The Hindu Business Line : There are secretaries in the waiting room

IN THE past one-year or so, there have been certain developments affecting the profession of company secretaries, which have not augured well for the members and the profession. These developments have put the profession back by a couple of years. Even the Institute of Company Secretaries of India (ICSI) is not in a position to convince the regulators from making these changes. Before getting into the details of these changes it would be desirable to briefly recapitulate the law relating to company secretaries.

The UK company law (1985 Act, Section 283) provides that every company must have a company secretary and the sole director of a company cannot also be the company secretary. The name and address of the company secretary together with the written consent has to be filed along with the other documents filed at the time of incorporation of the company.

The corresponding law in India was enacted through an amendment by the Companies (Amendment) Act, 1988 with the introduction of Section 2(45) to the Companies Act, 1956. The said section defines the term `secretary' as "a company secretary within the meaning of clause (c) of sub-section (1) of Section 2 of the Companies Secretaries Act, 1980 and included any other individual possessing the prescribed `qualifications' and appointed to perform the duties which may be performed by a secretary under this Act and any other ministerial or administrative duties."

Under the 1956 Act, secretary was defined as an individual who had been appointed to perform the duties, which may be performed by a secretary under the Act. The definition was amended in 1960 so as to enable firms and companies as well as individuals to act as secretaries. But this definition was re-amended by the Companies Amendment Act, 1974, so as to permit only individuals to be appointed as company secretary and the omission of the word `purely' before the words "ministerial or administrative duties". As stated, Section 383-A was added by the Companies (Amendment) Act 1974, which was given effect from February 1, 1975. With this, the appointment of a secretary with prescribed qualifications became obligatory in the case of companies having a paid-up capital of Rs 25 lakh or more. The Companies (Amendment) Act, 1988 substituted the words "having such paid-up share capital as may be prescribed" for the words "having a paid-up capital of Rs 25 lakh or more."

By notification dated April 13, 1993, the Government prescribed that companies with a paid-up capital of not less than Rs 50 lakh should have a whole-time secretary. With effect from June 11, 2002, the prescribed amount for appointment of a company secretary was upwardly revised to Rs 2 crore. Now, as per the extant law, every company whether private or public, if it has a paid-up capital of Rs 2 crore or more shall appoint a whole time company secretary.

Like the English legislation, in India too, where a company has only two directors (as in the case of private limited companies) neither of them can be the secretary besides being a director.

Thus, in a company having three or more directors, one of them possessing the prescribed qualification can also act as secretary.

In between was born the `practising company secretary'. Though the recognition for `practising company secretaries' came a little late, it was welcome. Section 2(45A) was inserted by the Companies (Amendment) Act, 1988, which defines `secretary in whole-time practice' as one "who shall be deemed to be in practice within the meaning of sub-section (2) of Section 2 of the Companies Secretaries Act, 1980 and who is not in full-time employment."

Thus, a member of the ICSI who is not in employment can become a `secretary in whole-time practice' after obtaining from the Council of the Institute a `certificate of practice'.

Secretaries in whole-time practice have been given a significant place under the scheme of the Act. The services of a practising company secretary is required right from the incorporation of the company till its winding up. They are also authorised to attest several important documents such as annual return, Form 25C for appointment of managerial person, and so on.

Then came the big boost to the profession in 2000. A proviso was added to sub-section (1) of Section 383A by the Companies (Amendment) Act, 2000. This new provision required every company with a paid-up capital of Rs 10 lakh or more and not required to employ a whole-time secretary, to file with the Registrar a Secretarial Compliance, a certificate signed by a company secretary in whole-time practice. This certificate is basically on compliance of company law provisions.

In terms of the proviso to sub-section (1) of Section 383A, the Central Government has prescribed the Companies (Compliance Certificate) Rules, 2001 for issue of compliance certificate by a practising company secretary.

These rules came into force with effect from February 1, 2001. This bonanza saw many company secretaries quitting lucrative jobs and jumping into the fray by setting up practice.

Many of them met with huge success within a short time. Of course the yardstick to measure the efficacy of any amendment cannot be the success of a few individual practising company secretaries.

(The authors are Chennai-based company secretaries.)