- The scope of company secretaries in India has now become vastly different compared to its traditional notions; the modern company secretary is an important cog in the business machinery
- Corporate governance and compliance matters are just one aspect – the new evolution of company secretaries sees them as advisors on various important matters related to law, mergers and acquisitions, restructuring, new business setups, etc.
- Their core competence has become increasingly valuable too, since regulatory compliance in India is still a pain point across businesses
- The new-age company secretaries are at the helm of this journey, undertaking their roles diligently and going beyond in terms of responsibility
In view of the increasing emphasis on adherence to norms of good corporate governance in today’s business environment in India, there has been increased focus on the professionals who support and guide the management team in generating long-term added value for the shareholders and society at large, and also those who are accountable to the shareholders for the companies’ long-term performance.
A key expectation of members of self-governing professions is that they accept legal and ethical responsibility for their work and hold the interest of the public and society as paramount. One of the essential traits of a profession is to follow strict codes of conduct preserving rigorous ethical and moral obligations. In a self-regulated regime, a Company Secretary (“CS”) subjected to a strict code of conduct is looked upon by the regulators, as and ethical and trustworthy professional whose professional judgment and competence has made a mark in the corporate sector.
Accordingly, the main purpose for this article is to highlight how company secretaries in India, over a period of time, have developed themselves as professionals – having core competence in compliance matters and corporate governance, moving away from the traditional notions of a CS of a given company.
Current Scope Of Company Secretaries In A Company In India And Their Responsibilities In The Corporate World
A company secretary is a qualified professional who is a member of the Institute of Company Secretaries of India (ICSI), a statutory professional body in India with the objective of promoting, regulating and developing the profession of company secretaries in India. A CS professional is recognized as a Key Managerial Personnel (KMP) under the provisions of Companies Act, 2013 wherein he/she occupies a senior-level position in the management and is an integral part of the board of any company.
CS professionals are the natural conscience keepers for the corporate sector since they are specialists in the field of corporate governance, regulations, processes and are the eyes and ears of the Board on such matters. They act as a vital link between the company and its board of directors (management), shareholders (owners), other stakeholders and regulatory authorities. A CS is an officer responsible for compliance with numerous legal requirements under different legal acts, including the Companies Act, 2013 as applicable to companies. Since it is the CS who is also “an officer in default”, therefore, the onus to ensure timely compliance of law is on her similar to any member of the board.
Another important role of a CS is to provide to the director(s) of a company, collectively and individually, such guidance as they may require, regarding their duties, responsibilities and powers. This is an important function of a company secretary since it is her who shall abreast to the Board members about their requisite roles and powers as envisaged under the corporate law, and at the same time assist the Board in the conduct and affairs of the company. CS plays a key role in ensuring board procedures are followed and regularly reviewed.
Changing Responsibilities And Scope Of Company Secretaries In India
In a rapidly changing economy, industrial environment and emergence of the need for corporate governance and ethical business practices, role of a CS has also changed substantially over last three decades. The stakeholders are becoming vigilant towards the compliances. It is the prime duty of a professional to meet the expectations of the stakeholders at any given point of time.
The company secretary profession has also obtained new dimensions from being conscience keeper to compliance officer, governance professional, advisor, strategist for the growth of a corporate, etc. Presently, the CS profession has achieved a significant position in corporate world by stepping in a leadership role in guiding the corporates for the success and sustainable growth.
It is now imperative for CS to act as facilitator for change and help decision makers in setting the direction of corporate to achieve excellence.
The Companies Act, 2013 and also Insolvency and Bankruptcy Code 2016, has considerably enhanced the role and responsibilities of company secretaries both in employment and in practice. Also, in the recent past, the Government has been focusing on promoting compliances and being harsh on shell companies and the companies involved in law evasion and window-dressing. In this scenario, the scope of a company secretary has increased immensely as they are entrusted to ensure that the law is strictly complied with and the legal compliances are duly checked as required in the company for any financial year.
Further, apart from looking after legal compliances/requirements and provide guidance to the directors, they have also been involved in decision making of top management, framing and implementations of structure and policies for operations of the company. They also assist and advise the board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices.
