company secretary a value creatora value creator · 2014. 7. 22. · duties of company secretary...

Company Secretary A Value CreatorA Value Creator

N K JainB.Sc, LLB.,DCL,FCS,FCPS

Corporate Advisor

Cell: 09818348811Landline: 0120 - 4263965

E-mail: [email protected]

Th t f CSThreats for CS Highly volatile economic environment;Highly volatile economic environment;New laws and changes in the existing laws;N b i t tNew business structures;Highly competitive environment for Industry

d f i land professionals;High expectations of stakeholders;Technology: XBRL, e-voting, v-conferencing;Globalisation: SARC,BRICS,G-20,ILO,UNO, World Bank, ADB, OECD, GRI

[email protected] 9818348811 2

Opportunities for CSCS an expert in corporate matters;Government & Regulators repose faith &Government & Regulators repose faith & confidence in the CS profession;Thrust on new areas:Societies NGOs ClubsThrust on new areas:Societies,NGOs,ClubsNew opportunities for CS in job & practice;Newly acquired position of KMP;Technical knowledge puts CS ahead of competitors.


ICSI Vision 2020 for MembersICSI Vision 2020- for Members in Employment

“ The objective of the strategy for the members in employment shall be to enablemembers in employment shall be to enable them to become ‘Corporate Managers’ responsible for total compliance management p p gand adoption of good corporate governance practices along with adding value and g gmaximising wealth for the company and its stakeholders as a part of the management,”


ICSI Vision 2020- for Members in Practicein Practice

“The objective of strategy for members inThe objective of strategy for members in practice shall be to enable them to serve as ‘Corporate Advisors’ providing sound andCorporate Advisors providing sound and efficient compliance management advisory and representational services in all areas ofand representational services in all areas of corporate activities”


New Horizons for CS in Employment

F ti d D ti f CS [S 205]Functions and Duties of CS [Sec. 205]Key Managerial Personnel [Sec. 203]Corporate GovernanceAnnual Return [Sec.92]Board’s Report [Sec.134]CSR [Sec.135]CSR [Sec.135]SFIO [Sec.211 & 212]NCLT [Sec 408]NCLT [Sec. 408]


New Horizons for CS in P tiPractice

Business StructuresBusiness StructuresSecretarial Audit [Sec.204]Reporting of Fraud [Sec.143(12)]Secretarial Standards [Sec.118(10)]Representation Services[Sec.432]Annual Return [Sec.92][ ]Report on AGM [Sec. 121]Registered Valuers [Sec 247]Registered Valuers [Sec.247]


New Horizons for CS in PracticePractice

Corporate Restructuring & InsolvencyC & fCompany Liquidators & Professional assistance to them [Sec.275] [Sec.291]Appointment as an Administrator [ Sec.259]Technical member of NCLT [Sec.409]E- FilingVoting through electronic means [Sec.108]g g [ ]Adjudication of penalties [Sec.454]Mediation & conciliation Panel [Sec 442]Mediation & conciliation Panel [Sec.442]


Important CG points

Corporate StructureBoard CompositionBoard CommitteesDirectorsManagementManagementBoard Evaluation/Directors’ developmentS t i l A ditSecretarial AuditDuties of Company SecretarySecretarial Standards


Important CG pointsImportant CG pointsStatutory Audit / Rotation of AuditorInternal AuditWhistle BlowerDisclosure & TransparencyCorporate Social ResponsibilityCorporate Social ResponsibilityRelated Party TransactionsP t ti f Mi it Sh h ldProtection for Minority ShareholdersInvestor ProtectionE-Governance


Functions of Company Secretary Sec. 205 {GAME CHANGER}

The functions of a CS shall include:The functions of a CS shall include:-a. To report to the Board about compliance

with the provisions of the Act/ Rules andwith the provisions of the Act/ Rules and other laws applicable to the company;T th t th li ithb. To ensure that the company complies with the applicable secretarial standards;T di h h th d ti bc. To discharge such other duties as may be prescribed.

