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COMPANY SECRETARIES – THE PROFESSION AND BEYOND

Introduction

The word ‘secretary’ has originated from the Latin word ‘secretarius’ which means a person who is entrusted with a secret. In the corporate world, a Company Secretary is a person whom every Board member value and when correlated with the literal meaning of the word ‘secretary’, it reflects the confidentiality of the role and the trust that is placed on that position. The trust is built through their competence and it is their honesty, integrity, authenticity, accountability fused with skills, knowledge, experience and performance that make them stand out of the crowd.

Despite having an array of roles in different areas, it is a common belief that the role of Company Secretaries is confined to Company Law alone. However, over the years it has been observed that Company Secretaries have ventured into areas beyond Company Law and have emerged as experts in taxation, financial market services, mergers & amalgamations, etc. Hence, we as professionals should explore beyond our comfort zone and be the experts that we are.

Analysing the Role of Company Secretaries

The role of a Company Secretary is not the typical stereotype of a man or woman who assists a board chair or executive director. The role has evolved from just being a support person to being the ‘trusted advisors’ and the ‘go to experts’ because Company Secretaries understand the law. Company Secretaries have transitioned to one of the key governance positions within a corporation and can help align the Company’s policies, the management functions, various regulatory compliances and the mutual ethics and trust in a Company to achieve corporate growth.

It has been very rightly said that “the profession of Company Secretaries has an important part to play in the introduction of professionalism in the area of corporate management” by Shri P Shiv Shankar, former Minister of Law, Justice and Company Affairs. The Company Secretaries possess the fundamental and distinctive characteristics or qualities of being remarkable professionals that corporates seek. They develop a law-abiding culture and a sustainable framework for the Company wherein a constant watch prevails over the company’s activities. With corporate governance being very prominent in recent times, the role of Company Secretaries has increased multiple folds in achieving the same and also maintain harmony among its stakeholders with respect to compliance simultaneously.

Thus, it is imperative that we discuss the role of Company Secretaries beyond the boundaries of Company Law. Company Secretaries have ventured into areas relating to corporate restructuring, taxation services, capital market related activities, foreign collaborations and joint ventures, international trade and WTO services, labour and industrial laws, intellectual property laws etc. They independently handle such activities and have emerged as experts in these areas.

The one such area that Company Secretaries have mastered now over the years is the field of taxation. Company secretaries are the one who are capable of understanding the dynamics of law and taxation system. Company Secretaries are termed to be masters of law; whether it is in indirect tax laws or the GST law, they were already recognized under the various tax laws and in VAT profiles by various State Governments. It has been often seen that Company Secretaries in Practice, along with providing secretarial compliance services are now tax advisors for corporates too. The advent of the reforms in the tax laws in the country are a welcoming change for professionals as it has expanded the ambit of practice of Company Secretaries particularly. After GST implementation the work area of professionals become wide and they can provide a single window solution to their client. It’s a new tax and a new opportunity. For better administration of new tax regime in the country, it is required to have more and more competent and equipped professionals to facilitate regulators to ensure compliance of various statues and thus help in achieving this ambitious task. The Company Secretaries, who practice in almost all the branches of law and have a strong accounting background, are competent professionals to handle the regulatory compliance under the proposed GST laws. They are skilled professionals who understand legal, financial and compliance dimensions of business entity comprehensively.

It has been also seen that Company Secretaries are speaking on public forums on topics related to Foreign Direct Investment (FDI), Cross-border mergers, Banking regulations, International Trade, Corporate Communications, Public relations, etc. In the Indian corporate set-up, ensuring governance has become a mandate owing to the introduction of various acts, tax reforms and policies by the Government. Also, the role of a Company Secretary becomes very limited when it comes to unlisted and private companies. They are often entrusted with finance and legal work to fill in their working hours. Hence, keeping the practice areas confined to Company Law will result in the stunted professional growth of Company Secretaries. It is important that Company Secretaries are updated about the various economic reforms brought about in the country and broaden their scope of work into different sectors. There has to be a constant effort in staying relevant.

