The Hindu Business Line : Fewer jobs for company secretaries — Criteria fixed for appointment waiver

IF you run a company with a paid-up share capital of Rs 2 crore or more, but less than Rs 5 crore, and have your registered office in towns with a population of less than a lakh, you need not worry about appointing a company secretary.

In effect, companies with a paid-up share capital of Rs 2 crore or more will neither require a compliance certificate from a certified company secretary, nor would it be required to appoint a company secretary.

The Department of Company Affairs (DCA), while amending the Companies (Appointment and Qualifications of Secretary) (Amendment) Rules, 2003, has now stated: "A company with its registered office and corporate office and works situated in towns with a population of less than one lakh in accordance with census of India 2001 report and having a paid-up share capital of Rs 2 crore or more but less than Rs 5 crore, may appoint any individual who possesses any or more qualifications specified in the Companies (Appointment and Qualifications of Secretary) Rules, as its whole-time secretary."

This recent change, brought in by the DCA, seems to have touched a raw nerve with the professional company secretaries who, in the changing corporate environment, were looking for more job opportunities and a level playing field with other professionals.

Further, this amendment comes with a caveat. As per the notification, if such a company shifts either its registered office or corporate office or works from towns with a population of less than one lakh, then it could appoint only a member of the ICSI as a whole-time secretary. A moot question being asked by the industry in this era of `corporate governance' is, "who benefits the most from this amendment - the professionals, investors or the corporates?"

"The amendment provides the companies freedom not to appoint a company secretary by shifting registered office and corporate office to towns with a population of less than one lakh. As the term `corporate office' has not been defined in the Companies Act, some companies may circumvent the facts to show that their corporate office is situated in such towns," professionals point out.

Besides, since the amendment provides for appointment of any of the professionals mentioned in the Rules, it is feared that the persons without any exposure and training will be appointed to occupy the position of a company secretary. To ensure that right professionals get the job, the department will also need to amend the Rules, which specify the qualifications. Currently, as per the Rules, apart from an individual who is member of the ICSI, individuals with a post-graduate degree in commerce or corporate secretaryship, or a degree in law, or having a membership of the Institute of Chartered Accountants of India, or membership of Institute of Cost and Works Accountants of India, can be appointed as a whole-time secretary.

This will not only encourage the companies to avoid the appointment of a company secretary and the penalties provided for the violation of Section 383A , but is contrary to what the Companies (Amendment) Bill, 2003 states, professionals point out. As per the Bill, "Every company having such paid-up share capital shall employ a whole-time secretary, who shall be a company secretary within the meaning of the Company Secretaries Act, 1980."

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