[email protected] 9818348811

Duties of Company Secretary{GAME CHANGER}{GAME CHANGER}1) To provide such guidance to the directors, as they may require, about their responsibilities, duties and powers [Refer Sec.166 re. duties of di t ]directors]; 2) To facilitate the convening of meetings and attend Board, committee and general meetings, and maintain their minutes;3) To obtain approvals from the Board, general meetings, the Government and such other

th iti i d d th A tauthorities as required under the Act. [email protected] 9818348811 12

Duties of Company Secretary{GAME CHANGER}{GAME CHANGER}4) To represent before various Regulators and other Authorities under the Act ;other Authorities under the Act ;5) To assist the Board in the conduct of the affairs of the company;affairs of the company;6) To assist and advise the Board in ensuring

d CG & i l i ith CG i tgood CG & in complying with CG requirements; 7) To discharge such other duties as have been

ifi d d th A t/ R lspecified under the Act/ Rules;8) To discharge such other duties as may be

i d b h B d f i iassigned by the Board from time to [email protected] 9818348811 13

ExpertExpertSec. 2 (38)

“Expert” includes an engineer, a valuer , a h t d t t tchartered accountant, a company secretary,

a cost accountant and any other person who has the po er or a thorit to iss e ahas the power or authority to issue a certificate in pursuance of any law for the time being in forcetime being in force.


Key Managerial PersonnelKey Managerial PersonnelSec. 2 (51) {GAME CHANGER}

“KMP” in relation to a company means the:–i Chief Executive Officer or the Managingi. Chief Executive Officer or the Managing

Director or the Manager;ii Company Secretary;ii. Company Secretary;iii. Whole Time Director;iv. Chief Financial Officer; andv. Such other officer as may be prescribed.


Key Managerial Personnel Sec 203 {GAME CHANGER}Sec.203 {GAME CHANGER}

Board of every listed company and every th bli h i id hother public company having a paid-up share

capital of � 10 crs or more shall appoint the whole time (i) MD or CEO and in theirwhole time (i) MD or CEO and in their absence a WTD (ii) a CS and (iii) a CFO.A WT KMP h ll t h ld ffi iA WT KMP shall not hold office in more than one company except in its subsidiary

t th ticompany at the same time.Vacancy in the office of WT KMP shall be filled up by the board within six months.


A d t t R l 8Amendment to Rule 8 re. appointment of CSpp

MCA vide its notification dated 9th June 2014 has amended the provisions of the Companies (Appointment and Remuneration f ) 201of Managerial Personnel) Rules, 2014.

As per the amendment, a company other than a company covered under Rule 8 which has a paid up share capital of � 5 crs or

h ll h h l timore shall have a whole-time company secretary. [email protected] 9818348811 17

Report on AGM Sec.121 & R l 31Rule 31

Every listed public company shall prepare a y p p y p preport on each AGM including confirmation to the effect that the meeting was convened, held and conducted as per the provisions of the Act, Rules and Secretarial Standard

di l iregarding general meetings.Report shall contain fair and correct summary of the proceedings of the meeting and shall be signed and dated by the Chairman of the

ti d th CS f thmeeting and the CS of the company. [email protected] 9818348811 18

One Person Company S 2(62)Sec. 2(62)

The introduction of OPC would encourageThe introduction of OPC would encourage entrepreneurship and corporatisation of sole proprietorship business with limited liability of the member.It will generate more investment and jobs.SMEs will be able to avail credit facilities from lending institutions through this new business structure.PCS can play major role in advising clients in f ti d t f OPCformation and management of OPCs.


Secretarial Audit S 204 {GAME CHANGER}Sec. 204 {GAME CHANGER}

Every listed and every public company having aEvery listed and every public company having a paid-up share capital of � 50 crs or more or turnover of � 250 crs or more :-

h ll ith it B d’ R tshall annex with its Board’s Report, a Secretarial Audit Report given by a PCS.The company shall give all assistance and p y gfacilities to PCS, for auditing the secretarial records of the company.The BOD in its report shall explain in full anyThe BOD in its report shall explain in full any qualification or observation or other remarks made by the PCS in his report.


Secretarial Audit Report F N MR 3Form No. MR-3

“ We have conducted SA of the compliance We have conducted SA of the compliance of applicable statutory provisions and the adherence to good corporate practices by--”adherence to good corporate practices by--“SA was conducted in a manner that provided me/us a reasonable basis for evaluating theme/us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing my opinion thereon ”and expressing my opinion thereon.



