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Appointment of company secretary

27 July 2012

Dear members,

As per section 383A of the Companies Act, 1956, a Company having paid up share capital of Rs. 5 crore or more has to appoint a full time Company Secretary.

Now my question is:

Is it mandatory for a listed company having paid up share capital less than 5 crore, to appoint a full time Company Secretary.

Thanks in advance

Regards

Arun Jaiswal

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17 Replies

(Guest)

Dear Arun,

As per the Companies Act 1956, every company having a paid up capital of 5 crore or more must have a whole time company secretary and if the company is listed, it must also have a company secretary who acts as a compliance officer as per the provision of listing agreement of stock exchange (s) which are monitored by the Security Exchange Board of India.

As per the provisions of the Companies Act 1956 , if a company does not appoint a company secretary, the company and every officer of the company who is in default, shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues.

However, no specific penalty seems to have been provided in the listing agreement for the non-appointment of compliance officer, while the listing agreement talks about the noncompliance and the investor’s protection.

Since the Stock Exchanges are concerned with the compliance under the listing agreement, so long as they get all the required reports / compliances in time, the exchange may not really bother whether there is a company secretary in the company who is acting as a compliance officer or otherwise – in summary, if the company complies everything required under the listing agreement, the exchanges are not much concerned about the appointment of the company secretary.

In reality, there are companies who are managing its affairs – rather very well without having appointed a company secretary as they are able to comply with the requirements as they established a good “standing operating procedure” (SOP) and have a necessary checklist for compliance. At times these companies also take help and assistance from the Practicing Company Secretaries where need be.

Regards,

Veeral Gandhi

2 Like

prakash (Company Secretary) (1352 Points)
Replied 28 July 2012

It is not manadatory to appoint whole time company secretary for the listed companies having paid up capital less than Rs. 5 crores but it is recomendary to have company secretary to set up good corporate governance.

Charu Srivastava (Company Secretary) (4210 Points)
Replied 28 July 2012

As per clause 47(a) of the listing agreement the Company should appoint Company Secretary who will act as a Compliance Officer of the Company, failing of which will result in breach of listing agreement.

1 Like

(Guest)

Dear Charuji,

I have reproduced Clause 47 of the BSE listing agreement with it's clauses. Although it stipulates to appoint a Company Secretary as a Compliance Officer, nowhere does it speak of penalty for not appointing him. I hold by my statement that the company as mentioned by Mr. Arun Jaiswal can even do without a Wholetime Company Secretary & Compliance Officer. However, none of our members are wrong in expressing their views.

Clause 47 of the BSE listing agreement :

The Company agrees-

a) to appoint the Company Secretary to act as Compliance Officer who will be responsible for monitoring the share transfer process and report to the Company’s Board in each meeting. The compliance officer will directly liaise with the authorities such as SEBI, Stock Exchanges, Registrar of Companies, etc., and investors with respect to implementation of various clauses, rules, regulations and other directives of such authorities and investor service and complaints of related matter;

b) to undertake a due diligence survey to ascertain whether the Registrars and Share Transfer Agent/s (RTA) and/or In-house Share Transfer facility, as the case may be, are sufficiently equipped with infrastructure facilities such as adequate manpower, computer hardware and software, office space, documents handling facility, etc., to serve the shareholders.

c) that it will ensure that the RTA and/or the In-house Share Transfer facility, as the case may be, produces a certificate from a practicing Company Secretary within one month of the end of each half of the financial year, certifying that all certificates have been issued within one month of the date of lodgment for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies and a copy of the same shall be made available to the Exchange within 24 hours of the receipt of the certificate by the Company;

d) to furnish to the Exchange both by way of floppy disks and printed details, within 48 hours of its getting information regarding loss of share certificates and issue of the duplicate certificates;

e) to maintain copies of Memorandum of Understanding entered into with the RTA setting out their mutual responsibilities, at the Registered Office of the Company for Public inspection and the company further agrees to submit within 48 hours a copy of the same to the Exchange for its records.

f) to designate an e-mail ID of the grievance redressel division/compliance officer exclusively for the purpose of registering complaints by investors. The company shall display the e-mail ID and other relevant details prominently on their websites and in the various materials / pamphlets / advertisement campaigns initiated by them for creating investor awareness”.

