“But times have changed. A Company Secretary is a much more important person nowadays than he was in 1887. He is no longer a mere clerk.” ~Lord Denning
In the dynamic world of business, a Company Secretary stands as a linchpin of Corporate Governance, expertly balancing legal acumen with strategic vision. Their role, pivotal in steering companies through complex regulatory landscapes, ensures not just compliance but also ethical and transparent business practices, reflecting the heart of modern corporate integrity.
Definition of Corporate Governance by OECD
According to the Organization for Economic Cooperation & Development (OECD), Corporate Governance (CG) involves a set of relationships between a company’s management, its board, its shareholders, and other stakeholders. CG is essentially a system by which corporations are directed and controlled, emphasizing principles like transparency, accountability, investor protection, compliance with laws and regulations, value creation for shareholders and other stakeholders, and societal value.
The Inception of ICSI and its Mission
More than five decades ago, on 4th October 1968, the Institute of Company Secretaries of India (ICSI) was established with a vision to be a global leader in the development of professionals specializing in Corporate Governance. Its mission is to develop high-caliber professionals who facilitate good Corporate Governance. ICSI was founded as a Section 25 Company under the provisions of the Companies Act, 1956.
Conversion of ICSI into a Statutory Body
The transformation of the Institute of Company Secretaries of India (ICSI) into a statutory body under the Company Secretaries Act, 1980 (CSA 1980), effective from 1 January 1981, marked a significant milestone in the professional landscape of India. This pivotal change bestowed ICSI with the authoritative mandate to oversee the development and regulation of the Company Secretary (CS) profession. As a statutory body, ICSI shoulders the critical responsibility of setting and maintaining high standards for the education, examination, and ethical conduct of CS professionals.
It plays a key role in ensuring that Company Secretaries are equipped with the necessary knowledge, skills, and ethical grounding to effectively guide corporate entities in compliance, governance, and strategic management. Through its rigorous programs and regulatory frameworks, ICSI ensures that the CS profession remains robust, relevant, and aligned with the evolving needs of the corporate sector, thereby contributing significantly to the integrity and efficiency of the business environment in India.
ICSI’s Role in Education and Standard Setting
The Institute of Company Secretaries of India (ICSI) stands as a beacon of excellence in the realm of corporate governance education, diligently providing top-tier education to students enrolled in the Company Secretary (CS) course. Its commitment to maintaining and elevating high standards for its members is unwavering. With a burgeoning community that currently includes over 72,000 members and approximately 2.2 lakh students, ICSI not only fosters a robust educational environment but also shapes the future of corporate governance in India.
The institute’s extensive network of professionals and aspiring students forms a dynamic and influential body, dedicated to upholding the integrity and proficiency of the CS profession. Through its comprehensive curriculum, continuous professional development programs, and rigorous examination standards, ICSI ensures that its members are not just well-versed in the technicalities of corporate law and governance but are also equipped to handle the evolving challenges of the modern business world.
ICSI’s Collaborations and MOUs
The Institute of Company Secretaries of India (ICSI) has strategically forged alliances with over 200 universities nationwide, including prestigious institutions like 6 National Law Universities and 17 Indian Institutes of Management (IIMs), through Memorandums of Understanding (MOUs). These partnerships are designed to enhance the educational landscape by facilitating knowledge exchange and skill development among students, academicians, and professionals.
These collaborations signify a commitment to nurturing talent and fostering a culture of continuous learning and professional excellence in the field of corporate governance.
ICSI’s International Expansion
ICSI has also expanded its presence internationally by setting up ICSI Overseas Centres in the USA, UK, Dubai, Singapore, Australia, and Canada. This expansion is designed to augment professional opportunities for ICSI members and facilitate practical training for students.
Evolution of the Company Secretary Profession
The inception of the Company Secretary (CS) profession in India was catalyzed by the establishment of the Institute of Company Secretaries of India (ICSI) and the enactment of the Company Secretaries Act (CSA) 1980. This pivotal development set the stage for a profession dedicated to upholding the highest standards of Corporate Governance (CG). CS professionals are committed to excellence, adhering to stringent legal, ethical, and regulatory frameworks, ensuring companies navigate the complex corporate landscape responsibly and transparently.
The Company Secretary in Companies Act 2013
Currently, the definition of a ‘company secretary’ or ‘secretary’ in India is anchored in Section 2(24) of the Companies Act 2013 (CA 13), referencing clause (c) of Section 2(1) of the Company Secretaries Act (CSA) 1980. This legal framework mandates the appointment of company secretaries by corporations to fulfill specific duties under CA 13.
Notably, CA 13 has brought a transformative shift in the scope and significance of the CS role, elevating them to the status of Key Managerial Personnel (KMP) under Section 2(51). This recognition underscores the vital part CS plays in steering corporate compliance, governance, and strategic decision-making within the corporate hierarchy.