“ company has complied with the statutory…company has…complied with the statutory provisions…has proper Board processes and compliance mechanism in place ”compliance mechanism in place…..“…The Board of Directors is duly constituted with proper balance of Executive Directorswith proper balance of Executive Directors, Non-Executive Directors and Independent Directors”Directors



“ there are adequate systems and processes..there are adequate systems and processes in the company commensurate with the size and operations of the company to monitorand operations of the company to monitor and ensure compliance with applicable laws, rules regulations and guidelines ”rules, regulations and guidelines.Auditor to give details of specific events and actions having a major bearing on theactions having a major bearing on the company’s affairs.


Secretarial Audit S 204Sec. 204

The provisions of Sec 143(powers and duties ofThe provisions of Sec.143(powers and duties of auditors..) shall mutatis mutandis apply to PCS conducting secretarial audit u/s 204.conducting secretarial audit u/s 204.If a company or any officer of the company or the PCS, contravenes the provisions of Sec. , p204, the company ,every officer of the company or the PCS, who is in default, shall be punishable with fine which shall not be less than � 1 lac but which may extend to � 5 lac.


Fraud Reporting by Auditor S 143(12) (15) & 204Sec. 143(12),(15) & 204

If a PCS conducting SA has reason toIf a PCS conducting SA, has reason to believe that an offence involving fraud is being or has been committed against thebeing or has been committed against the company by its officers/employees, he shall immediately report the matter to the Centralimmediately report the matter to the Central Government.If a PCS does not comply with the aboveIf a PCS does not comply with the above provision, he shall be punishable with fine of minimum �1 lac and may extend to � 25 lac.minimum �1 lac and may extend to � 25 lac.


Fraud Reporting by Auditor: Sec 143(12)Sec. 143(12)

Should the concept of materiality beShould the concept of materiality be introduced as was in the draft rules.At what stage should it be reported;At what stage should it be reported;Should it be merely based on allegations or after the matter has been investigated andafter the matter has been investigated and investigation report is available;Regulations should be in place to protect theRegulations should be in place to protect the auditor from criminal or civil liability;


Fraud Reporting by Auditor: S 143(12)Sec. 143(12)

Globally such protection is accorded toGlobally such protection is accorded to auditors. F lFor example:

(i) US SEC Order 10A; (ii) OECD anti- bribery recommendations state that the requirement to report bribes h ld b i d b t ti tshould be accompanied by protection to

auditors.


Internal Audit Sec. 138{Ch ll i A i t}{Challenging Assignment}

An internal auditor shall either be CA/CMA/ other professional to conduct internal audit ofother professional to conduct internal audit of the functions and activities of the company.


Annual Return Sec. 92 {GAME CHANGER}{GAME CHANGER}

TransparencyDisclosuresNon- Financial Information


Certification of Annual Return

Sec 92 of the Act read with Rule 11 of the C i (M t dCompanies (Management and Administration) Rules, 2014 provide that AR filed by following companies shall be certifiedfiled by following companies shall be certified by a company secretary in practice :-Li t dListed company;Company having a paid up share capital of

10 t f 50� 10 crs. or more or a turnover of � 50 crs.or more.


C tifi ti f A l R tCertification of Annual Return

Annual Return shall be certified by a PCSAnnual Return shall be certified by a PCS stating that the AR discloses the facts correctly and adequately and that thecorrectly and adequately and that the company has complied with all the provisions of the Act [ Refer Form No MGT-8]of the Act. [ Refer Form No. MGT 8]If the PCS certifies the AR otherwise than in conformity with the requirements of Sec 92 orconformity with the requirements of Sec 92 or the Rules made thereunder, he shall be punishable with fine of � 50k up to � 5 lacs.punishable with fine of � 50k up to � 5 lacs.


