Emerging Role of Company Secretaries in Corporate Governance “Corporate Governance is the application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders.” -Institute of Company Secretaries of India Good Corporate to be competent enough to handle the pressure of governance relates compliance under various jurisdictions. Company to systems Secretary is a competent officer to ensure compliances; of supervision, this is the reason that today appointment of a Company monitoring and sharing Secretary is being made mandatory in various jurisdictions. of information with the India, Pakistan, Bangladesh, Nepal, Singapore, Malaysia, stakeholders to Maldives, Hong Kong, Kenya are some of the countries generate confidence which have made the appointment of a Company and trust with Secretary mandatory for companies. customers, suppliers, In U.K. it is mandatory for every public company to creditors and have a Company Secretary. Few key findings of survey maximizing corporate done by Henley Business School and ICSA-(UK) on the value for its role of company secretaries are summarised below: shareholders. The four 1. The role of the company secretary is much more than Atul H.Mehta key elements of just administrative. At its best, it delivers strategic President corporate governance leadership, acting as a vital bridge between the Institute of Company are transparency, executive management and the board and facilitating Secretaries of India,The fairness to all the delivery of organisational objectives. stakeholders, disclosure of all financial and non-financial 2. Company secretaries are ideally placed to align the information in an easily understandable manner and interests of different parties around a boardroom supervision of the company’s activities by professionally table, facilitate dialogue, gather and assimilate relevant competent and independent Board of directors. To build information, and enable effective decision-making. this confidence, it is imperative that sturdy systems are They are often the only people to know first-hand how in place to ensure due compliance of laws and to bring the decisions made have been reached. transparency in operations and disclosure of information 3. The skills and attributes of the best company to the stakeholders. secretaries are closest to those of the chairman: The Company Secretary plays a crucial role in the humanity, humility, high intelligence, understanding governance of any organisation. The board and particularly of agendas, negotiation and resilience. the Chairman of the board relies, or ought to rely, on the 4. It is vital that company secretaries have both direct Company Secretary to advise them in respect of current and informal access to board members – executive best corporate practices, corporate governance norms and non-executive directors (NEDs), CEOs and and practices, directors’ duties under the law, board chairmen. reporting and disclosure obligations, listing requirements 5. Board members often have a lack of awareness of the and meetings procedure. ways in which the company secretary supports an The Companies Act, 2013 leapfrogs from the regime of organisation in its decision-making. Boards may control to that of liberalisation/self-regulation, which miss out on making full use of the skills, knowledge enables the corporates to play as per the rules of the and experience at their disposal. game in a dynamic environment. This calls for good 6. Company secretaries are often the longest-serving amount of self-regulation and corporate governance on members present at board meetings, and so are a their part, which necessitates the services of independent, vital repository of company history and culture, and a but competent and responsible governance professionals, guarantor of continuity. like Company Secretary. 7. Company secretaries are embedded in the process of making boards more effective; they contribute by Redefining the role of Company Secretary observing boards in action and advising on any skills The role of company secretary in the governance of gaps that need filling. organisations has become more prominent as a result of 8. The breadth of the company secretarial role includes ongoing regulatory developments and changing additional responsibilities such as being an officer of stakeholder expectations. This role of company secretary the company, chief of staff to the chairman and has been recognised worldwide by major jurisdictions. adviser to the board on governance. Dynamism and globalization requires board of a company A Company Secretary as governance professional is · Report on Annual General Meeting: Every listed thus a key person to guide the corporates to achieve its public company is required to prepare a report on each defined objectives within the forwalls of the law. annual general meeting including the confirmation to the effect that the meeting was convened, held and Company Secretary under the Companies Act, 2013 conducted as per the provisions of the Companies The Companies Act, 2013 (Act) has catapulted the Act, 2013 and rules made thereunder. The report is profession of Company Secretaries to newer heights. also required to be signed by company secretary of The dominant theme of Companies Act is self regulation. the company. The principal responsibility in this regard has been · Functions and Duties: For the first time, the functions entrusted on