Role of the Company Secretary in CSR Governance in India
In India, the Company Secretary (CS) plays a crucial role in Corporate Social Responsibility (CSR) governance, acting as a bridge between ethical ambitions and business operations. They ensure that CSR initiatives align with legal frameworks, while championing sustainable practices that resonate with the company’s core values.
Their expertise in legal compliance, coupled with a deep understanding of societal impacts, guides corporations in making meaningful contributions to social causes. By integrating CSR into corporate strategy, CSs not only reinforce a company’s commitment to societal welfare but also enhance its reputation and stakeholder trust, embodying the essence of responsible business leadership.
Mandatory Appointment of CS as KMP
Under the provisions of Section 203 of the Companies Act 2013 (CA 13), in conjunction with Rule 8 & Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, it has become a statutory requirement for every listed company, as well as for every public and private company with a paid-up share capital exceeding ten crore rupees, to appoint a Company Secretary (CS) as a Key Managerial Personnel (KMP).
This mandate underscores the pivotal role of the CS as the chief compliance officer within a corporation. Their responsibilities are integral to the corporate framework, ensuring adherence to pertinent legislation and regulations. The CS also plays a crucial role in guiding the board members, keeping them abreast of their legal obligations and responsibilities. This reinforces the governance structure within the organization, promoting transparency and accountability in corporate affairs, and ensuring that the company’s operations are in line with legal and regulatory standards.
Functions and Duties of the Company Secretary
The functions and duties of the CS include, among others, ensuring that the company complies with the applicable secretarial standards, facilitating the convening of meetings and attending Board, committee, and general meetings, and maintaining the minutes of these meetings. They also assist the Board in the conduct of the company’s affairs and advise the Board in ensuring good corporate governance and in complying with corporate governance requirements and best practices.
CS as Key Managerial Personnel: A Multi-Skilled and Multifaceted Role
Company Secretaries (CS), as Key Managerial Personnel (KMP), occupy senior-level positions in management, leading them towards a multi-skilled and multifaceted role. Their versatility allows them to engage in diverse roles:
- As a Governance Professional (GP), adopting principles of corporate governance to achieve excellence.
- As a GST Professional, providing guidance and advisory services to business entities for interpreting GST laws.
- As a Corporate Law Advisor, advising companies on compliance with legal and procedural aspects.
- As an Authorized Representative before various Boards and Tribunals, including the Company Law Board, National Company Law Tribunal, Competition Commission of India, etc.
- As an Insolvency Professional, handling matters related to corporate insolvency resolution processes.
- As a Compliance Officer of a Listed Company, ensuring adherence to various laws including the SEBI Act, FEMA Act, Labour laws, etc.
- As a Chief Administrative Officer, responsible for planning, organizing, supervising, and coordinating work, reporting directly to the Managing Director/CEO and the Board of Directors.
- As a Public Relations Officer, acting as a link between the Board of Directors and the company’s stakeholders.
- In Start-ups and MSMEs, by providing professional advisory services.
- This expansive range of responsibilities highlights the significant and evolving role of Company Secretaries in today’s dynamic corporate environment.
Global Recognition of Company Secretaries in Corporate Governance
Furthermore, world over, more countries such as the UK, Australia, and New Zealand are recognizing Company Secretaries (CS) as pivotal in enabling effective Corporate Governance (CG) structures, policies, and procedures. The concept of CG, which took root in countries like the US and UK, has since spread globally. CS play a crucial role in bridging the communication gap between management and the board, thereby facilitating a better understanding of board requirements and management challenges.
Expanding Global Role of Company Secretaries
Their responsibilities extend beyond mere compliance; they manage stakeholder relations and foster the right organizational culture to ensure effective CG practices. Known for their research acumen, legal expertise, analytical skills, and managerial capabilities, Company Secretaries are increasingly seen as integral to compliance management.
These diverse skills make CS professionals apt for global roles, especially in the context of the globalization of services through frameworks like the World Trade Organization (WTO) and the General Agreement on Trade in Services (GATS). This global perspective highlights the expanding influence and importance of Company Secretaries in the international corporate arena.
Over and Above: Digitalization’s Impact on CS and Regulatory Compliance
Digitalization has significantly transformed the landscape of legal and regulatory compliances, profoundly affecting the role of Company Secretaries (CS). As technology continuously evolves, CS professionals must stay abreast of these changes to ensure effective management and adherence to regulations.
In line with the objectives of ‘Digital India’ and ‘Ease of Doing Business’, the Ministry of Corporate Affairs (MCA) launched MCA21 Version 3.0 (V3). This update represents an enhancement over the previous version, V2, by introducing online form filling, thereby streamlining processes and increasing efficiency.
