Can a Company Secretary become a CEO?

Introduction

In a company, the administration, management, and executive departments contain multiple members acting in key managerial positions; each of them have significant roles and responsibilities and are expected to exert them efficiently. Company secretaries are among the key managerial personnel who handle the company’s administrative and legal affairs. All prescribed class or classes of companies are demanded to have a company secretary to discharge certain pivotal functions. The Indian Companies Act, 2013 defines a company secretary under section 2(24), which states that the expression “secretary” means a company secretary within the meaning of section 2(1)(c) of the Company Secretaries Act, 1980 and includes any other professional individual possessing the prescribed qualification and appointed to perform the duties which may be performed by a secretary under this act and any other ministerial or administrative duties.

In the 1988 amendment, a reformed definition was also made, which introduce the concept of “Secretary in whole-time practise”, which means a secretary who shall be deemed to be in practice within the meaning of section 2(2) Company Secretaries Act, 1980.

As per section 2(1)(c) of the Company Secretaries Act of 1980, a company secretary means a person who is a member of the Institute of Company Secretaries of India. In general, a company secretary is a designated officer of a corporation responsible for its official documents; they will look into the company’s legalities and the document. They are meant to ensure the efficiency of administration in the company and its compliance with legal obligations. The Board of directors directly appoints them to deal with the legal and administrative matters by holding a secretarial position for the Board of directors.

The executive and the legal wing of business in different countries employ a company secretary to handle the records of the shares, the bylaws of the company, meeting agendas, minutes of the meeting, reports of various committees within and outside the corporation.

They neither become part of line management in the corporation nor a board member. However, they form an essential role within the company management, focusing on the companies components with the statutory and regulatory requirements and making sure that the company implements the board decisions effectively. They must exert attributes such as commitment, governance expertise, solid judgements, effective communication and planning, efficient organizational behaviour and proper detailing and reporting of the company management affairs.

Within the purview of Indian company law, a company secretary is considered critical managerial personnel within the corporation; they hold office as prescribed by the company’s directors, which is purely dependent on their appointment letter stating the tenure and reasons for cessation. As per the Companies Act 2013, the following corporations appoint a company secretary;

1. Every listed company
2. Every other public company having a paid-up capital share capital of ten crore rupees or more
3. Every private company which has a paid-up share capital of ten core rupees or more shall have a whole-time Company Secretary

(within these companies, they are considered to be key managerial personnel)

Company Secretary as one of the Key Managerial Personnel

As per section 203 of the Companies Act, 2013; Every listed company and every other public company having paid-up share capital of ten crore rupees or more shall have the following whole-time key managerial personnel—

1. Managing director, or Chief Executive Officer, or manager, and in their absence, a whole-time director;
2. Company Secretary; and
3. Chief Financial Officer

Provided that an individual shall not be appointed or reappointed as the chairperson of the company, as well as the managing director or Chief Executive Officer of the company at the same time unless—

1. the articles of such a company provide otherwise; or
2. the company does not carry multiple businesses.

Every whole-time key managerial personnel of a company shall be appointed through a resolution of the Board containing the terms and conditions of the appointment, including the remuneration. They shall not hold office in more than one company except in its subsidiary company at the same time. However, they were having then, within six months from such commencement, choose one company in which he wishes to continue to hold the office of Key managerial personnel if the office of any whole-time key managerial personnel is vacated. In that case, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within six months from the date of such vacancy.

Characteristics of a Company Secretary

The following are some of the characteristics of a company secretary;

1. act as a primary contact toll for the board members providing them knowledge on the company affairs internally and externally
2. ensure the legal compliance and regulatory norms of the articles of association by the management
3. prepare and provide the necessary materials for the general meeting, such as the agendas, the minutes of the meeting, the resolutions passed etc.
4. possess immense knowledge and experience to assist the committees within the management by ensuring effective procedures
5. organized and effective in dealing promptly with the crisis and fallouts of the company management with sharp decision-making skills
6. possess good judgement skills, a good eye on details, networking skills and mentoring skills.

Duties and Responsibilities of a Company Secretary

A company secretary is considered a governance officer who plays a significant role in the emergence of corporate governance within the company management; they are given paramount importance in compiling this with the company’s corporate governance norms internally and externally. The corporation’s entire legal management will be taken care of by the company secretaries who manage and administer various legal issues such as contractual obligations, employed remuneration, audit accounts, registration process, appointment, and legal proceedings in the court of law.