the Company secretary, who has been of a company secretary have been stipulated in the given an alleviated position in the corporate hierarchy. Companies Act, 2013. The Act casts an overwhelming The Act confers a special status on Company Secretary responsibility on Company Secretary in employment as Key Managerial Personnel and has bracketed him in the discharge of their duties and they are expected along with Managing Director, Chief Executive Officer, to play a proactive role in meeting the expectations of Manager, Whole-time director, Chief Financial Officer. A various stakeholders. Other than the traditional role, Company Secretary is now appointed only through the the Companies Act, 2013 codifies the functions and resolution passed in the Board meetings. duties of Company Secretary, as under: The Act provides substantive oversight role for company Ø Reporting to the Board about compliance with the secretary. For the first time the functions of the company provisions of the Act, the rules made thereunder secretary are codified to include reporting on compliance and other laws applicable to the company; with the provisions of the Companies Act, 2013, the rules Ø Ensuring that the company complies with the made thereunder and other laws applicable to the applicable secretarial standards issued by Institute company. This in itself is a huge responsibility for the of Company Secretaries of India, as approved by company secretary to rise to the expectations of the Central Government. The Institute has issued two company and the regulators. Further, the rules provide Secretarial Standards under section 118(10) of the that it is the duty of the company secretary to provide to Companies Act, 2013, namely, Secretarial the directors of the company, collectively and individually, Standard on Meetings of the Board of Directors such guidance as they may require, with regard to their (SS-1) and Secretarial Standard on General duties, responsibilities and powers; to assist and advise Meetings(SS-2). These Standards have come the Board in ensuring good corporate governance and in into effect from 1st July, 2015; complying with the corporate governance requirements Ø Providing to the directors of the company, and best practices and to assist the Board in the conduct collectively and individually, such guidance as of the affairs of the company. they may require, with regard to their duties, Company Secretary is a key functionary in the corporate responsibilities and powers; pyramid. With increasing emphasis on the principles of Ø Facilitating the convening of meetings and good governance and on compliances, responsibilities attending Board, committee and general meetings of company secretary have increased manifolds towards and maintaining the minutes of these meetings; safeguarding the interests of all stakeholders. Ø Obtaining approvals from the Board, general The substantially enhanced role of company secretary, meeting, the government and such other authorities both in employment and in practice, is summarised as required under the provisions of the Act; below: Ø Representing before various regulators, and other authorities under the Act in connection with COMPANY SECRETARY IN EMPLOYMENT discharge of various duties under the Act; · Key Managerial Personnel (KMP) Ø Assisting the Board in the conduct of the affairs of The Companies Act, 2013 confers a special status on the company; Company Secretary as the Key Managerial Personnel Ø Assisting and advising the Board in ensuring good (KMP). It provides that every listed company and corporate governance and in complying with the every other public company having a paid up share corporate governance requirements and best capital of ten crore rupees or more has to appoint a practices; and whole time KMP. Ø Discharging such other duties as have been The appointment of whole time KMP has to be made specified under the Act or rules. by a Board resolution, which is a testimony of the significance of the role of Company secretary as · Secretariat Standards: The Companies Act, 2013 KMP. Registrar of Companies must be notified of the recognizes the secretarial standards specified by appointment together with any change of details or ICSI. It is the beginning of a new era in corporate the termination of the appointment. Whole time governance, where not only financial standards but company secretary is also required to be appointed in also non-financial standards have been prioritized other companies which have a paid up share capital and given statutory recognition. Section 118(10) makes of five crore rupees or more. it mandatory for every company to observe the secretarial standards with respect to Board Meetings Additional Responsibilities: The Company Secretary and General Meetings specified by the ICSI. is invariably required to take on a variety of additional Secretarial Standard on Meetings of the Board of administrative duties, typically, these may include: Directors (SS-1) and Secretarial Standard on General · Risk Management Meetings (SS-2) issued by the Institute of Company · Communication with various stakeholders, such Secretaries of India (ICSI) are applicable to all as shareholders, Government, regulatory companies (except One Person Company) w.e.f. 1st Authorities, etc. July, 2015. The Secretarial Standards being a reality · Advising on Company Management now, the company secretaries