Compliances

Role of Company Secretary in Corporate Governance

The crucial responsibilities of a company secretary in corporate governance include upholding ethical business practises, facilitating open communication between the Board of directors and stakeholders, and ensuring compliance with legal and regulatory frameworks. The Company Secretary plays a crucial role in encouraging efficient decision-making, protecting shareholder interests, and improving overall transparency and integrity within the organization’s operations and interactions with external entities by maintaining accurate records, offering advice on corporate governance best practises, and encouraging a culture of accountability.

The Concept of Corporate Governance

Corporate governance is defined differently by various organizations. Corporate governance is determined by the Organisation for Economic Cooperation and Development as a series of interactions between a company’s management, shareholders, and other stakeholders. Additionally, it offers the framework for establishing the means by which businesses will achieve their goals.

In order to meet new needs and seize new possibilities, organizations must innovate and modify their corporate governance practices in order to remain competitive. Similarly, the government must provide a functional regulatory framework that offers enough latitude for markets to operate efficiently and adapt to the needs of shareholders and other stakeholders.

Governments and market participants must decide how to implement these principles in order to create their corporate governance frameworks. Corporate governance is an established idea that has matured.

What Function Does The Company Secretary Play In Effective Corporate Governance?

A corporate secretary (CS) is essential to managing the business. He is accountable to the business’s creditors, employees, shareholders, society, and government in addition to the latter two. He is one of the company’s primary officials who ensures the Companies Act’s rules are strictly followed.

He should ensure that the Board’s decisions are efficiently carried out because of his high administrative position within the organization. In order to effectively manage the business, CS is in charge of overseeing, controlling, and coordinating how each department operates.

Company Secretary’s Function and Required Legal Provisions

As part of his duties, CS is responsible for counselling the company’s Board of directors on proper corporate governance procedures and legal compliance. The CS is an essential relation between the Board and the company’s management and is a unique contact between the two.

According to the law, CS has a crucial role in setting up and carrying out the decisions the Board, its committees, and general body meetings make. The expectations of the stakeholders of the CS are rising due to the increased attention on corporate governance, which has elevated the importance of the position of CS.

CS as KMP – Legal compliance-related obligations

It is important to note that the position of CS is a KMP (Key Managerial Personnel), which places it next to the CEO or MD and emphasizes its significance in the organization. In terms of both corporate administration and legal compliance, the Companies Act recognizes CS’s role as an officer of the organization.

The legislature has given CS a significant position in the business to guarantee that the Act’s legal requirements are followed. In addition, Section 203 stipulates that every company belonging to these classes of companies must have the following full-time KMPs: a managing director, CEO, or manager, and in their absence, a full-time director; a chief financial officer; and a chief operating officer. This is done in order to ensure strict compliance with the Act’s provisions.

Additionally, it states that KMP must be appointed perpetually by a decision of the company’s Board of directors that contains the terms and conditions of their appointment. Therefore, it is clear from the preceding how significant a role CS plays.

The duties of CS within an organization are outlined in Section 205. To achieve sound corporate governance, these duties are essential. According to the job description, the CS is required to: Report to the Board regarding compliance with the Act’s provisions, rules made thereunder, and laws that apply to the company; Ensure that the company complies with the applicable secretarial standards as issued by the ICSI and approved by the Central Government; and Discharge other duties as prescribed.

A Committee Is Required To Look Into Corporate Frauds and Mismanagement

According to reports, as part of the measures to combat the threat of companies engaged in illegal activities, about 2.50 lakh companies have been identified for de-registration under the Companies Act¹. Of those, approximately 2.2 lakh companies were struck off because they were not engaged in any business activity.

There are instances where, despite having respectable independent and representative directors of the banks, the management of the companies has indulged in financial fraud to benefit the promoters/management in control. The central government has not yet issued a clear policy on how these loopholes can be closed and how the money looted can be brought back into the economy.

Conclusion

The Company Secretary’s involvement in corporate governance is essential to creating an environment that promotes ethical and responsible business practices. Their skill in navigating complex legal environments, ensuring compliance, and facilitating smooth communication within the organization significantly contributes to upholding the values of transparency, accountability, and fairness, fostering sound decision-making, and maintaining trust among stakeholders. In today’s complicated business climate, the Company Secretary serves as a critical link between the Board, management, and other stakeholders, protecting the organization’s reputation and bolstering the principles of a well-governed and long-lasting corporation.

Frequently Asked Questions

Read our article: Appointment of Key Managerial Personnel under Companies Act, 2013

1. https://www.indiacode.nic.in/handle/123456789/2114?sam_handle=123456789/1362