RECOGNITION OF COMPANY SECRETARIES – COMPANIES ACT, 1956 Vs. COMPANIES BILL, 2009

COMPANIES BILL 2009 Companies bill reintroduced Was section 383A protective? What necessitated changes in 383A from TWO to FIVE crores? Strength for any profession comes with making a mark in practice (Quality) Certification by PCS between 2 to 5 crores Quality versus quantity?

No of Members on Rolls of ICSI as on 4 th December 2008 Net Number of Members as borne on the Register of Members (after deducting deaths, cancellations and defaulters) Number of Members who have not paid annual fee and are eligible for restoration of membership 3512 Number of persons who have completed the Final Examination and are at various stages of completing practical training 3897 Total Less number of members holding Certificate of Practice 2971 Number of persons available for employment 23176

Active Companies between paid capital (in Rs.) Total number of Companies Number of companies in which Company Secretary is appointed YesNo 2 crore to 5 crore crore to 10 crore More than 10 crore Total Status of compliance with 383A Information provided by MCA as of Nov 2008

Appointment of Company Secretary Companies Act, 1956 Section 383A(1)- Every company having such paid-up share capital as may be prescribed shall have a whole-time Company Secretary. At present the paid-up capital prescribed is Rs.5 crore and above. Companies Bill, 2009 Clause 178(1) - Every company belonging to such class or description of companies as may be prescribed shall have whole- time key managerial personnel. A Company Secretary is a KMP along with the Managing Director, the Chief Executive Officer and the Chief Financial Officer.

Appointment of Company Secretary Companies Bill, 2009 Suggestion to be made to the Parliamentary Standing Committee could be on the following lines –To cover all listed entities irrespective of the capital –To cover others where the Capital is 5 crores or more –To cover based on turn over –To cover for a minimum period of say 3 years once the turnover criteria is breached –Reappointment not required if for a continuous period of 3 years turnover is less than prescribed limit

Manner of Appointment Companies Act, 1956 No such requirement. Companies Bill, 2009 Clause 178(2) - Company Secretary to be appointed by a resolution of the Board containing terms and conditions of appointment including remuneration. View expressed by some for approval through AGM? Would be a very dangerous precedent? Shareholder activism?

Removal of Company Secretary Companies Act, 1956 No such requirement. Companies Bill, 2009 Since Company Secretary is to be appointed by a resolution of the Board, his removal will also be by a resolution of the Board. This is a well settled principle of law that the appointing authority is the removing authority also.

Vacancy in office of Company Secretary Companies Act, 1956 No period specified Defences available [Sec.383A(1A) proviso] –to prove that all reasonable efforts were taken to appoint CS. –the financial position of the company was such that it was beyond its capacity to engage a CS. Companies Bill, 2009 Clause 178(4)- vacancy of CS to be filled up by the Board at a meeting of the Board within six months. No defence available.

Penalty for non-compliance Companies Act, 1956 Section 383A(1A)- the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues. Companies Bill, 2009 Clause 178(5) Penalty - on company – one lakh rupees On every director and KMP who is in default – 25,000 rupees, for each default. Suggestion to Parliamentary Standing Committee – The penalty under clause 178(5) should be continuing one as in the case of section 383A(1A), after the expiry of six months.

Signing of Annual Return Companies Act, 1956 Section 161 – Annual Return to be signed both by a Director and by the manager or Secretary, where there is no manager or Secretary, by two directors, one of whom shall be the MD, where there is one.

Companies Bill, 2009 Clause 82(1) - the Annual Return of every company to be signed by a Director and the Company Secretary, or where there is no Company Secretary, by a Company Secretary in whole-time practice. It means that the annual return of every company, whether private or public, listed or unlisted, (except one person and small companies), will be required to be signed by either Company Secretary in employment or the Company Secretary in practice. Signing of Annual Return

Companies Act, 1956 Annual Return of listed companies to be signed by PCS also. No provision. Companies Bill, 2009 Annual Return of listed companies also to be signed by PCS. AR of a company having such paid-up capital and turnover as may be prescribed – also to be signed by PCS.