Major Changes-Annual Return

Substantial additional disclosures of non-financial information about the companyfinancial information about the company.AR to contain particulars as they stood on the close of the FY and not on the date of AGMclose of the FY and not on the date of AGM.AR shall now be compulsorily signed by a CS/PCS(except in case of OPC/SC)CS/PCS(except in case of OPC/SC).The 1956 Act required signing of AR by PCS for only listed companies but 2013 Actfor only listed companies but 2013 Act provides for certification of AR by PCS for listed and prescribed classes of unlistedlisted and prescribed classes of unlisted companies. [email protected] 9818348811 32

M j Ch A l R tMajor Changes-Annual Return

Full AR to be filed every year No provisionFull AR to be filed every year. No provision like Sec.159(1) of 1956 Act of filing full AR once in 5 years and changes in betweenonce in 5 years and changes in between.The 2013 Act provides that an extract of AR shall form part of Board’s Report There wasshall form part of Board s Report. There was no such requirement in 1956 Act.The 2013 Act provides a PCS shall beThe 2013 Act provides a PCS shall be punishable with fine if he certifies the AR not in conformity with Sec 92 There was no suchin conformity with Sec 92. There was no such penal provision in 1956 [email protected] 9818348811 33

Board’s Report Sec.134 {CS t h iti l l }{CS to have critical role}

A Report of the Board of Directors shall beA Report of the Board of Directors shall be attached to the financial statement laid before a company in general meetinga company in general meeting.Rule 8(1) of the Companies (Accounts) Rules 2014 provides that the Board’s ReportRules,2014 provides that the Board s Report shall be prepared based on the stand alone financial statement of the companyfinancial statement of the company.


Contents of Board’s Report

Extract of the Annual Return in Form MGT 9;Number of meetings of the Board;Number of meetings of the Board;Directors’ Responsibility Statement;A t t t d l ti i b IDA statement on declaration given by IDs u/s 149(6) that they meet the criteria of independence;independence;Particulars of loans, guarantees or i t t / 186investments u/s 186;


Contents of Board’s Report

In case of a company required to constitute a NRC u/s178(1), its policy on appointment &

ti f di t KMP tremuneration of directors, KMP etc.;Explanations or comments by the Board on

lifi ti ti devery qualification, reservation or adverse remark or disclaimer made:-

i. by the auditor in his report; andii. by the company secretary in practice in his

secretarial audit report;[email protected] 9818348811 36

C t t f B d’ R tContents of Board’s Report

Particulars of contracts or arrangements withParticulars of contracts or arrangements with related parties referred to u/s 188(1);St t f th ’ ff iState of the company’s affairs;Amounts proposed to carry to any reserves;Amounts recommended for dividend paymentMaterial changes and commitments affecting the financial position of the company which have occurred between end of the FY and the date of the report;


Contents of Board’s ReportContents of Board s ReportThe conservation of energy, technology absorption foreign exchange earnings & outgo;absorption, foreign exchange earnings & outgo;Development and implementation of risk management policy including identification ofmanagement policy including identification of risk which may threaten existence of company;CSR policy and its implementation;CSR policy and its implementation;A statement indicating the manner of formal annual evaluation made by the Board of its ownannual evaluation made by the Board of its own performance and that of its committees and individual directors (for prescribed companies).Such other matters as may be prescribed.


Di t ’ R ibilitDirectors’ Responsibility Statement shall state that:-

The directors, in case of a listed company, had laid down adequate internal financialhad laid down adequate internal financial controls which were operating effectively. The directors had devised proper systems toThe directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems wereapplicable laws and that such systems were adequate and operating effectively.


P ltPenalty

If a company contravenes the provisions ofIf a company contravenes the provisions of Sec.134, the company shall be punishable with fine of � 50K to � 25 lacswith fine of � 50K to � 25 lacs.Every officer in default shall be punishable with imprisonment up to 3 years or with finewith imprisonment up to 3 years or with fine of � 50K to � 5 lacs or with both.


M j Ch B d’ R tMajor Changes-Board’s Report

The Act requires the BR to be attached to FSThe Act requires the BR to be attached to FS and not the BS as was required by1956 Act.Additi l di l /i f ti i l diAdditional disclosures/information including extract of AR as compared to 1956 Act.


