Company Secretary- Powers and Duties
Company Secretary’s powers and duties
Duties are largely ministerial or administrative. Secretary’s duties are largely of ministerial or administrative nature. He has no power to negotiate contracts nor borrow moneys or make policy decisions, nor, in the absence of special authorization, acknowledge a debt or other liability. The Supreme Court observed: Ordinarily the functions of the secretary of the corporation would be ministerial and administrative. As a secretary only, he would have no authority to bind the corporation by entering into contracts or other commitments on its behalf. He cannot register a transfer of shares without the sanction of the Board and if there is no Board of directors it does not mean that he can register the transfer on his own.
Under no circumstances can the secretary of the company discharge the functions of the Board or act on behalf of the company in matters of policy or take substantial steps which are not of an administrative or ministerial nature. He cannot give consent on behalf of the company under section 399 to the filing of a petition under sections 397 and 398 of the 1956 Act.
Speaking of the effect of the amendment of 1974, the Calcutta High Court said that though the amendment elevated the position of the secretary to that of an administrative officer, it has not altered the basic position of the secretary as to enable him to undertake serious litigation on behalf of the company without a decision of the company’s Board. The court cited the following passage: He (the secretary) has no power, without the resolution of the directors, to call a meeting of the company or to commence proceedings on behalf of the company, nor can he alter the register of members, but any such act may be ratified by the directors. The secretary cannot usurp the functions and powers of the board or the company, but due to the enormous growth of company activities he has been empowered to discharge various ministerial and administrative duties on behalf of the company which generally can be performed by an authorized agent. In due course of time the secretary has been given certain statutory powers, like signing the annual returns etc. But under no circumstances can he discharge the functions of the board or act on behalf of the company in matters of policy or substantive steps which is not administrative or ministerial in nature. He cannot also file a suit on behalf o the company, unless authorized to do so. So also the secretary cannot issue notices without the Board’s authority, or commence litigation in the company’s name without authority from the Board or alter the register of members without the Board’s authority or summon a meeting without the Board’s authority or fill-up the blanks in the minutes of a directors’ meeting.
Whole field of administration but not managerial functions
The functions of the secretary of a company have considerably expanded during the past eighty and more years. He is no more a mere clerk or servant as was stated in several decisions of the English Courts. Short of managerial functions his powers and duties extend to the whole field of administration of the affairs of the company, so that an outsider dealing with him may assume that functions and duties other than managerial, are normally within the ambit of the secretary’s powers unless there are circumstances to show that they are limited in respect of particular matters.
In England the duties of secretary are thus described: “The duties of the secretary will depend on the size and nature of the company and of the arrangement made with him. But of proceedings, he will issue under the direction of in any case he will be present at all meetings of the company and of the directors and will take proper minutes of proceedings, he will issue under the direction of the Board all notices to members and others that may be requisite; he will conduct all correspondence with shareholders in regard to calls, transfers, forfeiture and otherwise, and will keep the books of the company or such of them as relate to the internal business thereof, e.g. the register of members, the share-ledger, the transfer book, the register of mortgages, etc. He will also make all necessary returns to the Registrar of Companies”.
The company secretary performs many of the administrative duties imposed upon companies, such as delivering documents to the Registrar of Companies and engaging office staff. So far as the position of a secretary as such is concerned, it is established beyond all question that a secretary, while merely performing the duties appropriate to the office of secretary, is not concerned in the management [of] the company. Equally I think he is not concerned in carrying on the business of the company. On the other hand, it is equally well established, indeed it is obvious, that a person who holds the office of secretary may in some other capacity be concerned in the management of the company’s business. Advisory role of secretary: Cadbury Report. The CADBURY COMMITTEE in England observed that the secretary is a kind of impartial civil servant offering advice to the Board of directors on procedures and responsibilities. Para 4.25 of the Report proceeds as follows: “The company secretary has a key role to play in ensuring that board procedures are both followed and regularly reviewed. The chairman and the board will look to the company secretary for guidance on what their responsibilities are under the rules and regulations to which they are subject and on how those responsibilities should be discharged. All directors should have access to the advice and services of the company secretary. It should be standard practice for the company secretary to administer, attend and prepare minutes of board meetings.”