MCA Initiatives and Adaptations for Company Secretaries
Furthermore, the MCA has also introduced an E-Book for the CA 13, which offers time and cost-saving advantages for Company Secretaries. During the COVID-19 pandemic, MCA provided guidelines for conducting Extraordinary General Meetings (EGMs). In situations where EGMs were unavoidable, they were suggested to be held through Video Conferencing (VC) or Other Audio-Visual Means (OAVM), with a requirement to maintain recorded transcripts in safe custody. This adaptation underscored the CS’s role as a competent professional and advisor to the Board, entrusting them with the full responsibility of managing these processes in compliance with the new digital standards.
The Future of CS in Corporate Governance
In conclusion, CS have been and will continue to be the drivers and torch bearers of effective CG. Recently, the CA, CWA and CS (Amendment) Act, 2022 was enacted in order to strengthen the disciplinary mechanism, enhance transparency and accountability and to address the conflict of interest between the administrative and disciplinary bodies.
On top of that, with India’s dedication to the Sustainable Development Goals (SDGs) 2030, there is a significant change in corporate expectations, consequently impacting the profession of CS. Due to their expertise in balancing and managing stakeholders’ interests, CS professionals are well-equipped to take on a crucial role in handling various governance aspects related to Environment, Social and Governance (ESG), Business Responsibility and Sustainability Reporting (BRSR), Social Stock Exchanges (SSE), and other multi-disciplinary initiatives involving complex stakeholder and issue management.
Business, Company Secretary & CSR Governance in India
CSR is a concept that has gained importance and recognition in India over time. It is not only a legal obligation but also a moral duty for businesses to contribute to society through their activities. By doing so, businesses can not only fulfill their social responsibility but also gain competitive advantage and long-term success.
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Corporate social responsibility (CSR) is a concept that refers to the voluntary contribution of businesses to the social and environmental well-being of the society. CSR aims to balance the economic, social and environmental impacts of business activities, and to create value for all stakeholders. CSR also helps businesses to enhance their reputation, trust and competitiveness in the market.
In India, CSR is governed by Section 135 of the Companies Act, 2013 (the Act), Schedule VII of the Act and Companies (CSR Policy) Rules, 2014 . These provisions mandate that every company having net worth of Rs. 500 crore or more, or turnover of Rs. 1000 crore or more, or net profit of Rs. 5 crore or more during any financial year shall constitute a CSR committee1. The CSR committee shall be responsible for formulating, implementing and monitoring the CSR policy of the company.
The CSR policy should be aligned with the national goals and priorities of sustainable development, as well as with the expectations and needs of various stakeholders such as employees, customers, suppliers, communities and government1. The CSR policy should also reflect the core values and vision of the company1.
Role of Company Secretary in CSR
The role of company secretary is crucial in ensuring that the CSR policy is implemented effectively by the company.
The company secretary is an important role player in ensuring that the CSR policy is implemented effectively by the company. The company secretary advises the board of directors on corporate governance and the director’s duties. This includes managing the interest area of shareholders, issues of conflict of interest, investor guidelines and handling with applicable codes.
The company secretary also assists in preparing and filing various forms and reports related to CSR activities under Section 135(2) and Schedule VII(2) of the Act. These include annual reports on CSR activities, board’s report on CSR activities, statement showing expenditure incurred on CSR activities during previous year etc.
The company secretary also monitors and evaluates the performance and impact of CSR activities by conducting audits, surveys, feedback sessions etc. The company secretary also ensures compliance with all applicable laws, rules and regulations related to CSR.
Benefits for Business
CSR can bring various benefits for businesses in terms of enhancing their reputation, trust and competitiveness in the market. Some of these benefits are:
- Improving customer loyalty: Customers are increasingly becoming aware and concerned about social and environmental issues. They prefer to buy from companies that have a positive social impact through their products or services. By engaging in CSR activities that address these issues, businesses can attract more customers who value their social responsibility.
- Enhancing employee engagement: Employees are also becoming more conscious about their role as corporate citizens. They expect their employers to support them in contributing to social causes that they care about. By involving employees in CSR activities that align with their interests or passions, businesses can increase employee engagement, motivation and retention.
- Building stakeholder relationships: Businesses can also benefit from building strong relationships with various stakeholders such as suppliers, communities etc. By engaging in CSR activities that benefit these stakeholders directly or indirectly, businesses can create goodwill, trust and loyalty among them.
- Attracting investors: Investors are also looking for companies that have a positive social impact through their business operations. They prefer to invest in companies that have a clear vision, mission and strategy for achieving sustainable development goals. By demonstrating their commitment and performance in CSR, businesses can attract more investors who share their values and vision.
(India CSR Research)
(Copyright@India CSR)
