Policy

Higher threshold for appointing company secretary: SC asks Ministry to respond to PIL

Forum Gandhi Mumbai | Updated on August 07, 2020 Published on August 07, 2020

MCA’s move could lead to lapses in governance, says the petitioner

The Supreme Court of India has issued a notice to the Ministry of Corporate Affairs (MCA) over a public interest litigation (PIL) filed against a recently modified rule that changed the minimum threshold paid-up capital of a company for appointing company secretaries.

Earlier this year, the MCA passed a notification enhancing the mandatory limit for engaging company secretary from ₹5 crore to ₹10 crore. This came to effect from April 1. According to the PIL, this move has made thousands of company secretaries irrelevant.

“A big question mark has come on the employment of approximately more than 11,000 company secretaries, great compromise with the corporate governance of these companies and have made an impact on 3.5-lakh students on the role of the ICSI,” the PIL stated.

Rising frauds

Before the amendment, all companies with paid-up capital of ₹5 crore or more, were required to hire a company secretary.

Suman Kumar, a senior company secretary, who filed the PIL through his advocates Shashank Deo Sudhi and Shreyas Jain, told BusinessLine, that the change in the norm could have serious implications on the corporate governance structure of small companies as they may not appoint a company secretary any more.

“This could lead to serious lapses in governance at a time when Indian companies are yet to achieve global levels of governance,” he said.

Sudhi said that through the PIL, they have highlighted the large number of frauds happening in various companies, which would aggravate without company secretaries.

The PIL has also requested for constituting a high-powered committee to look into the “frauds committed by more than 6.7 lakh companies across the country including the shell and crony companies which had weakened the financial structure of our country as they have taken away a huge fund of public money amounting to thousands of core.”

Hearing on Sept 21

As per data from the MCA, about 11, 532 companies are falling within the ₹5-₹10 crore bracket. According to data from The Institute of Company Secretaries Of India, between 2013 and 2019, about 4,077 new company secretaries came into the market on an average every year.

The hearing for this case has been pushed to September 21, before on or before which MCA has to submit its response.

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Published on August 07, 2020
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