In para 4.27 the Committee expressed its expectation that the secretary would be a source of advice to the Chairman and also to the Board of directors on the implementation of the Code of Best Practice. This provision of the Code has to be observed by all listed companies. The Report on this point further says that all directors should have access to the advice and services of the secretary and that the secretary is responsible to the Board for ensuring compliance with provisions Rules and Regulations.
Prescribed authority for authentication of documents
A secretary is a prescribed authority for authenticating a number of documents which companies have to issue for different purposes at different times. Most of the documents which are required to be filed with the Registrar have to be authenticated either by a secretary or by a director or by both, a secretary and a director. When two signatures are so prescribed they cannot be made by one person acting in both capacities. Where at the crucial moment there is no secretary in office, the acts required to be done by the secretary, may be done by other officers, such as assistant or deputy secretary including a director who has been authorized by the Board.
A principal officer of a company, including its secretary can verify the contents of pleadings on the company’s behalf and it is immaterial for this purpose that the appointment of any such officer is pending before the Central Government for approval. UK Institute of Secretaries’ view of secretary’s duties. The President of the U.K. Institute of Chartered Secretaries, at a conference held at KIEL UNIVERSITY September, 19 to 21, 1968 has summarized the secretary’s duties as follows:
- Board. Briefing directors; documenting agenda; preparation of concise minutes for action purposes; arrangement for meetings (conditions and atmosphere important); progression of business between meetings; liaison with full and part-time directors; personal matters affecting directors such as service contracts; committees; composition; meetings and reports.
- Stockholders. Services in regard to notices, reports and dividend and interest payments; correspondence; information and work visits involving public relations, takeover bids; merger codes; disclosure of information including interim financial and trading statements; timely notification to stock exchange and the press analysis of shareholdings for board dissemination.
- Legal obligations – Requirements of the Companies Acts, and a multitude of other legislation concerning trade, employment, etc.
- Administrative duties. Accounting functions, general legal work in conjunction with internal legal departments and/or outside solicitors: company law administration; property valuations; negotiations and management; insurances and banking; pensions; personnel and contracts of services, clinics; medical and dental services; charitable trusts and general headquarters organization and administration.
- Outside contacts. Government departments, stock exchange, professional advisers, consultants and trade associations.
Judicial view of secretary’s position
The secretary is only a subordinate officer and he has no managerial functions. He performs such functions and exercises such powers as the Board may delegate to him, and these powers may be extensive or limited according to the terms of appointment in each case, and there is nothing to prevent their being extended to the sphere of managerial functions also. But no one entering into contractual relations with the company can assume without further enquiry that the secretary as such, has authority to make representations or do anything binding on the company.
This view, however, has been modified in Panorama Developments (Guildford) Ltd. versus Fidelis Furnishins Fabrics Ltd, by the Court of Appeal where LORD DENNING M.R., thus describes the present position of the company secretary: “Times have changed, a company secretary is a much more important person nowadays than he was in 1887.He is an officer of the company with extensive duties and responsibilities. This appears not only in modern Companies Act, but also by the role which he plays in the day-to-day business of the companies. He is no longer a mere clerk. He regularly makes representations on behalf of the company and enters into contracts on its behalf which come within the day-to-day running of the company’s business. So much so he may be regarded as having been held out as having authority to do such things on behalf of the company. He is certainly entitled to sign contracts in the administrative side of the company’s affairs, such as employing staff and ordering cars and so forth. All such matters now come within the ostensible authority of a company secretary”. SALMON, J has concurred in this judgment and emphasized that the secretary is the chief administrative officer of the company and in respect of matters concerned with administration he has ostensible authority to sign contracts and do all things within the ambit of administration.
Even in the light of this decision it cannot be assumed, in the absence of facts or special circumstances in any case, that the powers of a secretary have expanded to any extent over the area of managerial functions. Functionally, a secretary as such can only be doing secretarial duties and exercising secretarial powers. He cannot be equated with a manager whose powers and functions are distinct from those of a secretary as understood by the business world. It may be noted that his remuneration is not taken into account for purposes of calculating overall managerial remuneration under section 198 of the 1956 Act.
