Appointment of a Company Secretary Under the Companies Act, 2013: A Detailed Guide

The Companies Act, 2013 governs corporate governance and compliance in India, with the Company Secretary (CS) playing a crucial role. This blog provides a detailed understanding of the appointment process, qualifications, roles, and legal requirements for appointing a Company Secretary, including the relevant sections and the latest provisions.

Company Secretary

A Company Secretary (CS) is a qualified professional who ensures that a company adheres to legal and regulatory frameworks while upholding the principles of good governance. The Institute of Company Secretaries of India (ICSI) is the body that regulates and maintains the profession of Company Secretaries. The role is mandated under certain provisions of the Companies Act, 2013, and is vital for maintaining transparency, compliance, and efficient corporate functioning.

Relevant Provisions of the Companies Act, 2013

The appointment of Company Secretary is governed by Section 203 of Companies Act, 2013 read with Rule 8 and Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

Who Needs to Appoint a Company Secretary?

Qualifications of a Company Secretary (CS)

The qualifications for a CS are defined under the Companies Act, 2013:

Membership with ICSI:

The candidate must be a member of the Institute of Company Secretaries of India (ICSI).

Professional Expertise:

Companies prefer candidates with experience in corporate governance, legal compliance, and regulatory affairs.

Time-frame for Appointment

No specific time-frame has been assigned for the appointment of a Company Secretary.

• The Companies are advised to appoint a Company Secretary as KMP in the immediate Board Meeting that falls after the enforcement of this provision or as it becomes applicable;
• The newly incorporated companies may do so at its first board meeting, in case applicable to them.

Steps for Appointment of a Company Secretary

• Identification of Candidate – The selected individual is a qualified member of ICSI.
• Board Resolution – Pass a resolution in the Board of Directors’ meeting to approve the appointment.
• Obtaining consent – Obtain the consent letter to act as a Key Managerial Person of the Company
• Generation of eCSIN – The company secretary should generate eCSIN at the time of employment as a company secretary, by registration with The Institute of Company Secretaries of India.
• Filing with the Registrar of Companies (RoC) – File Form DIR-12with the Registrar of Companies within 30 days of the appointment.
• Drafting of Employment Agreement – It is not mandatory to have an Employment Agreement, however, it is beneficial to have an agreement that can detail the CS’s responsibilities, terms of employment, and remuneration.
• Intimation to Stock Exchanges (For Listed Companies) – To Notify stock exchanges about the appointment for public disclosure and compliance.

Key Duties of a Company Secretary

A Company Secretary performs a wide range of functions, few of them are as below:

1. Compliance Management – To ensure adherence to the Companies Act, 2013 and other applicable laws and filing of relevant forms with Ministry of Corporate Affairs.
2. Corporate Governance – Advises the board on governance frameworks and compliance strategies.
3. Board Meetings and Documentation – To prepare and circulates notices, agendas, and minutes of board meetings & to maintains statutory registers and records.
4. Shareholder Management – To Organise Annual General Meetings (AGMs)/ Extra-ordinary General Meetings (EOGMs) and other shareholder interactions.
5. Liaison with Regulatory Authorities – To act as a bridge between the company and regulatory authorities like RoC, SEBI, and tax authorities.

Penalties for Non-Compliance

Failing to appoint a Company Secretary where required can result in:

1. Company Penalty:
   • Fine of up to ₹5 lakh.
2. Officer-in-Default Penalty:
   • Fine of up to ₹50,000 and an additional ₹1,000 per day for continuing default, not exceeding ₹5 lakhs.

Filling up of Vacancy of Whole-time Company Secretary

Under the provisions of Section 203(4) of the Companies Act, 2013, if the office of any whole-time key managerial personnel (in this case whole-time Company Secretary) is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.

Conclusion

The appointment of a Company Secretary is not merely a legal obligation but a strategic decision that ensures the smooth functioning of your business. With evolving regulatory requirements and amendments, appointing a qualified Company Secretary who understands compliance and governance intricacies is essential to meet the compliance needs of every business, and also to ensure the risk is mitigated and overall enhance the transparency and confidence in stakeholders.

Our experts at Chhota CFO are here to guide you through the Company Secretary appointment process, ensuring you meet all statutory requirements under the Companies Act, 2013.