India: Role Of Company Secretaries In Practice Under Companies Bill, 2012

Last Updated: 13 February 2013
Article by Aishwarya Mohan Gahrana

Lok Sabha recently passed the companies Bill 2012 in last session. Now, we can positively hope that in budget session Rajya Sabha will pass this bill.

The Companies Law is one of the most important and comprehensive legislation after the Constitution of the Nation. This directly indirectly affects all citizens. This bill has 470 Sections and 7 Schedules.  This bill provides basis and flexible framework. The Bill has leaved so many matters for subordinate legislation; rules, regulation, circulars etc.

This is very clear this time that there are remarkable scope for professionals, practicing professionals particularly Company Secretaries in practice. We will know real position when all rules and regulations notified after passing and notification of present bill as an Act.

Presently we may discuss, role of Company Secretaries under Companies Bill, 2012 as it is.


Company Secretaries has scope of practice as Company Secretaries in practice as such as well as Expert under the Bill.

Sub – section (38) of Section 2 of the Bill define an expert, as an engineer, a valuer, a chartered accountant, a company secretary, a cost accountant and any other person who has the power or authority to issue a certificate in pursuance of any law for the time being in force.

Here this is clear that Company Secretaries in Practice have to share its expertise with other professionals. There are certainly vast possibilities for Company Secretaries depending upon rules and regulations soon to be drafted by Ministry. We have to wait for clear position about scope for practice as Company Secretary. This is presently out of scope of this discussion today.

We will discuss today, our role as Company Secretaries in Practice. There is no change of in Definition of Company Secretaries in Practice. Sub – Section (25) of Section 2 of the Bill define Company Secretaries in Practice as a company secretary who is deemed to be in practice under sub-section (2) of section 2 of the Company Secretaries Act, 1980.

I think there is no need to discuss this definition as we all know this sub – section (2) of section 2 of the Company Secretaries Act, 1980. Now, we will discuss roles of company Secretaries in Practise as such, as mentioned in this Bill.


We find mention Company Secretaries in Practice first time after definitions in Section 7 of the Bill, which deals with incorporation of companies.  Company Secretary in Practice has to compete here with other professionals. For incorporation of a company there is a requirement that a declaration is to be given by company secretary practice, which is engage in formation of the company that all the requirements of Act and rules related to registration, matter precedent and incidental thereto.

Any person making false declaration shall be liable for action under Section 447.


Section 92 of the Bill contains provisions about Annual Return of the Companies. Every company shall prepare annual return containing details as mentioned in Sub – section (1) of this section.; like registered office, principle activities, shareholding pattern, members, debenture – holders, Promoters, Directors, Key Managerial persons, meetings, managerial remuneration, penalty punishment and other matters as prescribed. This Annual Return shall be signed by a director and company secretary of the company. Where there is no company secretary, it shall be signed by Company Secretary in Practice.

In case of listed companies and certain other companies determined on the basis of paid – up capital and turnover; this annual return shall be certified by company secretary. The company secretary shall certify that annual return discloses all facts correctly, adequately and in compliance with all provision of the Companies Act.

In any case, Company Secretary in Practice certify Annual Return otherwise than in conformity with requirement of the section, it shall be punishable with fine of Fifty thousand to Five Lakh rupees.


Sub – section (8) of Section 118 has an interesting reading. It say that where the minutes have been kept in accordance with sub-section (1) then, the meeting shall be deemed to have been duly called and held, and all proceedings thereat to have duly taken place, and the resolutions passed by postal ballot to have been duly passed and in particular, all appointments of directors, key managerial personnel, auditors or company secretary in practice, shall be deemed to be valid. I want to add emphasis on words "Company Secretary in Practice". Even though, there is no clarity, whether appointment of Company Secretary in Practice will be take place by Board of Directors or Members in General Meeting, but certainly in some meeting. Presently, any Tom, Dick and Harry hire a Company Secretary in Practice; this unhealthy practice may hopefully stop.


Clause (f) to Sub – section (3) of Section 134 makes it clear that report by Board of Directors shall include an explanations or comments by the Board on every qualification, reservation or adverse remark or disclaimer made by the company secretary in practice in his secretarial audit report. This clearly specifies importance of secretarial audit report in eye of legislature. Now, this is on Company Secretary Community to meet these expectations of legislature and corporate community. Hope, Secretarial Audit report by Company Secretaries will win confidence among stakeholders including investors.