Compliance Certificate Companies Act, 1956 Section 383A – Companies with paid-up share capital of more than Rs.10 lakhs but less than Rs. 5 crore – PCS to give a compliance certificate. Copy of certificate to be attached to Board’s Report

Companies Bill, 2009 Clause 82(1) –annual return to contain inter alia matters related to certification of compliances, disclosures. The Company Secretary in whole-time practice while signing annual return of listed companies or companies having prescribed paid-up capital and turn over to certify not only that the annual return states the facts correctly and adequately but also that the company has complied with all the provisions of the Act, in the prescribed form (i.e. compliance certificate). An extract of the Annual Return to form part of the Board’s Report. Compliance Certificate

Secretarial Standards Companies Act, 1956 No such requirement. Suggestions to Parliamentary Standing Committee - Secretarial Standards issued by ICSI to be prescribed. Companies Bill, 2009 Clause 107(10)- Every company to observe such secretarial standards as may be prescribed w.r.t. General and Board Meetings.

Report on General Meetings Companies Act, 1956 No such requirement. –Part of listing compliance Suggestions to Parliamentary Standing Committee – Report to be given by PCS. Companies Bill, 2009 Clause 109 (1) Every listed public company to prepare a report on each annual general meeting. Report to be filed with ROC within 30 days

Authentication of Financial Statements Companies Act, 1956 Sec Balance sheet and profit and loss account to be signed by : –Manager or Secretary, if any, and –Not less than two directors one of whom shall be MD, if there is one. Companies Bill, 2009 Clause 120(1) Financial Statements shall be signed by: –Chairman – where he is authorised by Board or –by two directors out of which one shall be MD or CEO. Proviso to 120(1) Financial Statements shall be authenticated in such manner as may be prescribed.

Insurance for Company Secretaries Companies Act, 1956 No such provision. Companies Bill, 2009 Clause 175(2) – D&O insurance may be taken for CS and other KMPs and the premium paid shall not be treated as part of the remuneration payable to any such personnel.

Registered Valuers Companies Act, 1956 No such provision. Companies Bill, 2009 Clause 219(2) - Company Secretary recognised for being registered as a valuer.

Appointment as Administrator Companies Act, 1956 No such provision. Companies Bill, 2009 Clause 234(1) – Company Secretary recognized to be included in the panel maintained by the Central Government for appointment as administrator /interim administrator in respect of revival and rehabilitation of sick companies.

Company Liquidators Companies Act, 1956 No such provision. Companies Bill, 2009 Clause 250(2) –Company Secretary recognized to be included in the panel for appointment as provisional /Company Liquidator.

Professional assistance to Company Liquidator Companies Act, 1956 No such provision. Companies Bill, 2009 Clause 266(1) - Company Secretaries recognized to be appointed for providing professional assistance to Company Liquidator.

Members of Tribunal Companies Act, 1956 Companies (Second Amendment) Act, 2002 (not yet effective). Company Secretary in practice for at least fifteen years is qualified for appointment as Technical Member. Companies Bill, 2009 Clause 370(3) - Company Secretary in practice for at least twenty years is qualified for appointment as Technical Member of NCLT. Suggestions to Parliamentary Standing Committee - The period of practice should be reduced to 15 years as prescribed under the Companies (Amendment) Act, 2002.

Adjudication of Penalties Companies Act, 1956 No such provision. Companies Bill, 2009 Clause 413(3) - Adjudicating Officer empowered to impose penalty on company and officer in default. Appeal lies to the Regional Director. This would enhance role of Company Secretaries as they would be called upon to represent their companies before the Registrar/Regional Director. Earlier these cases used to go to court where only lawyers were authorised to appear.

Enhancement of Penalties Companies Act, 1956 Nominal penalties. Companies Bill, 2009 Enhanced penalties with maximum and minimum quantum of penalty for several offences with deterrence for repeated defaults. Board to rely on services of professionals like Company Secretaries for due compliance.

Duties and Liabilities of Directors Companies Act, 1956 Duties not specified. Companies Bill, 2009 Clause The duties of the directors specifically laid down. The directors would look forward to the advice and assistance of Company Secretaries for due discharge of their duties and responsibilities.

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