Moreover, the CS also acts as a co-ordinator in administration of the company’s business and affairs. It is the company secretary only who ensures effective execution and implementation of the management policies laid out by the board. The ambit of his role as a co-ordinator also extends beyond the company and he is the link between the company and its shareholders, the authorities and the Government.
Thus, the role of a CS as a co-ordinator has two aspects, namely internal and external. The internal role of a co-ordinator extends to the board including the chairman and managing director and the auditors of the company. And her role as an external co-ordinator extends to the relationship of the company with shareholders, regulators, and the Government.
Thus, it is imperative to note that the roles and responsibilities of a CS are widening and few of them may be elucidated as:
- Advising on foreign collaborations/setting up of joint ventures/subsidiaries in India or abroad
- Carrying out plan for consolidation and diversification of the business
- Planning strategies for amalgamation/merger, acquisition, takeover, reorganization, restructuring and winding up of companies
- Advising the management on post-merger, acquisitions or restructuring strategies
- Advising on legal and procedural matters under the Companies Act and FEMA
- To act as Arbitrator and Conciliator and advising on the same
- Appearing as authorized representative of the Company before the NCLT/NCLAT, Central Government, Regional Director and Registrar of Companies
- To act as Secretarial Auditor, advisor or consultant
- Advising on matters related to Intellectual Property
Regulatory Compliance in India & The Underlying Roles And Duties Of The Company Secretary
Regulatory compliance in India has a direct bearing on ease of doing business and also impacts parameters related to Government initiatives like “Make In India”. As per the Ease of Doing Business Index of the World Bank, India is ranked at 63rd position and has made significant improvement in ranking as compared to few years back wherein India was usually ranked after Top 100 countries.
However, in spite of the improvement in Ease of Doing business ranking, compliance burden in India has not reduced.1
As per the website of Ministry of Law and Justice2, there are a total of 993 acts in India in which average amendments made in a year exceeds 2,500, including 600 updates related to taxation and finance acts only.
An enterprise has to adhere to 25,537 central compliances which increases to 69,233 compliances if the enterprise is operational across all states. As per a World Bank report3, an Indian business spends 252 hours paying taxes. In comparison with other countries, a Chinese enterprise spends 138 hours paying taxes while a business in the best-performing country of Singapore spends only 49 hours.
On the top of it, any default in these matters may lead to stringent actions, including levy of penalty and prosecution.
The above facts appropriately explain why India is still not the preferred destination for businesses despite the fact that it is the second largest consumer market in the world. Thus, regulatory compliances have proven to be a bane so far, for businesses operating in India. Accordingly, in order to encourage authenticity in the day-to-day operations of the company, the Government, while introducing new compliances should also consider that such newly-introduced compliances are streamlined in a way that instead of becoming tedious and a costly affair for organizations, they should act as a wakeup call for all the stakeholders from companies to directors and to shareholders, thereby making them vigilant in their daily compliance.
As discussed, aforesaid, a company secretary in India plays a very vital role in ensuring compliance to these regulations of a business, and she is often required to answer the following basic questions with respect to regulatory and legal compliance:
- What is to be done?
- Who is to execute it?
- How it is to be done?
- When is it to be done?
- In which cases, approval or permission is required from statutory authorities?
- Who all are to be intimated post the transaction including regulatory authorities, etc.?
Without answering all these questions, it is not possible to carry out any business transaction in India. Therefore, a CS as a professional has a core competence in compliances and corporate governance.
They are specialized professionals in the matter of compliance enjoined under various statutes and rules, regulations, byelaws, guidelines made thereunder. And as a professional, a CS should be very careful and diligent while performing their duties not only to avoid any legal implications but also to adhere to the professional standards, professional duties and trust reposed on them by the management and the shareholders.
Thus, with the increase in roles and responsibilities of a company secretaries in India, their accountability has also increased. Since CS professionals understand the complexities of law, therefore the shareholders and management of the company should rely on them for all such matters so as avoid any breach of compliance which would in turn result in sound conduct of affairs of the company.
Amrita leads Coinmen’s Corporate Secretarial Services as an Assistant Manager.