Role of Company Secretary in Corporate Governance
A company secretary ensures ethical practices, fosters communication between the board and stakeholders, and ensures compliance with laws and regulations. Check here for the role of Company Secretary in Corporate Governance!
Jatin Sharma23 Nov, 2023
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Role of Company Secretary: The Company Secretary has important duties in corporate governance. They need to make sure the company follows ethical business practices, promotes open communication between the board and stakeholders, and ensures the company follows laws and regulations. The Company Secretary plays a key role in helping the board make efficient decisions, safeguarding the interests of shareholders, and making sure the company operates transparently and with integrity.
They do this by keeping accurate records, giving advice on the best ways to run the company, and encouraging a culture of accountability. To learn more about the role of the Company Secretary in Corporate Governance, check the below article.What is the Meaning Of Corporate Governance?
Various groups define corporate governance differently. According to the Organisation for Economic Cooperation and Development (OECD), it involves how a company's management, shareholders, and other stakeholders interact. The Role of the Company Secretary is crucial in implementing governance practices, ensuring ethical conduct, and facilitating communication. To stay competitive, organizations need to update their governance practices, a task where the company Secretary's role becomes pivotal. The government also plays a role by creating effective rules that let markets run well and adapt to the needs of shareholders and others. Both governments and market players need to figure out how to put these principles into action to build their governance frameworks. Corporate governance is a well-established idea that has evolved over time.Role of CS in Corporate Governance
The Role of Company Secretary in Corporate Governance is pivotal, acting as a crucial link between the board, management, and shareholders. In the dynamic realm of business ethics and regulatory compliance, the Company Secretary ensures transparency, accountability, and adherence to legal and ethical standards within the organization. We've mentioned some important points below for the Role of CS in Corporate Governance:1. Guardian of Compliance:
The primary role of Company Secretary is to ensure the company complies with laws and regulations. By staying updated on legislation changes, advising the board, and implementing processes to mitigate legal risks, they safeguard the company's reputation and protect it from legal consequences.2. Board Support and Dynamics:
The Company Secretary is the go-to person for the board, facilitating communication, organizing meetings, and fostering positive dynamics. Their role extends to managing conflicts of interest, preparing agendas, circulating board papers, and documenting minutes for transparent decision-making.3. Communication Hub:
As a communication conduit, the Company Secretary links the company with stakeholders, including the board, shareholders, and regulatory bodies. Maintaining open lines of communication builds trust and ensures stakeholders are well-informed and engaged.4. Ethical Oversight:
The Company Secretary instils an ethical culture by developing a code of conduct, providing ethics training, and advising the board on ethical decision-making. Upholding ethical standards is vital for maintaining the company's integrity.5. Risk Management:
Contributing to risk management, the Company Secretary identifies, assesses, and mitigates risks. Their comprehensive knowledge helps formulate strategies to minimize risks impacting the company's performance.6. Proxy for Shareholders:
Acting as a point of contact for shareholders, the role of Company Secretary ensures they are well-informed, facilitates communication channels for feedback, and addresses queries, bridging the gap between the company and its owners.7. Continual Professional Development:
In the dynamic corporate governance landscape, the role of Company Secretary is to engage in continual professional development, stay informed about best practices, attend training programs, and network with peers.8. Crisis Management:
In times of crisis, the Company Secretary plays a critical role in devising strategies, communicating effectively, and implementing measures alongside senior management and the board to mitigate the impact and prevent similar occurrences.Role of Company Secretary as KMP – Legal Compliance-Related Obligations
The Role of Company Secretary is pivotal, designating the position as a Key Managerial Personnel (KMP), akin to the CEO or MD, underlining its significance within the organization. As outlined by the Companies Act, the CS holds the status of an officer, actively contributing to corporate administration and legal compliance. Key Managerial Personnel (KMP) Position:- The Companies Act recognizes the CS as a KMP, placing them alongside top executives like the CEO or MD.
- This acknowledgement underscores the CS's importance in both corporate administration and ensuring legal compliance.