in employment as well · Advising on business policy, strategy and as company secretaries in practice have been planning entrusted with the duty to ensure adherence of · Advising on corporate social responsibility secretarial standards. · Advising on sustainability reporting · Advising on brand equity and image building Benefits of Secretarial Standards · Managing Intellectual property rights of the a) A credible tool for vigilant Boards: Robust Board company Processes are a pre-requisite for the true effectiveness of the Board. Adoption of the COMPANY SECRETARY IN PRACTICE Secretarial Standards will facilitate effective Companies Act, 2013, provides wide opportunities to deliberations and timely decision making. Company Secretaries in practice such as: b) Booster of Corporate Transparency: The · Promotion, formation and incorporation of companies stakeholders including the investors are better and related matters. informed for effective decision making. Secretarial · Secretarial Audit and Certification Services. Standards would lend greater credibility to the · Signing of Annual Return. practices and procedures on important matters · Representing on behalf of a company and other relating to the meetings. persons before National Company Law Tribunal. c) Furthering Shareholders’ democracy- Investors · Corporate Restructuring and takeover. are continually raising the bar for governance · Appointment as a scrutinizer, to scrutinize the e- Standards. Secretarial Standards preserving the voting process in a fair and transparent manner. respect to shareholder rights and help to create · Administrator in respect of rehabilitation or revival of confidence in the mind of investors, more specifically sick companies. the fund managers and the overseas investors, · Appointment as Company Liquidator/ Provisional towards adherence of corporate governance Liquidator. practices in India. · Professional assistance to Company Liquidator. d) Ease of Doing Business - A comforted investor is · Technical Member of National Company law Tribunal. a key to corporate development, the Secretarial · A Company Secretary may become a registered Standards would help in ease of doing business, valuer under various provisions of the Act. improved governance, confidence building in minds · Pre-certification and e-filing of various e- forms. of investors, improved compliance level, ultimately · Developing a corporate compliance management leading to flow of capital in India and achieving the system and social sustainability framework for a government’s objective of make in India. company. e) Better interpretation of laws- Companies follow · A company secretary can also become part of a diverse secretarial practices. These practices have Mediation & Conciliation Panel consisting of experts evolved over a period of time through varied usages having prescribed qualifications for mediation and as a response to differing business cultures. between the parties during the pendency of Secretarial Standards provide for facilitating proceedings before Central Govt./NCLT/NCLAT. provisions that aim to systematize the differing practices. The Standards are a comprehensive · Company Secretary as Secretarial Auditors: practice module strengthening the provisions of Secretarial Audit is certainly a complete expression Companies Act, 2013. of faith of the legislature and government on the f) Accentuates Corporate Governance- The company secretaries to instil corporate discipline and Secretarial Standards enhance the concept of ensure compliance with laws. Under Companies Act, Corporate Governance that primarily hinges on 2013 every listed company and complete transparency, integrity and accountability (a) every public company having a paid-up share of the management with a greater focus on investor capital of fifty crore rupees or more; or protection and public interest. It is assumed that (b)every public company having a turnover of two even the minutest of compliance and good hundred fifty crore rupees ;or more. governance would be ensured if the companies is required to annex with its Board’s report a follow the standards effectively. Secretarial Audit Report, given by a company secretary in practice, in form MR.3. The introduction of ‘Secretarial Audit’ as a new economic laws, Taxation Laws, Foreign Exchange class of audit, in addition to the existing statutory Management Act, Consumer Protection Act, Depositories audit, internal audit and cost audit, is a welcome Act, Environment and Pollution Control Laws, Labour move towards improving the corporate governance in and Industrial Laws, Co-operative Societies Act, etc. the country. The objective of the secretarial audit is to improve the compliance culture in the corporate Role of Company Secretary in Whistle Blower sector in letter and spirit, and ensure transparency Mechanism and timely communication of compliance/non- Company Secretary being a secretary to the Audit compliance status to the management of the company, Committee is actively involved in ensuring the proper regulators and external stakeholders. This will functioning of whistle blowing mechanism in the ultimately protect the interest of customers, organization. The company secretary is primarily employees, directors, stakeholders and avoid any responsible for the efficient administration of company in unwarranted action from the law enforcing /other accordance