Role of Company Secretaries in compliance of Corporate Governance

19/10/2022 0 By indiafreenotes

Corporate governance is concerned with the process by which corporate companies and particularly limited liability companies are governed. Business people as well as general public expect good business ethics and effective corporate governance from the business leaders.

In the modern era of globalization, corporate governance plays an important role. It ensures that corporate managers run their businesses successfully and take care of long term interests of the stakeholders of the company. Corporate governance improves capital efficiency of companies and provides a roadmap for an entity, helping the leaders of a company in making decisions by law, benefits to stakeholders, etc.

Corporate governance is the application of best management practices, compliance of law in true letter and spirit and adherence to ethical standards for effective management of the company and distribution of wealth and discharge of social responsibility for sustainable development of all stakeholders of the company. Corporate governance rests with the vision and perception of the leadership and a leader need to adopt a vision for corporate governance.

The role of CS includes advising the Company’s Board of Directors of the Company on good corporate governance practices and compliances with the rules and regulations. The CS is a unique interface between the board as well as Company’s management and acts as a vital link between the board and the business.

Under law, CS has a critical role to play in organizing and implementing board’s decisions, its committees, general body meetings. Now with increased focus on corporate governance, the expectations of the stakeholders from the CS is increasing, and this is what has led to the rise of the importance of the role of CS.

CS as KMP: Duties related to legal compliance

It is worth mentioning here that the position of CS as the KMP (Key Managerial Personnel) comes next to that of the CEO or the MD and underlines the importance of the position of CS in the company. The Companies Act recognizes the position of CS as an officer of the company in its administration as well as legal compliance.

To ensure legal provisions of the Act, the legislature has given CS an important role in the company. Apart from this, with a view to ensure strict compliance with the provisions of the Act, Section 203 provides that every company belonging to such classes of companies should have the following whole time KMP-

  • Managing director of CEO or manager and in their absence a whole time director;
  • CS;
  • Chief Financial officer.

Need for a committee to investigate corporate mismanagement and frauds

It is reported that about 2.50 lakh companies have been identified for de-registration under the Companies Act as part of the measures against curbing menace of companies engaged in illegal activities, and out of it, about 2.2 lakh companies were struck off as they were not carrying on any business activity. 

There have been cases where the companies’ management, despite having respectable independent and representative directors from the banks, have indulged in financial frauds for the benefit of promoters/management in control, and there has been no clear policy by the central government as to how these loopholes in the system can be plugged and how the money that has been looted can be brought back to the economy.

Role of Company Secretary in Good Corporate Governance

Company secretaries all over the world have been assigned the responsibility for good corporate governance practices to be followed by the companies where they work or for their clients by the institute of company secretaries of India.

Under the erstwhile SEBI listing regulations under clause 49 there were provisions for corporate governance. Under new SEBI listing obligations and disclosure requirements there are provisions under regulation 15 to 27 there are provisions for good corporate governance.