The Cadbury committee of the United Kingdom, which was formed in 1992 to look into the corporate governance affairs of the companies, stated that “company secretaries are essential officers in the company who deals with legal and administrative duties and is answerable to the board of directors, therefore they are considered as the pillars of corporate governance.” They share a fiduciary relationship with the company’s shareholders and advise the directors and non-executive members in policy-making and decision-making.

1. Coordinate with the Board to convene board meetings, prepare agenda, circulate notice, manage proxies, read reports and correspondence in the meeting, maintain register et cetera
2. Within the scope of administration, they play the role of the administrator in handling finances, company properties and assets, corporate records et cetera
3. Internally the coordinate with the board members, managing directors, trade unions, various committee members, auditors, intermediaries, and other employees
4. Externally they handle the relationship between various shareholders, government organizations and other investment agencies
5. They assist in framing company policies, their amendment, its implementation in the management, and perform analysis for future modifications through assimilation of information
6. The company secretary supervises the following legal requirements;
   1. Listing agreements
   1. Company registration
   1. Dispute resolution
   1. Grievance redressal
   1. Stock exchange matters
   1. Executing contracts
   1. Passing resolutions
   1. Lawsuits in the name of the company
   1. Nondisclosure agreements
   1. Payment schedules and deliverables

Functions of company secretary as per Section 205 of the Companies Act 2013

• report to the Board about compiling this with the provisions of the act, its rules and other laws applicable to the company.
• ensure that the company compiles complies with the applicable secretarial standards (Secretarial standards issued by the Institute of company secretaries and approved by the central government).
• discharge such other duties as may be prescribed

Elevation of Company Secretary Position

The decision of the English court in the case of Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd[1] states as follows:

 “But times have changed. A company secretary is a much more important person nowadays; he is an officer of the company with extensive duties and responsibilities. This appears not only in the modern Companies Act but also in the role which he plays in businesses. He is no longer a mere Klerk; he regularly makes the presentations on behalf of the company and enters into a contract on its behalf, which comes within the date-to-day running of the company’s business. So much so that he may be regarded as held out as having authority to do many things on behalf of the company. It is certainly entitled to sign contracts connected with the administrative side of the companies affairs, such as employing staff, and ordering cars, and so forth. All such matters now come within the ostensible authority of a company secretary.”

These observations made by the court of law have certainly elevated a company secretary’s position from being a mere member of the company to an administrative officer. It also clarifies that the administrative duties can also be assigned to Secretary through a legislative recognition subject to certain limitations. They cannot usurp the functions and powers of the Board of directors or the company management; however, due to enormous growth of the company and its activities, has empowered the companies Secretary to act more comprehensively and perform duties as an authorized agent through statutory powers like signing the annual returns, entering into contracts etc

Can a Company Secretary Become a CEO

The US Legal defines CEO as “A chief executive officer of a corporation is the officer responsible for carrying out the strategic plans and policies established by the Board of directors. In a corporation, the chief executive reports to the Board of directors. In the form of business that is usually without a board of directors (sole proprietorship, partnership, etc.), the “chief executive officer” is typically the member that sets the direction and oversees the operations of an organization.”

A company secretary or otherwise a corporate secretary is an officer of the company having a senior position in private and public organizations, usually a managerial or administrative position or above. A corporate secretary is responsible for the efficient administration of a company. They must ensure that statutory and regulatory requirements are complied with by the company and its directors.

Both the company secretary and the chief executive officer have similar roles; they manage the corporation’s affairs internally and externally. From analyzing both their positions it is an undebattble fact that a company secretary can become a Chief executive officer, to justify the same, the following tabulation will show the critical comparison of the roles and responsibilities of both positions:

Conclusion

Both the authorities have similar standpoints in corporation affairs; they possess roles and responsibilities on par with each other. Though the chief executive officer is positioned at a top-rank within the company and the company secretaries being considered the most underrated member of the company, their roles ans responsibilities have great value within the company. Since the company secretary’s various traits are similar to that of the chief executive officer in terms of position, responsibility, control, appointment, characteristics, standpoint and operation, a company secretary can indeed become the chief executive officer. Elevating the company secretary’s position from a most underrated actor of company to the administrative head will allow them to qualify for the position of the chief executive officer of the company to undertake its managerial affairs.

References:

[1] (1971) 2 QB 711

[2] Mohan Lal Mittal v Universal Wires Ltd, (1983)