with the applicable laws and for ensuring that agencies. board level decisions are implemented properly and are The Board of Directors in their report to shareholders reported regularly. In addition, the company secretary are required to explain any qualification/remark made should also oversee the impact of any such decision on by the company secretary in practice in the secretarial stakeholders and if there is any concern, it must be audit report. reported to the management. · Reporting of fraud - In the course of the performance The effectiveness of system mainly depends upon of his duties as secretarial auditor, if company secretary how the reported wrong doings have been acted upon in practice has reason to believe that an offence while providing sufficient protection to whistle blowers. involving fraud is being or has been committed The professionals like company secretaries being a against the company by officers or employees of the bridge between the stakeholders, company’s company, he has been placed under obligation to management and the Board hold enormous responsibility immediately report the matter to the Central in ensuring the effective implementation of Whistle Government. blower mechanism in the company and to develop the · Annual Return Certification: In respect of all the confidence of employees in that mechanism so that they companies (except one person companies and small can freely report any unethical practices, fraud or concern companies), the annual return has to be signed by noticed in the company. either a company secretary in employment and director or where no company secretary is appointed by the Corporate Social Responsibility (CSR) and company, then by the company secretary in practice. Sustainability Further, the company secretary in practice is required Section 135 of the Companies Act, 2013 makes it to certify the annual return, filed by a listed company mandatory for certain class of companies to constitute or a company having paid-up share capital of ten crore a Corporate Social Responsibility (CSR) Committee of rupees or more or turnover of fifty crore rupees or the Board with at least one independent director. While more. the Committee has been entrusted to formulate and · Pre-Certification Services: A company secretary in recommend Corporate Social Responsibility Policy of the company in line with schedule VII of the Act, the Practice is authorised for Pre-certification of various Board of directors are required to ensure that company e-forms/LLP Forms/ DIN certification. This also entails spends in every financial year atleast 2% of the average huge responsibility on the professional to ensure net profits of the company made during the three compliance of laws. immediately preceding financial years in pursuance of its · Company Secretary as Registered Valuer: CSR policy. Where the company fails to spend such Registered Valuer is one of the new concepts amount, the Board is required to specify in its report the introduced by the Companies Act, 2013 to provide a reasons for not spending the amount. The approach is to proper mechanism for valuation of the various assets ‘comply or explain’. and liabilities related to a company and to standardize The evolution of the relationship between companies the procedure thereof. A company secretary in Practice and society has been one of slow transformation from a is eligible to be a valuer. philanthropic coexistence to one where the mutual interest · Company Secretary as an Insolvency Practitioner: of all the stakeholders is gaining paramount importance. Company secretary has been recognised in the The company secretary can play instrumental role in the Companies Act as Provisional/ Company Liquidator. development of CSR values and policy for an organisation He may also be appointed as company administrator and also in implementation of various other laws/guidelines for the purpose of revival and rehabilitation of important from society perspective like competition companies. laws, environment laws and Business Responsibility Guidelines etc. In addition to Companies Act, 2013, a Company Secretary renders services in the area of various corporate and Conclusion regulatory environment. The Companies Act, 2013, depict Transition in a profession is a silent, invisible movement significant improvements in the corporate sector towards attaining intangible perpetual gains. The operations and casts huge responsibility on company profession of company secretary in India has undergone secretaries. The Institute of Company Secretaries of many stages of transformation from Record keeper to India (ICSI) in its continued endeavours to bring about a Compliance officer, from Compliance officer to Business more vibrant, ethical and responsible corporate India has manager, from Business manager to Board Room Advisor embarked upon a nationwide capacity building exercise and now transformation beckons for Governance for its members to meet the expectations and requirements Professional. of the enhanced position of Company Secretaries under The profession of company secretaries needs to evolve the Companies Act, 2013. to meet the challenges of a more dynamic business and

References http://www.thelegaltrain.com/2013/10/company-secretarys-extended-role.html http://www.newsvoir.com/release/14th-london-global-convention-on-corporate-governance-and-sustainability-1788.html