There is strict compliance under the Companies Act 2013 as penalties are heavy for violations, feels R Sridharan, president of The Institute of Company Secretaries of India (ICSI). In an interview with FE, which is the Print Media Partner for the 42nd national convention of company secretaries, Sridharan said this is the first time when functions of a CS professional have been clearly defined and under the new Act, the professionals can play multiple roles. Excerpts:
What is ICSI?s take on the new Companies Act?
The Act is good for the profession. It has opened many areas to company secretaries ? as a key managerial person, an internal auditor, valuer. There is strict compliance under the Act because penalties are heavy compared to the Companies Act, 1956.
Will there be any functional change of ICSI with the new Act coming into force?
?Company secretaries? defined under the Companies Act, 1956 and 2013 has the same definition ? one is the definition of company secretaries and the other is company secretaries as key managerial personnel. The two aspects have been covered under the new Act. The key functional changes for members of ICSI under the new Act are that company secretaries have been elevated as key managerial personnel. But the key managerial personnel are not applicable for all companies; they are applicable for listed companies and all other companies which have paid up capital of R 10 crore and above. The same sections have made it mandatory for appointment of a CS in a company which has paid up capital of R5 crore and above. This is the first time that functions of a CS have been defined under a new section. The new Act focuses on the functions, including advising the board and ensuring governance. About nine functions are specified specifically for a CS.
Many provisions of the Companies Act, 2013, have come into force from April 1, 2014, and have provided for wide ranging changes in the way corporates are governed in the country. Do you think India Inc in the last four months has been working in a direction to bring changes in corporate governance?
The new Act is basically focussing on governance and self-regulation. If you see the vision and mission statement of our institute, the vision is to be a global leader in promoting good corporate governance and the mission is to develop high-calibre professionals for facilitating good corporate governance. We have been doing it for the last 12-14 years. Even though we are company secretaries, we are responsible for ensuring governance is in place in the corporate world. The thinking of the present government is also in line with the vision and mission statement of our institute.
Industry bodies have been complaining that the new Act is unclear and could make things worse. How would you react to such opinions?
I disagree with the question posed before me. The Companies Act, 2013, has been introduced after prolonged deliberations with various chambers of commerce and institutional bodies. It was put up for public comments for quite some time. The feedback from various stakeholders across the country has been received and suggestions given by them have also been accepted by the standing committee which was looking into the Companies Bill, 2013. The majority of representations from the public have also been considered by the ministry of corporate affairs before making the rule mandatory. I don?t think there is any issue related to compliances and the penalties are also stringent. I think all sections are manageable. For a few sections there are operational difficulties, but the government has agreed it will look into that.
What is your take on the specialised tribunal (NCLT) proposed in the new Companies Act to deal with corporate law?
I think it is too early to comment on NCLT. But our professionals will play a major role as far as liquidation, merger and demerger is concerned. Our members are competent to get into those areas.
What larger role can ICSI play in the current economic scenario?
While a CS is a compliance officer, he/she is also a governance officer. The thinking of the government is also less government and more governance. So it is clearly aligning with our profession. In the current economic scenario, a CS will play a major role.
What is the objective of the 42nd national convention?
The challenge for company secretaries is to cope with the speed at which changes are taking place. We thought we should make the members aware that they should take the new Act very seriously.