Module 1: Over View of Companies Act

Introduction:
Meaning
Word Secretary is derived from the Latin word secretary meaning confidential officer.
A secretary is one whose work is to work for another, especially one who is employed to
conduct correspondence to keep records & to translate various other usinesses for another
person or for a society, corp. or pulic ody.
Types of Secretaries:
!. "rivate secretaries
#uties performed$
%aking dictations
&andling mails
'iling and inde(ing
)eeping financial and personal records
Attending to callers
*aking appointments
&andling the telephones
+ollecting information
,. Secretary of an association or a clu
-. Secretary of a .overnment department
/. Secretary of a co$operative society
0. Secretary of a local ody
1. +ompany secretary2
Section ,3/04 of the +ompanies Act, !501 defines a secretary as Secretary means a
+ompany Secretary within the meaning of Section ,3!43c4 of the +ompanies Secretaries
Act, !567 and includes any other individual possessing the prescried 8ualifications and
appointed to perform the duties which may e performed y a secretary under this Act
and any other ministerial or administrative duties9
+ompanies Act, ,7!-, Sec.,3244 company secretary9 or secretary9 means a company secretary
as defined in clause 3c4 of su$section 314 of section , of the +ompany Secretaries Act, !567 who
is appointed y a company to perform the functions of a company secretary under this
Act:
As per the Companies Act, 2013, Sec.2 3254 company secretary in practice9 means a
company secretary who is deemed to e in practice under su$section 324 of section , of the
+ompany Secretaries Act, !567.
Features
&old meetings of the union
*aintain accounts and statutory ooks
Advises union
;egotiate with the employees
ualifications of a Company Secretary
As per the +ompanies 3Appointment & <ualification of secretary4 =ules !566, the 8ualifications
which a person must possess to e eligile for appointment as a secretary are as follows2
A4 >n case company has paid up share capital of =s. 0 crore or more 3!7 +rores or more paid
up capital and it should e a "ulic Limited company, as per the +ompanies Act,
,7!-4shall have a whole time secretary unless he is a memer of the >nstitute of company
secretaries of >ndia, under company secretary Act !567.
?4 A company having a paid up share capital of less than =s. 0 crore may appoint any
individual who possesses any one or more of the following 8ualifications namely 2
*emership of the >nstitute of company secretary of >ndia constitutes under the co.
secretary Act !567.
"assed the intermediate e(amination conducted y the >nstitute of co. secretary of >ndia.
". degree in +ommerce or corporate secretary granted y any university of >ndia.
#egree in law granted y any university.
*emership of >+A> constituted under the +hartered Accountants Act, !5/5.
*emership of >nstitute of +ost & Works Accountants of >ndia.
". degree or diploma in management sciences, granted y any university or the >nstitute
of *anagement. Ahmedaad, )olkata, ?angalore or Lucknow.
"ost .raduate #iploma of +ompany secretaryship granted y >nstitute of +ommercial
"ractice under #elhi Administration.
#iploma in corporate laws & management granted y the >ndian Law >nstitute, ;ew
#elhi.
". diploma in company law and secretarial practice granted y the university in @aipur.
*emership of the Association of Secretaries & managers of +alcutta.
Ot!er ualifications
Sound education
"roficiency in language 3forceful, logical, persuasive.4
)nowledge of office organiAation and usiness methods.
)nowledge of accounts and ta(ation.
)nowledge of mercantile laws.
)nowledge of economics, anking and finance.
>mpressive personality.
Appointment of a Company Secretary:
AS "B= %&B >ndian companies Act, !501, it is not compulsory for companies to appoint a
secretary.
&owever, in practice all companies appoint a company secretary.
;ow, as per the +ompanies 3Amendment4 Act, ,77, it is oligatory for every company having a
paid up share capital of =s. 0 crore or more 3!7 +rores or more paid up capital and it should e a
"ulic Limited company, as per the +ompanies Act, ,7!-4to appoint a full time secretary.
T!e procedure for appointing a company secretary is as follows:
A resolution has to e passed at the oard of directors meeting.
Appointment must e filed with the =C+ within -7 days of appointment.
>f the person appointed as a secretary in one company is found to e the secretary in
another company then he has to notify the other company within ,7 days of his
appointment.
Any director interested in the post of secretary must stay away from voting on the
resolution.
Special resolution should e passed y directors.
T!e "uties of a Company Secretary Are As Follows
As per t!e Companies Act# $%1&# Sec'$%(' 314 %he functions of the company secretary shall
include,D
3a4 %o report to the ?oard aout compliance with the provisions of this Act, the rules made there$
under and other laws applicale to the company:
3b4 %o ensure that the company complies with the applicale secretarial standards:
3c4 %o discharge such other duties as may e prescried.