Regards,

Veeral Gandhi

Charu Srivastava (Company Secretary) (4210 Points)
Replied 28 July 2012

Hi Veeral Sir,

Thanks for the reply. There is a constant doubt in my mind ,when clause 47(a) of the listing agreement specifically states company secretary to be the Compliance Officer. I am aware of the fact that in actual practice Compliance office may not necessarily be the Company Secretary.How come anyone can be appointed as a Compliance officer, when it is specifically mentioned.

Hope i could clear my point of contention.

(Guest)

Charuji, infact the listing agreement expects all listed companies to appoint a qualified Company Secretary as a Compliance officer. As per their expectations, even a company whose paid-up share capital is less than Rs. 5 crore should appoint a qualified Company Secretary as a Compliance officer.

It is just that it does not provide a penalty like the Companies Act 1956 for not appointing a Company Secretary as a Compliance officer, a listed company whose paid up share capital is less than Rs. 5 crores and which is on a cost cutting spree, can use this loophole for not appointing a qualified Company Secretary as a Compliance officer. But once it's paid-up share capital goes above Rs. 5 crores, it will have to mandatorily appoint a qualified Company Secretary as a Compliance officer. If it does not, it will have to pay the penalty as per the provisions of the Companies Act, 1956.

So, what I have proposed is just an independant move to benefit from the loophole. But as I have said, the expectation of the listing agreement from the listed companies is to appoint a qualified Company Secretary as a Compliance officer. And it is not risky as it seems, as many listed companies whose paid up share capital is less than Rs. 5 crores are benefiting from this loophole.

After all, the Stock Exchanges are concerned with the compliance under the listing agreement, so as long as they get all the required reports / compliances in time, the exchange may not really bother whether there is a company secretary in the company who is acting as a compliance officer or otherwise – in summary, if the company complies everything required under the listing agreement, the exchanges are not much concerned about the appointment of the company secretary.

Regards,

Veeral Gandhi

2 Like

Arun Jaiswal (CS) (89 Points)
Replied 28 July 2012

Thank you Veeralji for providing such a valuable information.

Thanks & Regards

Arun Jaiswal

1 Like

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 28 July 2012

Exactly under Clause 47 of the listing agreement it is provided that :

The Company agrees-

Infact Listing Agreement expects every listed company to appoint a Whole Time Company Secretary. However, as such it don’t bother whether compliance are being done by Directors or a Company Secretary.

Dear Veeral ji,

With due respect i would like to say that we are here to discuss what is legal and right. As per Listing Agreement if a Company is Listed it must appoint a Company Secretary who shall act as Compliance Officer. However, Companies redesignate its directors or even Accountants to act as Compliacne Officer and Stock EXchange dont bother on that. But the provision remain same, a Company if it is Listed it has to appoint Company Secretary.

So the answer of the query is yes it is mandatory for the Company if is listed and having paidup capital of less than Rs. 5 Crore to appoint a Company Secretary.

1 Like

(Guest)

Dear Ankurji,

Throughout my replies I have maintained that as per the listing agreement, even a listed public company having paid-up capital of less than Rs. 5 crores needs to appoint a Company Secretary who is a Compliance officer. And as you said that this Compliance officer need not be a qualified Company Secretary is very much true. Yes, even a director or an accountant could act as a Compliance officer of such a company.

What I tried to convey is that no specific penalty has been provided in the listing agreement for the non-appointment of compliance officer, while the listing agreement talks about the noncompliance and the investor’s protection. So long as Stock Exchanges get all the required reports / compliances in time, the exchange may not really bother whether there is a company secretary in the company who is acting as a compliance officer or otherwise.

Thus, I too know about the legal position. What I am trying to opine is an alternative solution for those companies who are on a cost cutting spree.

And, are laws made by ordinary human beings, who are full of faults, as sacred as Vedas ?

Even if we transgress them, we would incur no sin…

Regards,

Veeral Gandhi

Arun Jaiswal (CS) (89 Points)
Replied 30 July 2012

Thank you Ankurji

Regards

Arun Jaiswal

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 30 July 2012

Most Welcome Arun ji...

mannoj (striving for success) (501 Points)
Replied 30 July 2012

Thank you all

for valuable debate or express of opinion, whatever may be !!

its worthy......

Regards

(Guest)

After all, the success of this club depends upon expression of opinion in a friendly manner...

Opinions may differ even among learned scholars. There is a Sanskrit saying, "Tunde tunde mati bhinna", which means that there are as many opinions as there are heads. But such differences should not be misunderstood as a war of words.

Healthy debates makes our brain sharper.

I thank all those who participated in this discussion.

Regards,

Veeral Gandhi

1 Like