Strange though it may sound in the midst of a global financial crisis, the government is working on a plan that would enable over half the corporate firms to do away with the statutory need for a full-time company secretary.
As companies struggle to find such professionals, who are in acute short supply, the corporate affairs ministry seeks to address the problem by bringing in a legislative change, a move that has raised the hackles of apex body of company secretaries ICSI.
Taking a cue from past experiences, the ministry is proposing changes in the Companies Act, 1956, to exempt firms with an equity capital of less than Rs 5 crore from having a full-time company secretary, a move that would benefit over 16,000 registered firms.
The changes coincide with the global crisis, which was triggered mainly due to the financial sector letting its guard fall in business transactions in the West, evoking a worldwide call for greater accountability and corporate governance.
A company secretary co-ordinates among departments of a firm to ensure compliance with legislative and statutory needs.
Of the more than 31,000 firms with an equity base of more than Rs 2 crore, about 15,000 firms have a share capital of Rs 5 crore and more, a ministry official said, adding that only the latter segment would need to have CSs on board.
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If the proposed changes come through, demand for company secretaries in the country will come down. On current estimates there are about 20,000 such professionals in India.
But ICSI President Keyoor Bakshi is strongly opposed to the government move, saying that there was a greater need for such professionals in smaller enterprises to ensure against any corporate wrongdoing.
“We don’t want the limit to be enhanced right now. Large companies are properly governed, it is the small and medium size companies which need good governance,” Bakshi said.
The ministry had earlier relaxed the norms for hiring a full-time company secretary. Companies with an equity base of Rs 25 lakh or more were required to have such professionals on board; subsequently the threshold was raised to Rs 2 crore.
“We will write to the government requesting (it) not to raise the limit right now. With the economic slowdown, it may not be the right time for such a decision,” Bakshi said.
He said as far as the shortage of company secretaries is concerned, the institute has seen an increase in the number of applications this year, with enrolment increasing by 50 per cent this year. Over two years, the gap will be filled, Bakshi said.
Currently there is a huge gap between the availability of company secretaries and firms’ demand for them. There are 19,582 qualified members of the Institute of Company Secretaries of India (ICSI), of which not even 50 per cent are in employment.
The Companies Act, 1956 [Section 383 (A)] says: “Every company having (a) paid-up capital of Rs 2 crore shall have whole-time secretaries and where the Board of directors of any such company comprises only two directors, either of them shall be the secretary of the company.”