Does the evolving role of Company Secretaries full of Challenges and Opportunities?

A key expectation of members of self-governing professions is that they accept legal and ethical responsibility for their work and put the interests of the public and society first. One of the essential features of the profession is to adhere to strict codes of conduct maintaining strict ethical and moral obligations. In the self-regulated regime, the company secretary (hereafter referred to as “CS”), who is subject to a strict code of conduct, is viewed by regulators as an ethical and trustworthy professional whose professional judgment and competence have made a mark in the corporate sector. This article discusses the changing role of the company secretary.

Overview of corporate governance by a Company Secretary

In particular, the Companies Act 2014 retained the need for a company secretary in both private and public companies. The responsibilities of the modern company secretary have evolved from being a “note taker” at board meetings or an “administrative employee of the board” to one that includes a much broader role of “advisor to the board” and responsibility for the organization’s operations and corporate governance.

The Board of Directors, particularly the Chairman, rely on the Company Secretary to advise them not only on the statutory duties of the Board of Directors under the Act, disclosure obligations, and rule requirements but also on corporate governance requirements and procedures and effective Board processes. This specialized role of the modern company secretary has emerged to position them as one of the key management experts within the organization.

Statutory liability

The Companies Act 2014, which came into force on 1 June 2015, retains the requirement for a company secretary, unlike UK legislation which removed this requirement for private companies in 2006. The retention of this requirement demonstrates the importance of the company secretary’s role in the eyes of the legislature and the proposals go a step further by transferring responsibility to the board of directors for ensuring that the secretary has the necessary knowledge and experience to perform the company secretary’s functions and to keep records as required Act. In addition, the company secretary will be required to sign a statement on the appointment confirming the existence of the secretary’s duties.

Functions of company secretaries and their responsibilities in the corporate world

A company secretary is a qualified professional member of the Institute of Company Secretaries of India (ICSI), a statutory professional body in India to promote, regulate and develop the profession of company secretaries in India. A CS professional is recognized as a Key Management Personnel (KMP) under the provisions of the Companies Act 2013, where they hold a senior management position and are an important part of the company’s board.

CS professionals are natural conscience keepers for the corporate sector as they are specialists in corporate governance, regulations, and processes, and are the eyes and ears of the board on these matters. They are a bridge between the company and its board of directors, shareholders (owners), other stakeholders, and regulatory authorities. The CS is the officer responsible for compliance with any legal requirements under various pieces of legislation, including the Companies Act 2013, which applies to companies. Since it is the CS who is also the “officer in default”, the onus to ensure timely compliance with the law is on her as it is on any board member.

Another vital role of the CS is to provide the director(s) of the company, collectively and individually, with such guidance as they may require regarding their duties, responsibilities, and powers. This is an essential function of the company secretary, as it is she who informs the members of the board of directors about their required roles and powers, as envisaged by company law, and at the same time assists the board of directors in negotiations and company affairs. CS plays a key role in ensuring compliance and regular review of board procedures.

Company Secretary’s responsibility for compliance

In today’s complex regulatory environment, it is paramount to have compliance as a top priority for all businesses. With an ever-changing and evolving regulatory environment, the margin for error is very thin. Company secretaries have a legal duty to guide the board in meeting their regulatory responsibilities in all aspects of the business while always following best practices. Taking a proactive approach to compliance with planning for important compliance matters can help the board respond to these matters and act on them promptly.

A company secretary’s compliance responsibilities typically include:

At board level

• Board Management Processes – Management of the meeting process and distribution of all board documents and proposals to all board members for consideration.
• Ensure that all relevant meetings are properly scheduled and conducted as per schedule.
• Ensuring members’ records and directors’ minutes are kept in compliance
• Administration of benefits and pensions
• Advising directors on legal and regulatory requirements

At the corporate level

• Managing all compliance policies, processes, and procedures
• Ensuring the establishment and proper management of the necessary registers
• Ensuring that the company adheres to its legal obligations
• Ensuring the company’s financial records are maintained and reports are prepared following legal requirements
• Tax returns filing and financial statements auditing.

Increased burden of regulation

In light of economic developments in recent years, corporate stakeholders, particularly in the financial services sector, are increasingly involved in managing corporate affairs, and it is therefore essential that best practices are always followed. The demand for higher standards in this sector can be further demonstrated by the introduction of several corporate governance codes by the central bank, including standards of fitness and integrity for certain regulated functions or persons who exercise regulated functions before approval. 

While compliance monitoring in the financial services sector has traditionally been outsourced with the introduction of these new standards, there is greater caution in providing such services. It is true that the company secretary’s role includes informing the board of new legislation and how it applies. With this increased focus on corporate governance, the role of the company secretary has been expanded so that the secretary is now seen as the guardian of the company’s compliance with legislative requirements and best practices.

Some responsibilities and roles of a Company Secretary

It is necessary to note that CS roles and responsibilities are expanding and a few of them can be clarified as:

• Consultancy in the field of foreign collaboration/formation of joint ventures/subsidiaries in India or abroad
• Implementation of the business consolidation and diversification plan
• Merger planning strategy, acquisition, takeover, reorganization, restructuring, and liquidation of companies
• Management consulting on strategies after mergers, acquisitions, or restructuring
• Advice on legal and procedural matters under the Companies Act and FEMA
• To act as arbitrator and conciliator and to advise on the matter
• Acting as an authorized representative of the company before NCLT/NCLAT, Central Government, Regional Director, and Registrar of Companies
• Advice on intellectual property matters

Final words

CS are specialized experts in the issue of compliance mandated by various laws and rules, regulations, ordinances, and directives under them. And as a professional, a CS should be very careful and diligent in the performance of their duties, not only to avoid any legal consequences but also to uphold professional standards, professional duties, and the trust placed in them by management and shareholders.

Thus, as the roles and responsibilities of company secretaries in India have increased, their responsibilities have also increased. Since CS professionals understand the intricacies of the law, shareholders and company management should rely on them in all these matters to avoid any breach of regulations that would subsequently lead to the proper management of the company’s affairs.