The role of a company secretary in a Limited Corporation is to check the financial statements, advise the board on the decisions, and protect the company. In the case of an unlimited company, the liability is huge, and the shareholders accept more liability. Here the role of a company secretary is financial and ministerial. This blog reveals the case of DCHL. The Deccan Chronicle holding limited is a Newspaper Company based out of India. SEBI charged a fine of 8.20 crore to the owners of DHCL and barred them from the securities market for two years. What is the story behind this process? The issue highlights two matters. One is about the company profile, and the other is about the responsibility of a company secretary. Mr V. Shankar is the company secretary of DCHL. He signed the public announcement made by the company regarding the buyback of securities.
What is the penalty to authorities?
Market regulator, SEBI, charged V.Shankar, the company secretary, with a penalty of ten lakhs by the regulator. The books show the violations from 2008-09 and 2011-12. The promoters and directors of DCHL are imposed with a penalty. The other parties of the company are T.Venkattram Reddy and PK Iyer. They are the chairman and vice-chairman. The penalty amount to them is 1.30 crore. The company understated the loan amount, overstated the profit amount and without ample reserve, they opted for a buyback of shares. The official authorities handle the financial statements and public announcements of the company. These authorities are qualified professionals. From the perspective of the investor, misleading information is unfair. They believe that the officials will provide the real picture of the company. The business owners Reddy, Ravi Reddy and Iyer were unable to disclose their shareholding details. The lack of transparency raises many related questions.
Argument from SAT:
The Securities appellate tribunal (SAT) argued the problem with supporting sections. The substantial acquisition of shares and takeovers regulation, 2011 instructs about the disclosures and announcements. Mr Shankar, the company secretary, filled a case with SAT to examine the issue with sections. He mentioned sections 68, 77, and 215 (sub-clause 3) and the buyback of securities regulation, 1988. The job profile of Mr Shankar is a compliance officer. He was handling the redressal process of investors. So, the stance of Mr Shankar says that his job is ministerial. His job profile is not financial. SAT accepted the argument. The role of the company secretary depends upon the nature of the company and the facts behind the issue. Company secretaries are not responsible for misleading financial information from the company.
Financial role of a company secretary:
Private limited companies, public companies, listed companies, and unlisted companies with a paid-up share capital of above ten crores should appoint a company secretary. The following points interpret the functional or financial power of a company secretary:
• Section 205 of the companies act says that he takes care of compliance and report about the changes to the board of directors.
• The company secretary does the functions instructed by the board of directors.
• Facilitate the meetings for the board, committee and the general public. They maintain the minutes of the meeting.
• Company secretaries make important decisions and get approval from the board members, directors, government and other authorities of participation.
• Advise the best practices and government expectations to the board.
• He takes care of internal regulations.
• He communicates the decision taken in the board meeting.
• He takes the responsibility of maintaining the company’s common seal.
Ministerial role of a company secretary:
• The CS foundation subjects explain the role of a company secretary as a professional who demonstrates intelligence and emotional quotient.
• Section 143 of the companies act explains that the company secretaries need to bring the fraud activity to public notice and central government.
• If the amount of fraud is less, the matter goes as a report to the audit committee.
• The audit committee will take the matter to the notice of the central government.
• Company secretaries working for a company have no right to monitor the e-voting of the shareholders. Company secretaries practising has the right to monitor the e-voting process.
• After gaining fifteen years of experience, the company secretary has the right to work in the company law tribunal as a technical member.
• During liquidation, a company secretary can work as a liquidator or assist the tribunal in completing the duties.
• Company secretaries have the authority to represent the securities appellate tribunal. They can work under SEBI regulatory body.
• A practising company secretary has the power to issue the certificate regarding the reconciliation of share capital, capital in dematerialized form, changes in the share capital, and listed capital, and gets approval from the stock exchanges.
• A practising company secretary should issue the following certificates after checking: transfer of securities, maintenance of asset cover, compliance of corporate governance, compliance certificate for performing in the BSE platform, a certificate for allotment of shares, insurance of securities, and certificate for the offer to the public. The certificate is for investors ranging from 49 to 200 numbers.
• For LLP companies with more than five crores of turnover, a practising company secretary must provide the certificate after checking the books of accounts.
• A practising company secretary can represent the company operating in a special economic zone.
• A company secretary in practice has the authority to be a representative for telecom disputes. He can provide his insights to the telecom dispute settlement and appellate tribunal.
• A practising company secretary can appear in form of a competition appellate tribunal as a representative.
Conclusion:
A company secretary doing a job has more duties linked with the financial and functional aspects. A practising company secretary has more duties linked with the ministerial aspect. Experience and knowledge separate the power of a company secretary.
