Why a Company Secretary Required ?

Section 203 of the Companies Act, 2013 read with rule 8 and 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 make it mandatory for the following entities to have a company secretary:

1.    Listed entities

2.    Public companies having a paid-up capital of rupees ten crore or more.

3.    Other companies having a paid-up capital of rupees five crore or more.

It’s notable that it is mandatory to have the other positions also falling within the bracket of key managerial i.e the managing director/whole time director/CEO and CFO for the first two categories of companies, for the third category of companies, it is only mandatory to appoint a company sectary.

Not only this, company secretary has been defined U/s 2(24) to mean company secretary as defined U/s 2(1) (c) of the Company Secretaries Act, 1980 and who is appointed by a company to perform the function of a company secretary.

This means, need to appoint someone who is qualified as a company secretary by clearing the required exams of the Institute of Company Secretaries of India.

In reality, in India you would find companies maintaining the paid-up capital at INR 4,99,90,000 to escape the requirement to appoint a company secretary.  Causes for this can vary from the directors’ attitudes towards compliance and corporate governance or the belief that these can be met without a company secretary or the not up to the mark performance from the company secretaries.

But an efficient, updated and diligent company secretary can smoothen the compliance systems in a company to a great extent. The board of directors of a company may not be hands down involved in day-to-day compliance requirements, but they are definitely interested in whether or not a system exists within the company to ensure requisite compliance and the reports flowing to them on the performance of these systems. Developing and involving these systems and reports is what a company secretary can contribute to.

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