Duty to ensure compliance with laws
Under the scheme of the 1956 Act, it would be seen that where a company appoints a secretary, it is his duty and responsibility to see that the affairs of the company are conducted in accordance with law and the requirements of the Companies Act and other laws (tax laws, factory laws, etc.,), are duly complied with. Accordingly in all cases where for contravention of any law by the company, an officer of the company is punishable as an officer in default, the secretary will be liable. (Sections 2(59) and 2(60) of the 2013 Act for officer and officer who is in default and section 205 of the 2013 Act.)
True legal position that of agent. His true legal position is that he is an agent in the same position as any other agent of the company. If his dealings are such that the company is not bound by them, he may himself be liable as in the case of a director on the ground of breach of warranty of authority. If he does any unauthorized acts or makes unauthorized representations the company is not bound by them.
Criminal liability for non-compliance
Generally the secretary of a company is treated as a mere administrative assistant of the Board, statutes (such as labour welfare and anti-pollution) creating new criminal offences responsible for the company’s crimes to the same extent as the directors. Thus criminal law is more in accordance with reality, because the secretary is sometimes a full-time director also who is as influential in managing the company’s affairs as his fellow directors.
Illustrative cases of secretary’s role
Certain English cases have considered different aspects of a secretary’s role; these cases are being set out below:
- The knowledge of directors is in the ordinary circumstances the knowledge of the company, but the knowledge of a mere official such as the secretary, would only be the knowledge of the company if the thing of which the knowledge is secured is a thing within the ordinary domain of the secretary’s duties.
- The secretary is not liable or accountable, as the directors are, for loss which may be incurred by the company by reason of any mis-application of funds of the company even with his knowledge unless the said mis-application was due to his own fraud or negligence.
- The offices of a director and secretary are so incompatible that one and the same person cannot hold both.
- If the acts of the secretary are done within the scope of his authority, it has been laid down that the principal (i.e. the company) is liable for the fraud of the secretary acting within the scope of his authority whether the fraud is committed for the benefit of the principal or for the benefit of the agent.
Removal of secretary
The removal of a secretary by the managing director is bad when the articles of association give such power only to the Board of directors. Haryana Seeds Development Corporation Ltd. versus J.K. Aggarwal, (1989) 65 Com Cases 95 (P&H). Where the managing director of a Government company, appointed by the Governor in accordance with the company’s articles, placed the secretary of the company under suspension for initiating disciplinary proceedings, the secretary was not allowed to question the validity of the appointment of the managing director to his office. A secretary on his removal from service has no cause of action against the company on the basis of articles.
Where the directors of a company gave notice to the secretary for his removal but the notice was defective, it was held that the defect in the notice became rectified when the shareholders approved the notice of removal and, therefore, the removal was valid in law. The Cadbury Committee has suggested that removal of a secretary should be a matter for Board as a whole and that it must be observed by all Listed Companies in England.
Qualified secretary’s professional privilege
The 1956 Act distinguishes a secretary in whole-time practice’ under s. 2(45A), other than the secretary in whole-time employment of a company. A company secretary possessing the qualifications prescribed under section 2(45) of the 1956 Act is entitled to appear in proceedings before Company Law Board, as per Rule 19 of the Company Law Board Regulations, 199 1. For text of the Regulations, see Appendix 26. Several other Acts and authorities have recognized a practicing company secretary for certification of documents etc.
ICSI is an authority
The Institute of Company Secretaries of India is an “authority” within the meaning of Article 12 of the Constitution. It has a public element and therefore its actions must be guided by reason. If it refuses arbitrarily to admit a person to membership the action will be violative of Art. 14 of the Constitution and a writ petition will be maintainable against such refusal. Where a person possesses prescribed qualifications, he has a legal right to be enrolled as a member of the Institute. For One Person Company Registration in Coimbatore, kindly visit our website and feel free to contact us.. We are here to help you.. Thanks for reading!!!!