- Section 203 of the Companies Act mandates certain companies to appoint full-time KMPs, including the CS.
- The appointment, including that of the CS, is perpetual and requires approval by the Board of Directors, ensuring strict compliance with legal provisions.
- The CS's duties, as detailed in Section 205, are instrumental in achieving sound corporate governance.
- Duties include reporting to the Board on compliance with legal provisions, ensuring adherence to secretarial standards, and fulfilling other prescribed responsibilities.
Role of Company Secretary: Establishing a Committee to Investigate Corporate Fraud and Mismanagement
Addressing the threat of illegal activities, reports indicate that approximately 250,000 companies are under consideration for de-registration under the Companies Act. Out of these, around 220,000 companies have been struck off due to their lack of engagement in business activities. To ensure good governance, every listed company must have specific committees like the Audit Committee, Nomination and Remuneration Committee, Risk Management Committee, and Stakeholders Grievances Committee. The Role of Company Secretary is crucial in guaranteeing compliance by establishing these committees and ensuring the right mix of executive and independent directors.- Committee Formation: The Company Secretary is responsible for creating committees like Audit, Nomination, Remuneration, Risk Management, and Stakeholders Grievances. They ensure the inclusion of the right combination of executive and independent directors in these committees.
- Document Preservation Policy: The Company Secretary ensures the company has a document preservation policy, categorizing documents as permanent or needing preservation for at least 8 years.
- Grievance Redressal: Handling shareholder complaints on platforms like SCORES, NSE, or BSE falls under the responsibility of the Company Secretary or the Registrar and Share Transfer Agent.
- Appointment of Independent Directors: The Company Secretary plays a role in appointing independent directors, ensuring they meet criteria laid down in the Companies Act and listing regulations.
- Compliance Across Laws: Apart from the Companies Act and listing regulations, the Company Secretary ensures compliance with various laws like provident fund, civil, and intellectual property laws.
- Board Meeting Oversight: Ensuring the company holds quarterly board meetings with a maximum 120-day gap and meets quorum requirements during these meetings is part of the Company Secretary's responsibilities.
- Video Conferencing Facilities: The Company Secretary ensures proper video conferencing facilities for directors attending meetings remotely and maintaining data after the meeting concludes.
- Director Payments: The Board of Directors can receive sitting fees of Rs. One lakh per board meeting and commissions as approved by the board or shareholders, a responsibility overseen by the Company Secretary.
Role of Company Secretary in Corporate Governance FAQs
What is the role of company secretary in corporate governance?
The company secretary is in charge of running the business smoothly, ensuring that decisions made by the Board of Directors are carried out, and making sure the company follows all legal and regulatory requirements. Also, for more detailed information on the Role of Company Secretary in Corporate Governance, check the above article.
How is the role of a company secretary defined in the Companies Act?
Under the Companies Act of 2013, the Company Secretary's role is elevated to "Key Managerial Personnel." Apart from ensuring legal compliance, the CS assists management in understanding various issues within the business. Also, for more detailed information on the Role of Company Secretary in Corporate Governance, check the above article.
What is the primary responsibility of a CS?
The Company secretary's main job is to ensure the Management Committee functions effectively. This includes organizing and documenting meetings, as well as maintaining efficient administration and records. Also, for more detailed information on the Role of Company Secretary in Corporate Governance, check the above article.
What qualities should a Company Secretary possess?
Company Secretaries should be able to multitask and stay organized under pressure. Being friendly and having strong interpersonal and communication skills are also important qualities. Also, for more detailed information on the Role of Company Secretary in Corporate Governance, check the above article.
Can a company secretary work in a government company?
Yes, company secretaries can work in listed PSU companies like LIC and SAIL in the public sector. The salary for CS jobs typically ranges from 3.5 to 5 lakhs Indian Rupees, and with more experience, it can go up to INR 20 Lakhs. Also, for more detailed information on the Role of Company Secretary in Corporate Governance, check the above article.
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