Company Secretary Appointment Procedure Legal Provisions

The following article is an detailed explanation of Appointment of Company Secretary, Procedure for Appointment of Company Secretary along with the Rule – 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 under the Companies Act 2013. Also read our previous articles on Board of Directors, Loans to Directors, MD Remuneration Calculation and Managing Director Appointment.

Introduction – Company Secretary

Company Secretary Appointment Procedure Legal ProvisionsCompany Secretary‖ or ―secretary‖ means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a Company Secretary under this Act;

As per Company Secretary Act, “Company Secretary” means a person who is a member of the Institute of Company Secretary of India (ICSI).

Appointment of Company Secretary

Under section 2 (51) of the Companies Act, 2013, Company Secretary has been defined as “Key managerial person”. Under section 203 of the Companies Act, 2013, being a key managerial person, company secretary is required to be mandatorily appointed in every company belonging to such class or classes of companies as may be prescribed.

Appointment of Key Managerial Person – Company Secretary

Section 203 (1) of the Companies Act, 2013 provides that every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial person,-

  1. Managing director, or Chief Executive Officer or manager and in their absence a whole time director;
  2. Company Secretary; and
  3. Chief financial officer

Provided that an individual shall not be appointed or re-appointed as the chairperson of the company, in pursuance of the articles of association of the company, as well as managing director or Chief Executive Officer of the company at the same time after the date of commencement of the Act unless,-

  1. The articles of such a company provide otherwise; or
  2. Company does not carry multiple business;

According to rule 8 of Companies (appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed company and every other public company having paid-up share capital of ten crore rupees or more shall have whole time key managerial person comprising of managing director, chief executive officer (CEO) or manager and in their absence, a whole time director, company secretary and chief financial officer (CFO).

Thus, private companies and public companies with a paid up share capital of less than ten crore rupees have been exempted from appointing key managerial personnel.

However, The Ministry of Corporate Affairs (MCA) has amended the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and inserted Rule 8A on 9 th June 2014.

Rule – 8A of Companies (Appointment and Remuneration of Managerial Personnel)  Rules, 2014

A company other than a company covered under Rule 8 which has a paid up share capital of five crore rupees or more shall have a whole–time Company Secretary.

This means that all companies (including Private Companies) are required to appoint Company Secretary in whole time employment whose paid up Share Capital is five crore rupees or more.

Company Secretary Appointment – Legal provisions 

The following are the Legal Provisions relating to the Appointment of Company Secretary.

Since company secretary is included in the definition of key managerial person as defined in section 2 (51) of the Companies Act, 2013, the procedure of appointment of company secretary would be similar to other key managerial person.

Therefore, Company secretary shall be appointed by means of Board resolution containing the terms and conditions of the appointment including the remuneration. He shall not hold office in more than one company except in its subsidiary company at the same time.

Sub-section (3) of Section 203 allows a wholetime key managerial personnel (which includes company secretary) shall not hold office in more than one company except in its subsidiary company at the same time.

However, a company secretary can be appointed as director of any company with the permission of the Board.

A director can be appointed as Chief Executive officer, Manager, Company Secretary or Chief Financial Officer [Regulation 77 (ii) of Model Articles of Association Table-F of the Companies Act, 2013]

However, a director cannot sign or authorize a thing in two different capacities [Regulation 78 of Model Articles of Association of company limited by shares as contained in Table-F of Schedule I of Companies Act, 2013]

However, articles of association of companies usually contain an article providing for the appointment of a company secretary. Such a provision is based on regulation 77(1) in Table F of Schedule I to the Companies Act and according to this regulation, subject to the provisions of the Act,–

“a chief executive officer, manager, company secretary or chief financial officer may be appointed by the Board for such term, at such remuneration and upon such conditions as it may think fit; and any chief executive officer, manager, company secretary or chief financial officer so appointed may be removed by means of a resolution of the Board.”

The above regulation gives absolute discretion to the Board of directors of a company to appoint a company secretary, fix the period of his tenure as such, fix his remuneration, revise his remuneration and vary the terms of appointment of company secretary. The Board of directors of a company may appoint a company secretary by passing a resolution either at a duly convened and held meeting or by means of resolution passed by circulation.

Appointment of Company Secretary – Offence & Penalty [Section 203(5)

If a company contravenes the provisions relating to appointment of whole-time key managerial personnel (which includes company secretary), the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to five lakh rupees and every director and key managerial personnel of the company who is in default shall also be punishable with fine which may extend to one thousand rupees for every day after the first during which the contravention continues.

Procedure for Appointment of a Company Secretary

Procedure for Appointment of a Company Secretary [section 203 read with Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

Since company secretary is one among the key managerial person, the procedure of appointment of company secretary would be similar to appointment of all other key managerial person.

As per Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every company having a paid-up share capital of Rupees five crore or more is required to have a whole time company secretary.

Only an individual, who is a Company Secretary within the meaning of clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 or who possesses the prescribed qualifications, can be appointed as secretary of the company. The Companies (Appointment and Qualification of Secretary Rules), 1988 contain the prescribed qualifications

Appointment of Company Secretary – Procedural Steps

The following procedural steps should be taken for appointing a whole-time company secretary:

  1. Advertise the post, collect applications, hold interview, short list the individuals for the position, and finalise the terms of appointment.
  2. Convene a Board meeting after giving notice to all the directors of the company as per section 173 of the Act. At the board meeting, place the proposal of appointing Company Secretary with the details of the person finalized and pass a resolution appointing the company secretary and approving the terms and conditions of his appointment.
  3. File return of appointment of company secretary with the Registrar in Form DIR 12 within thirty days from the date of appointment (date of joining office) and Form MGT. 14 is also required to be filed along with such fee as specified in Companies (Registration of offices and Fees) Rules, 2014.                                                                                                   The particulars of Company Secretary, Income-tax PAN, Membership details (will be validated from ICSI records), residential details, date of appointment, e-mail ID of the person for communication purpose are required to be filled in the Form.
  4. A Company Secretary shall not hold office in more than one company except in its subsidiary company at the same time.
  5. Make entries in the Register of directors and key managerial personnel under Section 170 of the Act
  6. Inform the Stock Exchange(s) where the company is listed.
  7. Since key managerial personnel are included in ‘related party’ as defined in section 2(76) of the Act, Please verify whether the company secretary so appointed involved in any related party transactions within the provisions of Section 188 of the Act. If yes, then comply with the requirements in this regard.