Explanation.D'or the purpose of this section, the e(pression secretarial standards9 means
secretarial standards issued y the >nstitute of +ompany Secretaries of >ndia constituted under
section - of the +ompany Secretaries Act, !567 and approved y the +entral .overnment.
A' Statutory "uties
)nder t!e companies act:
*aintenance of ooks and registers of the company.
'iling of necessary returns with the =egistrar
Supervising the issue, allotment, transfer, forfeiture of shares and deentures.
Attending the meetings and recording their proceeds
Allowing inspection of ooks and documents when re8uired y the statute.
Safe custody and proper use of the common seal of the company.
)nder t!e income ta* act:
See that proper >% is deducted from the salaries of the employees.
"roper >% is deducted from dividend and interest paid to the share holders and deenture
holders.
See that ta( to e deducted has een deposited in .overnment %reasury.
%o file the >% returns of the company.
)nder M+T, Act
- >f +o. has assets worth more than !77 cr, he should see that under sec ,1 of the *=%" Act
the co. is registered with the +entral .overnment.
- As per sec !, & -- of the *=%" Act, the secretary should see that all agreements entered
into y the co. pertaining to =%" are registered with #irector .eneral of >nvestigation &
=egistration.
-' .eneral "uties
"uties in +elation to "irectors
Work in accordance with the instructions of the #irectors.
>ssue notice and prepare agenda for ?C# meeting.
"repare minutes of meetings.
%o draft directors report.
+ommunicate the decision of the ?oard to the staff and shareholders.
Eses common seal directed y the ?oard.
"uties towards s!are!olders
CrganiAe and supervise allotment of shares, calls on shares, forfeiture of shares,
distriution of dividend, meetings of shareholders, in8uiries and complains from
shareholders and transfer of shares.
;ot to disclose any confidential information relating to company.
;ot to make secret profits from his position.
"uties towards Organi/ation and office
;eed to control over department F records, accounts and statistics.
Supervise and coordinate the activities of the department.
&e has to organiAe and guide staff.
*aintain personal contact with the staff.
"uties towards ,u0lic
Act as a medium of +ommunication etween +ompany and .eneral "ulic 3deenture
holders, ankers, creditors4.
"rovide information asked for.
See that no confidential information is revealed to the pulic.
'unction as a liaison officer.
"uties 0efore Incorporation
Attend preliminary meetings of the "romoters
.uide promoters on provision of +ompanies Act
&elp in preparation of various documents like "rospectus, *CA, and ACA
Should arrange filing with the =egistrar
After Incorporation
a4 Arrange for !
st
oard meeting
4 .et +ertificate of +ommencement of ?usiness
c4 Should prepare statutory report & conduct statutory meeting
d4 Look after the works in connection
#eentures
%ransfer
Allotment
+all on Shares
1ia0ilities of t!e Secretary
Contractual 1ia0ilities
+S has certain liailities to the +o. arising out of his contract of service.
&e must carry out the orders given to him y the directors.
+arry out oligations of his service agreement
Should not disclose any confidential information
&e should not do anything eyond his authority
&e stands in a fiduciary relationship with the company
&e is liale for damages caused due to his misconduct & neglect of duties
&e is liale for any fraud if proved that he is party to such fraud.