Additional Disclosures{ C iti l R l f CS}{ Critical Role for CS}

P t S 26Prospectus-Sec.26Annual Return-Sec.92Promoters’ Stake Change-Sec.93Statement with AGM Notice-Sec.102Consolidated Financial Statement-Sec.129 and 137Boards’ Report-Sec.134Directors’ Responsibility Statement-Sec 134Directors Responsibility Statement Sec.134


Additional Disclosures{C iti l R l f CS}{Critical Role for CS}

Register of KMPs-Sec. 170R l t d P t T ti S 188Related Party Transactions-Sec.188Register of Contracts-Sec. 189Managerial Remuneration-Sec. 197Mergers & Amalgamations-Sec. 232


Secretarial Standards S 118(10) {GAME CHANGER}Sec. 118(10) {GAME CHANGER}

Every company shall observe secretarialEvery company shall observe secretarial standards with respect to General and Board meetings specified by ICSI constituted undermeetings specified by ICSI constituted under section 3 of the Company Secretaries Act 1980 and approved as such by theAct,1980 and approved as such by the Central Government.It is one of the functions of the CS to ensureIt is one of the functions of the CS to ensure that company complies with the applicable secretarial standards [Refer Sec. 205].secretarial standards [Refer Sec. 205].


CS as Independent Directors {Id ll it d}{Ideally suited}

act objectively; independent judgment;…act objectively; independent judgment;…objectivity in board evaluation;…safeguard interest of all stakeholders;…balance conflicting interest of stakeholders;…seek clarification/information/opinions;…recording unresolved concerns in minutes;g ;…determine remuneration, appointment and removal of EDs, KMPs & senior managementremoval of EDs, KMPs & senior management


Woman Director Sec. 149(1) {Id ll it d}{Ideally suited}

The following classes of companies shall appoint at least one WD :-

i. every listed company;ii. every other public company having: -y p p y g

paid-up share capital of �100 crs or more; or turnover of � 300 crs or moreturnover of � 300 crs or more.


Registered Valuers Sec.247 {Ch ll i A i t}{Challenging Assignment}

Valuation of any property stocks sharesValuation of any property, stocks, shares, debentures, securities, goodwill, any other asset or net worth or liabilities of a company p yshall be valued by a RV.The RVs shall have prescribed qualifications and experience and registered as a valuer on prescribed terms & conditions.A dit C itt /BOD h ll i t RVAudit Committee/BOD shall appoint an RV. [Not yet notified]


Appointment of AdministratorSec 259 {Ideall s ited}Sec. 259 {Ideally suited}

CS may be appointed as Interim/CompanyCS may be appointed as Interim/Company Administrator (CA) from a databank to be maintained by the Central Governmentmaintained by the Central Government.NCLT may direct the CA to take over the assets or management of the companyassets or management of the company.The CA shall prepare a scheme for revival and rehabilitation of the sick companyand rehabilitation of the sick company.


Company Liquidator S 2(23) {Id ll it d}Sec. 2(23) {Ideally suited}

“Company Liquidator” means a personCompany Liquidator means a person appointed by:-th T ib l i th f i di b tha) the Tribunal in the case of winding up by the Tribunal; orth dit i fb) the company or creditors in case of voluntary winding , as a Company Liquidator from a penal of professionals maintained byfrom a penal of professionals maintained by the Central Government.


Company Liquidator S 275 {Id ll it d}Sec. 275 {Ideally suited}

The Panel shall consist of CSs, CAs, CostThe Panel shall consist of CSs, CAs, Cost Accountants, Advocates, other notified professionals or a firm or a body corporate of p y ppersons having a combination of such professional and having at least 10 years’ experience in company matters. [not notified]Liquidation proceedings are extremely

rewarding professional engagement in several jurisdictions.


Professional Assistance to C Li id t S 291Company Liquidator Sec.291

The Company Liquidator may with theThe Company Liquidator may, with the sanction of NCLT, appoint Company Secretaries or other professionals to assistSecretaries or other professionals to assist him in the performance of his duties and functions under the Actfunctions under the Act.


Legal Representation before NCLT Sec 432{Game Changer}NCLT Sec.432{Game Changer}

It substantially increases the scope of CS h h i ht t l l t tiwho have a right to legal representation

before NCLT & Appellate Tribunal on all matters including scheme of compromise ormatters including scheme of compromise or arrangement, scheme of merger and amalgamation winding up of a company etcamalgamation, winding up of a company etc.CS may be appointed as technical member of NCLT if he is or has been in practice as aof NCLT if he is, or has been in practice as a company secretary for at least 15 years.