Sub – section (14) of Section 143 make it clear that company secretary in practice conducting secretarial audit under section 204 shall have same power and duties as auditor of the company. Even though, personally, i feel that this should be done under definition by saying auditor include cost and secretarial auditors; but this is very welcome provision.

Sub – section (1) emphasis on power by saying that every auditor of a company shall have a right of access at all times to the books of account and vouchers of the company, whether kept at the registered office of the company or at any other place and shall be entitled to require from the officers of the company such information and explanation as he may consider necessary for the performance of his duties as auditor.

Sub – section (12) cast very important duty; if an auditor, Company Secretary in practice or Cost Accountant of a company, in the course of the performance of his duties has reason to believe that an offence involving fraud is being or has been committed against the company by officers or employees of the company, he shall immediately report the matter to the Central Government within such time and in such manner as may be prescribed.

This section, in fact, turn auditors into whistle – blowers, which was really a role for them intended by law – makers.


Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board's report made a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed. It shall be the duty of the company to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company. The Board of Directors, in their report shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report. If a company or any officer of the company or the company secretary in practice contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees.


Where, upon information in his possession or otherwise, the Registrar or inspector has reasonable ground to believe that the books and papers of a company, or relating to the key managerial personnel or any director or auditor or company secretary in practice are likely to be destroyed, mutilated, altered, falsified or secreted, he may, after obtaining an order from the Special Court for the seizure of such books and papers,— (a) enter, with such assistance as may be required, and search, the place or places where such books or papers are kept; and (b) seize such books and papers as he considers necessary after allowing the company to take copies of, or extracts from, such books or papers at its cost.

This is clear that Company Secretary in practice is considered an important functionary related to company and record at his possession is being considered important evidence. At this point, I request all fellow company secretaries, please maintain proper record at their offices other piecemeal record may cause problem and make them party for unwanted situations.


Certainly company secretaries have important role as consultants in merger and amalgamation but here under sub – section (7) of Section 232 provide an opportunity after order of approval for merger and amalgamation. Every company in relation to which the order is made shall, until the completion of the scheme, file a statement in such form and within such time as may be prescribed with the Registrar every year duly certified by a chartered accountant or a cost accountant or a company secretary in practice indicating whether the scheme is being complied with in accordance with the orders of the Tribunal or not. Please note that any contravention of this section attract penalty of one lakh rupees. Company secretary has to give an statement that the scheme is being complied.


Among other qualifications, practice as a company secretary for at least fifteen years or being a person of proven ability, integrity and standing having special knowledge and experience, of not less than fifteen years, in law, industrial finance, industrial management or administration, industrial reconstruction, investment, accountancy, labour matters, or such other disciplines related to management, conduct of affairs, revival, rehabilitation and winding up of companies is a qualification for appointment as technical member of the National Company Law Tribunal.


Section III of Schedule V of the Company Bill deals with Remuneration payable by companies having no profit or inadequate profit without Central Government approval in certain special circumstances. Proviso to this section list some conditions to comply by the company before approving managerial remuneration in such circumstances. Two important conditions are:

(i) the auditor or Company Secretary of the company or where the company has not appointed a Secretary, a Secretary in whole-time practice, certifies that all secured creditors and term lenders have stated in writing that they have no objection for the appointment of the managerial person as well as the quantum of remuneration and such certificate is filed along with the return as prescribed under sub-section (4) of section 196

(ii) the auditor or Company Secretary or where the company has not appointed a secretary, a secretary in whole-time practice certifies that there is no default on payments to any creditors, and all dues to deposit holders are being settled on time.

Further, Part III of the Schedule V make a condition from the auditor or the Secretary of the company or where the company is not required to appointed a Secretary, a Secretary in whole-time practice that the requirement of this Schedule have been complied with and such certificate shall be incorporated in the return filed with the Registrar.

Thus, present companies Bill, 2012 have many opportunities for Company Secretaries in Practice. They have to grab these opportunities and win confidence of stakeholders, legislature and corporate world. Hope, this confidence will not be broken and make this profession a just another useless employment providing opportunity at the cost of industries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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