The Hindu Business Line : Will the company secretary stand up?

STARTING today (Thursday), the Institute of Company Secretaries of India (ICSI) is holding a three-day national convention in Chennai on `Transforming for Globalisation — breaking the barriers'. It is an occasion not only to look back at the difficult path the ICSI has traversed but also to assess its future.

The Companies Act, 1956 is the single most important Central legislation which recognises the ICSI and its members. The Act itself has been undergoing a number of changes and is to be overhauled.

The `overhauling' exercise, also known as `re-codification', was started in 1997 with a comprehensive proposal in the form of the Companies Bill, 1997, but was abandoned in favour of a shorter version of the legislation.

This resulted in the preparation of a `Concept Paper' last year, which attempted to reduce the number of sections in the Act from the present 658 to around 250.

The zipping was achieved mainly by dropping/deleting various redundant sections and by clubbing the smaller ones without sacrificing the intent or essence of the legislation.

The Concept Paper contained certain interesting proposals vis-à-vis the profession, with the important among them being:

The introduction of requirements for certification by a practising company secretary of all documents required to be filed with regulators; and

Secretarial investigation in specific cases where the Centre is of the opinion that the affairs of a company are being conducted in a manner violative of the Companies Act.

These two proposals are in addition to existing provision for `Secretarial Compliance Certificate' and other certification requirements.

These proposals are expected to give a huge impetus to the profession.

But the Concept Paper was seen as not having addressed certain contemporary issues such as `independent directors', the relationship of holding-subsidiary companies, the position of financial statements, and so on. The Centre, therefore, appointed a committee under the chairmanship of Dr J. J. Irani to accommodate new ideas and improve on the Concept Paper.

While the Irani Committee made suggestions on a number of issues, the law relating to the appointment of company secretaries, issuance of compliance certificates and the two important proposals in the Concept Paper have been left untouched.

The Irani Committee also proposed appointment of private inspectors for carrying out investigations under the Act. All these have raised hopes of a more constructive role for the profession under the Act.

Appointment of professionals as liquidators, an area identified by the Companies Bill, 1997, , has neither been considered by the Concept Paper nor the Irani Committee. If this were also to be made part of the list of services to be provided by company secretaries, it would add colour to the profession.

Now, the key question before the profession is: How much of these new areas would be part of law when a new Bill is introduced?

Apart from the `recognition' the profession enjoys under the Companies Act, the new Clause 49, which will come into effect from December 31, 2005, identifies a practising company secretary also as competent to certify the corporate governance report.

The profession also expects to play an important role by being one of the major feeder services if the proposed law on "independent director" were to become law.

The Convention should address certain specific issues, such as:

If the profession has made `value addition' to the industry/business, how is that a large number of companies which are required to have a company secretary not havingone? and

How is that a section of practising company secretaries is apprehensive of signing financial statements? Is it because they are not trained enough to understand and appreciate financial statements or are the companies concerned not taking company secretaries into confidence before preparing financial statements?

(The author is a Chennai-based chartered accountant.)

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Balancing act in Geneva

Beware the backlash

We have too many people watching the pot!

Will the company secretary stand up?

Mitrokhin Archives — Politics in the Cold War years

Education loans

Independent directors

Opening the LoC

IT for poll contestants