SFIO Sec.211 {G d O t it }{Good Opportunity}

The SFIO shall be headed by a Director andThe SFIO shall be headed by a Director and consist of experts in the fields of corporate affairs capital market law banking taxationaffairs, capital market, law, banking, taxation, forensic audit, IT etc.The CSs have an opportunity of occupyingThe CSs have an opportunity of occupying prestigious positions as an expert in SFIO and play vital role in investigationsand play vital role in investigations.


Mediation & Conciliation Panel S 442Sec. 442 {Good Opportunity}

Th C t l G h ll i t i l fThe Central Gov. shall maintain a panel of experts to be called as “Mediation and Conciliation Panel” for mediation betweenConciliation Panel for mediation between parties during the pendency of any proceedings before the Central Govt or theproceedings before the Central Govt. or the Tribunal or the Appellate Tribunal under the new law.new law.CS have an opportunity to be empaneled on this Panelthis Panel.


E-Governance{C iti l R l f CS}{Critical Role for CS}

Service of documents through electronicService of documents through electronic transmission;M i t d i ti f d t iMaintenance and inspection of documents in electronic form;B k f t i l t i fBooks of accounts in electronic form;Notice of meetings through electronic mode; Board meetings through video conferencing ;Voting through electronic means.


E-Governance{C iti l R l f CS}{Critical Role for CS}

Responsible for maintenance and security ofResponsible for maintenance and security of electronic records [Rule 28];T t k d & bl t f dTo take due & reasonable care to safeguard the integrity of the board meeting;PCS b i t d ti i tPCS may be appointed as a scrutinizer to scrutinize e-voting process [Rule 20 & 21]


Enhancement of Penalties{C iti l R l f CS}{Critical Role for CS}

The Companies Act, 2013 provides for h d lti ith i denhanced penalties with maximum and

minimum quantum of penalty for each offence with deterrence for repeated defaultswith deterrence for repeated defaults.This would result in better compliance of law by companies through more and more reliance oncompanies through more and more reliance on services of professionals like Company Secretaries.


Adjudication of penalties Se.454{Critical Role for CS}

It provides for appointment of adjudicating officers for adjudging penalty on the company & th ffi h i i d f lt f lithe officer who is in default for non-compliance or default under the Companies Act, 2013. Any person aggrieved by an order will have aAny person aggrieved by an order will have a right to prefer an appeal to Regional Director. It would enhance role of CS who may be calledIt would enhance role of CS who may be called upon to represent the companies before the Registrar/Regional Director in such matters.Registrar/Regional Director in such matters.


D ti T dDomestic Trends

Law makers Parliament & State AssembliesLaw makers-Parliament & State AssembliesCentral & State GovernmentsRegulatorsJudicial & Quasi-judicial authoritiesIndustry Associations & Trade & CommerceCollaborations-NFCG,IIBF, IGNOU, NISM, , ,Investors & Investor associationsCommunities & other stakeholdersCommunities & other stakeholders


Gl b l T dGlobal Trends

Global Corporate Governance ForumGlobal Corporate Governance ForumOrganisation for Economic Cooperation & D l t (OECD)Development (OECD)International Corporate Governance NetworkGlobal Reporting Initiative(GRI)INSOL InternationalChartered Institute of Securities & InvestmentTransparency InternationalTransparency InternationalCSIA [email protected] 9818348811 60

Way Forward{D it & f t}{Do it soon & fast}

Don't lower your expectations to meet yourDon't lower your expectations to meet your performance.R i l l f f t tRaise your level of performance to meet your expectations. E t th b t f lf d th d h tExpect the best of yourself, and then do what is necessary to make it a reality.


Way Forward{D it & f t}{Do it soon & fast}

Invest on resourcesInvest on resourcesFix expiry date/time of your knowledgeRegular communication with your clientsDe-stress yourselfSpend time with loved onesConnect with natureBe fun loving and enjoy your work


Way Forward{B i M t }{Business Mantra}

In BUSINESSIn BUSINESS,words are words;explanations are explanations;promises are promises;

butONLY PERFORMANCE IS REALITY


THANK YOUTHANK YOUN K Jain

B.Sc, LLB.,DCL,FCS,FCPSCorporate Advisor

Cell: 09818348811Landline: 0120 - 4263965

E-mail: [email protected]

company secretary a value creatora value creator · 2014. 7. 22. · duties of company secretary...

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