Legal requirement of appointment of Company Secretary

Legal Requirements

As per Section 203 of the Companies Act, 2013 read with Rule 8 & Rule 8A of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Every listed company and every other Public Company or Private Company having a paid-up share capital of ten crore rupees or more shall have Whole-time Company Secretary as Key Managerial personnel (KMP).

Thus, the following companies are required to mandatorily appoint Company Secretary:

• Every listed company, 
• Every public company having a paid-up share capital of ten crore rupees or more; and 
• Every priavte company having a paid-up share capital of ten crore rupees or more

Thus, if Client’s company does not fall in the above category or ambit, a Company Secretary is not required to be appointed. Though, a company can voluntarily comply with this provision. Note that a Company Secretary who is appointed as key Managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time.

Penalty for non Compliance

Any company which is mandatorily required to appoint a Company Secretary if doesn’t appoint, such company shall be liable to a penalty of five lakh rupees, and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees. 

In the recent case of M/s. PITCHERS INTERNET PRIVATE LIMITED, the order of adjudicating officer dated 25-05-2022, ROC Delhi & Haryana has imposed a penalty of Rs.5,00,000/- on the Company and Rs.4,41,000/- on three Directors of the Company.

Role and Functions 

A Company Secretary of a Company has the primary responsibility to ensure compliance with statutory and regulatory requirements and for ensuring that decisions of the board of directors are implemented. 

According to the Companies Act, 2013 and Companies Rules, 2014, the company secretary must perform the following duties:

• Ensure that the company follows the relevant secretarial standards 
• Make the board of directors aware of the rules and laws applicable to the company 
• Advise the board of directors members to assist them with their duties and responsibilities towards the company 
• Help in organizing and recording meeting with the concerned people, including the board of directors 
• Help the board to comply with all the corporate governance standards 
• Representing the company in front of regulators and other authorities 
• Act as a principal officer of the company to sign documents on behalf of the company if approved by the board 
• The duty of signing share certificates lies in the hands of the company secretary after his appointment and by a director if the company secretary has not been appointed yet. 
• The annual return is signed by the director and company secretary of the company before filing it with the Registrar of Companies. The company secretary  in practice can sign the return if the company does not have a full-time company secretary
• A company secretary must coordinate with the depository and stock exchange in case of Demat shares
• When a company is established by submitting the required documents, such as the MOA and AOA, the company secretary can sign the declarations and the person specified in the article as director or manager;
• Other duties as stated by the Board of Directors. 

Risk of non appointing company secretary 

The risk of not appointing a company secretary is for the company that is mandatorily required to appoint company secretary. The main risk of working without a company secretary for such a company is the penalty u/s 203 of Companies act as stated above. 

The companies that do not fall under the purview of appointing company secretary do not attract any risk for such non appointment, however such companies shall make sure that they properly comply with the provisions of companies act applicable to the company and can hire a company secretary firm or practicing company secretary for such activities. 

Who can be appointed as company secretary?

A Company Secretary is the key managerial personnel of a company. A Company Secretary is entrusted with the compliance and legal aspects of a company. The Institute of Company Secretaries of India (ICSI) is the body that regulates and maintains the profession of Company Secretaries. A Company Secretary means a person who is a member of the ICSI.

Benefits of appointing Company Secretary

It is beneficiary for a company (whether mandatory or not) for appointing a professional Company Secretary. The company secretary of a company makes sure that the company’s legal obligations under corporate legislation are complied with. Having access to a governance, risk and compliance professional  a CS is someone with a grounding in finance, risk, strategy and law, and an understanding of the law of meetings.