Statutory 1ia0ilities
&e may e held liale for the following2
'iling a return of allotment F =s.0777G$ per day 3Sec.H04
#efault in keeping ready of share certificates and deenture certificates2 allotment within
- months time and transfer within , months F =s.0777G$ per day 3Sec.!!- 4
#efault in filing particulars of ac8uisition of new properties F fine up to =s.0777G$
3Sec.!,H4
'ailure to comply with sec !/H of the Act F Ep to =s.0777G$ per day
#efault in filing annual return F fine up to =s.077G$ per day3Sec.!1,4
#efault in holding statutory meeting or filing the statutory report with =C+ F fine up to
=s.0777G$ 3Sec.!104
#efault in holding the A.* F fine up to =s.07777G$ I =s.,077G$ per day 3Sec.!164
#efault in circulating memers resolution F fine up to =s.07777G$ 3Sec.!664
#efault in filing certain resolutions and agreements re8uiring registration F fine up to
=s.,77 per day 3Sec.!5,4
'ailure to record the minutes of the oard and .* F fine up to =s.077G$3Sec.!5-4
=efusal to inspect the minutes of meeting or a copy to a memer F fine up to =s.0777G$
3Sec.!514
#efault in laying down "&L and ?alance Sheet at the A.* or B.* F fine up to
=s.!7777G$ or 1 months imprisonment or oth3Sec.,!74
'ailure to give notice for oard meeting F fine up to =s.!777G$ 3Sec.,614
'ailure to maintain the following statutory ooks2
=egister of memers F fine up to =s.077G$ per day3Sec.!074
>nde( of register of memers F fine up to =s.077G$ 3Sec.!0!4
=egister & inde( of deenture holders F fine up to =s.077 3Sec.!0,4
=egister of directors F 'ine up to =s.077G$ per day3Sec.-7-4
=egister of directors share holding $ fine up to =s.07777G$ 3Sec.-7H4
)nder t!e Income Ta* Act 1231
'ails to deduct >% from
Salaries F employees
#ividends F share holders
'ails to pay >% collected
)nder t!e Indian Stamp Act
'ails to verify the documents needing stamps
'ails to verify their correctness
)nder Sales ta* Act 45ow as per t!e Value Added Ta* Act6:
As +S is the principal officer of the +o. he is responsile for fulfilling the re8uirements
Company Secretary7s lia0ility for offences committed 0y t!e company
"ismissal of a Company Secretary
A. %he Secretary may e removed from office y the oard of directors, under the power
given in the articles or under general powers.
?. %he services of a Secretary may e terminated y giving him notice as per the terms of
the service agreement.
+. >f an agreement does not mention any specific period of notice, reasonale notice must e
given.
#. %he services of the secretary may e terminated without notice if
'or willful disoedience
'or negligence
'or misconduct of moral turpitude
'or incompetence of permanent disaility
When a secretary is terminated, "articulars in duplicate in form ;o.-, should e filled with the
=C+ within -7 days of termination & changes should e made in =egisters of directors, *# &
Secretary.
Administration and Set8up of Company 1aw in India:
1egislative -ac9drop of Companies Act:
%he World War , resulted in the oom of industrialiAation leading to the =evision of
companies Act.
+ommittee constituting !, e(perts in various fields under the chairmanship of &.+.
?&A?A was appointed in !507.
+ommittee sumitted its report in !50,, thoroughly revising the Amendments to the Act
of !5!-.
?ill was passed y the legislature in ;ovemer !500.
%he Act came into effect from !
st
April !501, replacing all the earlier Acts and
amendments.
%he !501 Act was ased on the Bnglish +ompanies Act of !5/6.
>t contained 106 sections and !0 schedules.
%here were various amendments from time to time.
+ompanies Act, ,7!- F divided into ,5 chapters and /H7 clauses.
Meaning of Company 1aw
+ompany law is that ranch of law which deals with the various aspects of the company such as2
>ncorporation of companies
Allotment of shares and share capital
*emership of company
*anagement & administration of company
Winding up of a company
As per the +ompanies Act, ,7!-, +&A"%B= >, Sec.1'314 %his Act may e called the +ompanies
Act, ,7!-.
324 >t e(tends to the whole of >ndia.
334 %his section shall come into force at once and the remaining provisions of this Act shall come
into force on such date as the +entral .overnment may, y notification in the Cfficial .aAette,
appoint and different dates may e appointed for different provisions of this.
Applica0ility:
Applica0le
+o.s registered under this Act &
previous Acts
Limited companies
Enlimited companies
5on8Applica0le
Statutory companies
"artnership firm
+o$operative societies
'oreign companies
?anking, insurance and electricity
companies
Limited Liaility "artnerships
Cne man company
.overnment companies
;idhis and mutual enefit societies
%rusts
Societies not engaged in trade and
commerce.
O0:ectives of Company 1aw -oard 4C1-6:
"rotect the interests of investors & creditors.
Bnsure proper performance of duties of persons managing the company.
"revent misconduct & malpractice from companies.
"romote healthy growth of companies.
%o ensure activities of companies are on par with economic and social policies of the
country.
%o empower the government to interface & investigate into the affairs of the companies.
Administration of Company 1aw:
%he companies Act of !501 is administered y the *inistry of +orporate Affairs.
%he +ompanies 3Second Amendment4 Act, ,77,, rought in a maJor change in the
administration of the +ompany Law
%he company law provides administrative set up for the administration of company
law in >ndia.