A guide to the Board of Directors of the Company

Apart from being an expert in their own field, it is the ethics and the values that make Company Secretaries distinct as a professional. Being diligent in what they do and responsible for their act makes the company achieve its goals. It is their responsibility to ensure that the company and its directors operate within the law. In simple terms, they are the professionals who act as power boosters for the companies to encourage their plans and ensures its smooth accomplishment with complying all applicable laws in the field. Beyond their normal course of duties, company secretaries provide advice and counsel to the board of directors, company’s shareholders and serve as confidantes.

Company Secretaries are the officers of the company who align various management functions with company policies, ensures compliance of all applicable laws and endeavours to develop mutual trust between various stakeholders for sustainable growth of the company. In addition to providing advice and guidance, they are called upon to create and manage relationships between the different players in the corporate governance system. But how do they act as the guide to the Board? Few attributes that Company Secretaries possess which make the Board of Directors of a Company bank on them, are listed below:

  • Possessing crisp and thorough knowledge of the business environment in which the organization operates as well as of the laws, rules, and regulations that govern its activities.
  • Identifying what and advising why certain corporate governance best practices should be adopted by the organization. This may be as a result of compliance with laws, regulations, standards and codes or because the practices make good operational sense for the organization.
  • Implementing within the organization those best practices through the creation and maintenance of cultures and relationships.
  • Being flexible, creative and detailed, not losing sight of perspective and giving the board and managers a “heads up” about new developments.
  • Having a holistic view of the governance framework and ensuring that this framework and any supporting policies and procedures are clearly implemented by the Company.
  • Being articulate about the decision to be taken and what impact it would have on implementation.

Organizations need to put in place structures, policies, and procedures that comply with best practice. This on its own is compliance and doesn’t create good governance. For good governance to be present, the people who work in the organization need to apply or practice these structures, policies, and procedures to create a culture within the organization that enables them to work effectively. This, in turn, leads to the organization being successful. For example, compliance is putting in place a code of ethics; governance is about creating an ethical culture.

A good Company Secretary should be able to assist the organization with identifying what should make up the correct infrastructure for each organization. In addition, and some would say more importantly, once the correct infrastructure has been identified, the Company Secretary should be able to assist the organization with the creation of the culture and the relationships required to ensure that the infrastructure is implemented, managed, and maintained effectively for the success of the organization. Hence, as professionals, it is a constant endeavour to develop themselves to be better at their job and have the knowledge to be able to guide not only the Board of Directors of a Company but also each individual who help run the show.

Whatever type of organization the Company Secretary works for, he or she usually plays a valuable role as a “bridge” for information, communication, advice, and arbitration between the board and management and the organization and its stakeholders, including its shareholders. The Company Secretary can, among other things, help management understand the requirements of the board, help the board understand the challenges faced by management in meeting the requirements of the board, and help the organization manage stakeholder relations.

In the light of economic developments in recent years stakeholders of companies, are increasingly concerned with the conduct of the affairs of the company and therefore it is essential that best practice is adhered to at all times and evidence is available to demonstrate the same. Thus, Company Secretaries have to ensure that the decisions taken by the Board and the management are transparent and the society is benefited from those decisions ultimately. Thus, Company Secretaries are the professionals, who are responsible for the Company’s actions. The onus of educating the Directors about the law, the ethical aspect of abiding the law and finally taking the decisions legally and ethically, is on the Company Secretaries. They are the watchdogs of a Company who are constantly updated about the changes in legislation and educating the Directors and management of the Company about such changes. Simply put, Company Secretaries should have a proactive approach rather than a reactive one.

