FUNCTION OF COMPANY SECREYARY

October 30, 2022

INTRODUCTION

The existing Companies Act, 1956 (the Act) in India (as also the Companies Act, 1985 in England) do not list out the functions of the secretary, there have been attempts over the last decade or so to include the same in the Act. The Companies (Amendment) Bill, 2003 and the Concept Paper on Company Law introduced in 2004 are among the most recent attempts. Any attempt at modernizing the Company Law to make it contemporaneous with the present milieu will be incomplete unless the functions and role of the secretary are defined and laid out in the statute book.

He is an individual, appointed to perform the duties which are to be performed by the Secretary under the Companies Act. He may perform ministerial and administrative duties. He must possess the prescribed qualifications.

PRESENT POSITION IN LAW

According to Section 2(45) of the Companies Act, 1956, “Secretary means any individual possessing the prescribed qualifications, appointed to perform the duties which may be performed by a secretary under this Act and any other ministerial or administrative duties”.

K A Krishna v. Indo Union Assurance Co Ltd. (1944)

The secretary as a servant of the company is bound to carry out the duties assigned to him.

Barnett Hoare’s & Co v. South London Trans ways Co. Newlands v. National Employers, etc. Association (1885) OR Diwan Chand v. Gujranwala Sugar Mills Co (1937)

A secretary as such has no authority to bind the company by contract or to make representations as to the company’s affairs, so as to induce people to take shares.

Newlands v. National FA Assurance Co.

The secretary of a company has no general authority to make representations to induce persons to take shares in a company; so that a person who is induced to take shares in a company by a fraudulent misrepresentation, not authorized by or known to the officers of the company is not entitled to maintain an action against the company for the recission of the contract, or for damages for such misrepresentation.

Chinda Mines v. Anderson (1905) OR Re Indo China Steam Navigation Co. (1917)

A secretary has no authority to register a transfer until it is passed by the company’s directors.

George Whitechurch v. Cavanagh

He can certify a transfer, but if he does so fraudulently, the company will not be liable.

Lakshmi Ratan Cotton Mills Co Ltd. v. Aluminum Corp of India Ltd. AIR 1971 SC

Ordinarily the functions of a secretary would be ministerial and administrative, and he would have no authority to bind the company by entering into contracts or other commitments on its behalf.

Status—–

A Company having 25 lakhs paid up capital or above, must have a secretary. He is a full-time paid Executive officer. The courts have held that the Secretary is not a humble servant as was understood earlier. He is not a clerk. He is a very important person, with extensive duties and responsibilities e.g. He may hire cars for the administrative purposes of the Company.
The Companies Act, 1956, imposed certain statutory obligations on the secretary of a company but law does not define his exact position. From the nature of functions performed by a secretary, we can have some idea about the legal position of a Company Secretary. According to the law of the land, a secretary is merely a servant of the company working under full control of the Board of Directors of the company.
He will carry out the orders given to him by the Directors. But since the judgment of Lord Escher in 1887, everything has changed. Legal position of the Company Secretary has completely changed. Today a secretary occupies a very important position in the administrative setup of the company. He is an officer of the company with extensive duties and responsibilities.
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 that he may be regarded as having authority to do such things on behalf of the company.
Companies Act also regards him as the principal officer of the company who is personally responsible for filing various returns to the Registrar of Companies. The legal status of the secretary has been described as a servant of the company but the actual position is much more than a servant.
It is the duty of the Company Secretary to execute the policy decisions of the Board of Directors. He plays an important role in the administrative work of the company. As a man on the spot, he has to take quick decisions on many routine matters. As the Chief Executive Officer of the Company, he has tremendous influence on the Directors and gives valuable advice in the policy decisions of the Board of Directors.
Since the Directors are fully busy with the development of business, they have no time to deal with shareholders, staff, and the public. The secretary communicates the decisions of the Board of Directors to the staff, shareholders, and the public. Here the secretary is the liaison officer between the Directors and others.
As the secretary has a sound knowledge of the Companies Act, the Board of Directors seek expert advice from him. The secretary has to convene and conduct all meetings of the company. He will prepare the agenda and send notice to all concerned and help the Chairman of the meeting in conducting the meeting.
The Directors act as the brain of the company because they frame the policy of the company. But in framing the policy decisions of the company the Directors have to depend heavily on the secretary. It is rightly said that while the Directors are the brains of the company, the secretary is its ears, eyes and hands.

In Panorama Development Co. case:

P was running car-hire business. D’s Company Secretary hired them saying that the cars were to meet the customers, but he used them for his own purposes it was held that hiring the Cars was essential part of his functions and is within his ostensible authority.

He is the Chief Administrative Officer. He has ostensible Authority to sign contract on behalf of the Company. He cannot borrow on behalf of the Company. Thus, where a director paid advances to the Company on the request of the Secretary, it was held that the Company was not liable. He can call meetings and carry-on administrative functions as per the A/A.

Liability—-

The Secretary is liable like a director of the Company.

Role of a Company Secretary—-

Company secretaries are the building blocks of companies, and they must carry their duties with reasonable care. In addition to the role as legal mentor, CS must ensure that all business processes comply with all legal requirements; failure to comply may result in liability for wrongdoing and termination for dishonesty or violation of the Company’s legal rights.

ADDITIONAL DUTIES—

In addition, the Guidance Note also lists out certain additional duties of the Company Secretary. These are as follows:

Legal Commercial law,
Intellectual property
Pensions law
Contracts negotiation
Litigation Data protection
Contract drafting, Conveyancing, Consumer credit
Contract vetting
Property management
European Community law

REFERENCE—

Aishwarya Says:

Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.

IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

We do conduct several Courses, Quizs and Webinars, Click here to register

Do follow me on Facebook, Twitter Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at secondinnings.hr@gmail.com

Join our Whatsapp group for Legal Job Openings

October 30, 2022