Administrative aut!orities under t!e Companies Act:
!. *inistry of +orporate Affairs
,. +ompany Law ?oard
-. ;ational +ompany Law %riunal
/. ;ational +ompany Law Appellate %riunal
0. %he Konal Cffices 3&eaded y =egional #irectors4
1. 'ield Cffices 3=egistrar of +ompanies for each state4
T!e Ministry of Corporate Affairs:
%he *inistry of +orporate Affairs is the supreme authority responsile for the
administration of the companies Act !501
%he +ompany Law ?oard takes prior approval or sanction y the central government
3*inistry of +orporate Affairs4 so that nothing of vital importance in the management of
the companies may go unnoticed y the government.
*inistry of +orporate Affairs e(ecutes its powers through the following administrative
set$up.
T!e 5ational Company 1aw Tri0unal 45C1T6:
Section !7 'A inserted y the Amendment Act has provided for the dissolution of the
company law oard with effect from the commencement of the Amendment Act.
%he new section further provides that all matters pending efore the company law oard
on or efore the constitution of the triunal shall stand transferred to the ;ational
+ompany Law %riunal on its constitution.
Features of 5C1T:
=elieving courts of mounting litigation.
'aster disposal of cases
Simpler and faster procedures and less formalities than courts
;+L% is a ody composed of e(perts in corporate law. >t consists of president and such memers
of Judicial and technical memers not e(ceeding 1,, appointed y the central government.
5ational Company 1aw Appellate Tri0unal:
As per t!e Companies# $%1&# Sec';1%' %he +entral .overnment shall, y notification,
constitute, with effect from such date as may e specified therein, an Appellate %riunal to e
known as the ;ational +ompany Law Appellate %riunal consisting of a chairperson and such
numer of @udicial and %echnical *emers, not e(ceeding eleven, as the +entral .overnment
may deem fit, to e appointed y it y notification, for hearing appeals against the orders of the
%riunal.
According to section !7 '< LAn appeal against any order or diction of the ;+L% will lie
to the Appellate %riunal.
%he chairperson of the Appellate %riunal shall e a person who has een a @udge of the
Supreme +ourt or +hief @ustice of high court.
Any person not satisfied y the decision of the Appellate %riunal can file an appeal to
the Supreme +ourt.
+egional "irector:
+entral government has set up / regional offices with head 8uarters at *umai, )olkata,
)anpur and +hennai.
Bach regional office is under a regional director.
Functions of +egional "irector:
Supervision, control & co$ordinate the activities of the offices of =egistrar of +ompanies.
%o advice and guide the =egistrar on %echnical & administration matters.
%o report to government on important events and trends in the region.
%o function as a link etween centre and state.
+egistrar of Companies:
+entral government has appointed a full time officer in each state to e known as =egistrar of
+ompanies 3=C+4
Functions of +egistrar of Companies:
%o register companies and to issue the certificate of incorporation on providing various
documents.
%o receive documents, notices, & reports and file them as per re8uired y the companies
Act.
%o issue the necessary notices, if default is made y any company.
%o present a petition to the %riunal for winding up of a company under certain
circumstances.
S<-I84Securities <*c!ange -oard of India6
%he securities and e(change oard of >ndia was set up in the year !566, April !,
th
. >t was set up
as a non$ statutory ody. >n !55, it conferred statutory powers financial institution.
O0:ectives of S<-I
%o protect the interest of investors so that there is steady flow of savings into the
market3capital4
%o regulate the securities market and ensure fair practices y the issue of securities so that
they can raise resources at minimum loss
%o promote efficient services y rokers, merchant ankers and other intermediaries so
that they ecome competitive and professional.
Functions of S<-I
=egulation of stock e(change and self$regulatory orgs
=egistration and regulation of stock rokers, su$ rokers, registrars to all issues,
merchant ankers, underwriters, etc, who are associated with securities market.
=egistration and regulation of collective investments schemes including mutual funds.
"rohiition of insider trading in securities.
=egulating sustantial ac8uisition of shares and takeover of companies
"evelopmental Functions
"romote investors education
+onducting research and pulish info useful to all market participants.
"romotion of fair practices and code of conduct for self$regulatory organiAations
,owers of S<-I
"ower to issue rules, regulations, directives, guide lines.
Bmpowered to register any agency or intermediary who may e associated with the
securities market.
SB?> Act lays down the civil and criminal penalties for contravention3violate4 of the
Act
+an conduct in8uiries into the working of stock e(changes which have to sumit their
annual reports to the SB?>.
Bmpowered to demand e(planations.
SB?> has also een empowered to file complaints in court.
"ower to compel listing of securities y pulic companies
"ower to make or amend ye$laws of recogniAed stock e(changes
"ower to call periodical returns from stock e(change.
"ower to grant approval to the ye$laws