Skills to be a Professional

It is apparent that Company Secretaries are required to have a thorough knowledge of the law. That is how they are the experts in what they do. But it should also be noted that merely having the knowledge is not enough as professionals. There are certain soft skills that they should possess to shape them as one of the best professionals in the country. Few have been listed below:

  1. Reliability: A person should be consistent in his or her job, for the organisation to rely on their advice. Being confident and delivering accurate results every time is a sign of consistency. The professional should be dependable because someone else’s work will be impacted by his or her actions.
  2. Quality Work: Delivering quality work every single time is what is expected of a Company Secretary. This includes accuracy and in-depth knowledge about their field of work as well as providing practical support to the Board.
  3. Depth of knowledge: The profession of a Company Secretary requires them to be constantly updated about the changes in laws. Increasing their knowledge makes them the expert in what they do. It is a constant learning process.
  4. Accountability: Being a professional it is their duty to be accountable for their work. They are entrusted with responsibilities and thus are expected to take up ownership for their job.
  5. Leadership: Being accountable is the path to leadership. It is a quality that a professional should possess to excel in their job.
  6. Integrity: Professionals are known by their integrity. Keeping moral principles intact and being ethical are the key factors of being country’s one of the best professionals.
  7. Diligence: A professional should show diligence in his/her work. One should make utmost effort to execute their responsibilities with care because that is what they are expect of. They should be thorough in their job.
  8. Communication: Company Secretaries serve as a link between the Company, the Board of Directors and other stakeholders. Hence, communication is important to ensure that the gap is bridged between the Company and its stakeholders.
  9. Time Management: Timeliness might seem simple, but it is one of the most important qualities in a professional.
  10. Flexibility: The law is changing every day and as professionals Company Secretaries should also be adapt the change. This profession requires flexibility and the willingness to change.
  11. Confidentiality: The information acquired by Company Secretaries during the course of their employment in an organisation is strictly confidential. It is of utmost importance that he or she does not disclose it or misuse it in any manner whatsoever.
  12. Independent: The professional should possess skills to independently handle the work responsibility they are entrusted with.

It is a great deal of responsibility that Company Secretaries carry on their shoulders. Thus, it is imperative that they as professionals grow constantly. There always exists a burden on these professionals to keep themselves updated and motivated to learn and also nurture their skills as they are among the most valued professionals in terms of importance and impact.

Concluding Thoughts

As a professional, Company Secretaries handle multiple roles. The are one of the Key Managerial Personnel of the Company who carries a huge responsibility on their shoulders and have immense responsibility towards the nation. They contribute in several areas such as Direct and Indirect Taxation, Corporate governance, Arbitration & Conciliation, Corporate Communication & Public Relations, Human Resources, Corporate Laws, Corporate Administration, Foreign Exchange matters, Board and shareholders meetings, Corporate Compliance Management, Stock exchanges and Listing agreement, Mergers and Amalgamations, Arbitrations and Reconciliation and many more. With each passing day, this profession is commanding respect not only in the corporate sector but is well regarded by other professionals as well as by governmental authorities and agencies concerned with corporate governance in India.

Company Secretaries possess the power to influence the nations’ corporate governance framework, so to abide the law in letter and spirit by all the professionals would become a boon for the country and give rise to well-governed business boosting the economic sector, helping the nation towards rapid economic growth. Seeing the factual and today’s scenario there is a lot of scope for Company Secretaries in India and the possibility of future growth is high as the demand of corporate governance is rising. Thus, the role of Company Secretaries shall increase multiple folds owing to the compliance requirements getting stricter in the years to come.

Author: Alivia Das Senior Associate, NovoJuris Legal

This article was first published in the ICSI Charted Secretary Journal – March 2019 issue.

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COMMENTS INVITED ON THE PROPOSED AMENDMENTS IN THE DRAFT COMPANIES (COST RECORDS AND AUDIT) RULES, 2014

COMMENTS INVITED ON THE PROPOSED AMENDMENTS TO THE DRAFT COMPANIES (COST RECORDS AND AUDIT) RULES, 2014

Pursuant to the implementation of Indian Accounting Standards (IndAS), the MCA vide its public notice dated 11 August 2017 has invited comments/suggestions on the amendment in Companies (Cost Records and Audit) Rules, 2014 in order to bring uniformity between financial records and cost records.

The comments/suggestions on the said Draft Rules shall be provided on or before 26 August 2017.

Source:

Public Notice: http://www.mca.gov.in/Ministry/pdf/notice_11082017.pdf

Draft Rules: http://www.mca.gov.in/Ministry/pdf/draftRules_11082017.pdf