A member of the ICSI not in any employment is entitled to practice after obtaining a Certificate of Practice from the Institute. Under the Companies Act, 2013, there are different sets of provisions related to the role of Company Secretary with the Company or the firm. The new companies act increases the attachment of a CS with the organizations by providing 2 ways of attachment. These are Company Secretary in Employment and Company Secretary in Practice. Hence, we can see or observe two different roles played by the CS according to their attachment with the organization.
Company Secretary in Employment
A Company Secretary in Employment is the attachment of the CS with the organization through an agreement of employment.
The Companies Act, 2013 provides certain guidelines for a certain class of the organization to appoint a CS. The Act recognizes him as a Key Managerial Personnel (KMP) along with Chief Executive Officer, Manager, Managing Director, Whole Time Officer, and Chief Financial Officer.
Every Listed Company and other public companies (of which paid-up share capital exceeds Rs.10 crore) need to appoint a whole time key-managerial personnel. It is covered under Rule 8.
Companies other than covered under Rule 8 have to appoint a whole time key managerial personnel. It happens only if their paid-up share capital exceeds Rs.5 crores.
Company Secretary in Practice
Firstly, Section 2(25) of the Companies Act, 2013 defines the term “company secretary in practice” which means a company secretary who is in practice under sub-section (2) of section 2 of the Company Secretaries Act, 1980.
Then Section 2(2) states that CS in practice means any member of the institute who does not work under any agreement. Hence, he works either as an individual or in partnership. The role, as well as the authority level of the CS under practice, is more than the CS in employment.
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Major Responsibilities of Company Secretary in Practice
1. Firstly, Promotion, formation, and incorporation of companies and related matters
2. Secondly, Representing on behalf of a company and other persons before NCLT
3. Thirdly, Handling Corporate Restructuring and takeover
4. Administrator in respect of rehabilitation and revival of sick companies
5. Provide Professional assistance to Company Liquidator
6. Secretarial Audit and Certification Services
7. The signing of Annual Return
8. Lastly, Pre-certification and e-filing of various e- forms
Major Need for Company Secretary in Practice
The need for CS in Practice has increased over a period of time. This is because of the various provisions under various acts. There are 2 major elements which increase the need for CS in Practice. These 2 elements are:
1. Annual Return
The annual return is the snapshot of certain company information as they stood on the close of the financial year. In case of a non-listed company, an annual return has to be signed by a CS in Employment and Director of the company. If the company has not employed any CS then it is signed by CS in Practice.
In Case of Listed Companies, even if the annual return is signed by the CS in Employment, it is to be certified by a CS in Practice. Company Rules 2014 states that this rule is applicable to listed companies only if their:
(a) Paid-up share capital is more than Rs.10 crores
(b) Turnover is more than Rs.50 crores
2. Secretarial Audit Report
Secretarial Audit is an audit to check compliance of various legislations including the Companies Act. Companies Act, 2013 states that every listed company and other class of companies need to submit a Secretarial Audit Report along with the Board Report which is certified by a CS in Practice. This report is submitted in form MR 3. Other classes of companies include those companies of which:
(a) Firstly, Paid-up share Capital exceeds Rs.50 crores; and
(b) Secondly, Turnover exceeds Rs.250 crores
Though there is equal importance of both CS in employment and CS in Practice, both have their own advantages and disadvantages. Let’s discuss the advantages and disadvantages of both of them.
Evaluation of CS in Employment
|Advantages of CS in Employment||Disadvantages of CS in Employment|
|Firstly, it is the highest post in the organization which is a dream for many managers.||Firstly, the income is stable and is not proportional to the increase in the revenue of the organization.|
|Secondly, under this steady growth is available without any risk.||Secondly, the agreement binds the functioning of the CS.|
|Thirdly, It does not involve any initial investment.||Thirdly, the area of specialization is not a choice in the job.|
Evaluation of CS in Practice
|Advantages of CS in Practice||Disadvantages of CS in Practice|
|Firstly, he is free to select his area of specialization.||Firstly, income is not constant and subject to market risks.|
|Secondly, his functional area is not fixed by any agreement.||Secondly, the laws are not strict decreasing their demand.|
|Thirdly, his income is directly proportional to the revenue of the firm.||Thirdly, it requires a complex skill set along with knowledge related to CS, like promotion and marketing skills to attract clients.|
Solved Question on Company Secretary in Practice
Question: What are the major Responsibilities of Company Secretary in Employment?
Solution: The following are the major responsibilities:
1. Firstly, To assist the Board of Directors
2. Secondly, To comply with the various law-related provisions
3. Thirdly, To ensure that the company complies with secretarial standards