional misconduct in relation to members of the Institute is broadly structured under Schedule I and Schedule II of the Act. They are briefly explained in below categories, Professional misconduct in relation to:

• Company Secretaries in Practice. (Part I of the First Schedule)
• Members of the Institute in service. (Part II of the First Schedule)
• Members of the Institute generally. (Part III of the First Schedule)
• Other misconduct in relation to members of the Institute generally (Part IV of the First Schedule)
• Company Secretaries in practice requiring action by disciplinary committee (Part I of the Second Schedule)
• Members of the Institute generally, requiring action by disciplinary committee (Part II of the Second Schedule).
• Other misconduct in relation to members of the Institute generally (Part III of the Second Schedule)

The detailed provisions relating to misconduct and disciplinary mechanism are contained in Sections 21,21A, 21B, 21C, 21D & 22 and the First and the Second Schedules to the Act and the Rules

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