LEGAL FRAMEWORK GOVERNING COMPANY SECRETARIES

LEGAL FRAMEWORK GOVERNING COMPANY SECRETARIES

Introduction – Evolution of Company Secretary as a Profession

Who is Company Secretary?
According to Section (2)(1)(c) of CS Act, 1980,

  • Company Secretary means a person who is a member of the Institute of Company Secretaries of India.

According to Section (2)(24) of Companies Act, 2013,

  • Company Secretary’ or ‘Secretary’ means a Company Secretary as defined in Section 2(1)(c) of the Company Secretaries Act, 1980, who is appointed by a company to perform the functions of the Company Secretary under the Companies Act, 2013.

Functions of Company Secretary [Section 205 of Companies Act, 2013]
The functions of the company secretary shall include,—

  • to report to the Board about compliance with the provisions of this Act, the rules made thereunder and other laws applicable to the company;
  • to ensure that the company complies with the applicable secretarial standards;
  • to discharge such other duties as may be prescribed under Rule 10 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Duties of Company Secretary [Rule 10 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014]
The duties of Company Secretary shall also discharge, the following duties, namely:-

  • to provide to the directors of the company, collectively and individually, such guidance as they may require, with regard to their duties, responsibilities and powers;
  • to facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these meetings;
  • to obtain approvals from the Board, general meeting, the government and such other authorities as required under the provisions of the Act;
  • to represent before various regulators, and other authorities under the Act in connection with discharge of various duties under the Act;
  • to assist the Board in the conduct of the affairs of the company;
  • to assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices; and
  • to discharge such other duties as have been specified under the Act or rules; and
  • such other duties as may be assigned by the Board from time to time.

Membership in ICSI

Associate Members (ACS)

Fellow Members (FCS)

Initially, after completing required qualification and training and after satisfying all other requirements, every person becomes Associate Member of ICSI.

Such person is entitled to use the letters A.C.S.

An ACS can become FCS only

  • In case of PCS: If he/she continuously practice in India as a Company Secretary for at least 5 years.
  • In case of CS in Job: If he/she continues to be an ACS for at least 5 years and possesses such qualifications or practical experience as the Council may prescribe 

Scope of a Company Secretary
After becoming the member of ICSI, a CS may opt

  • to join job as a Company Secretary or
  • to work as a Company Secretary in Practice.

To work as a Company Secretary in Practice, Certificate of Practice (COP) is required along with membership number.

Who is Company Secretary in Practice?
Company Secretary in Practice means a CS having COP who provides his/her professional services to the clients. He can work individually (as a sole proprietor) or in association (partnership) with other company secretaries/professionals (like CA, CMA).

Deemed to be in Practice
A member of the Institute shall be deemed “to be in practice” when, individually or in partnership with one or more members of the Institute in practice or in partnership with members of such other recognised professions as may be prescribed, he, in consideration of remuneration received or to be received,—

  1. engages himself in the practice of the profession of Company Secretaries to, or in relation to, any company; or
  2. offers to perform or performs services in relation to the promotion, forming, incorporation, amalgamation, reconstruction, reorganisation or winding up of companies; or
  3. offers to perform or performs such services as may be performed by—
    • an authorised representative of a company with respect to filing, registering, presenting, attesting or verifying any documents (including forms, applications and returns) by or on behalf of the company
    • a share transfer agent,
    • an issue house,
    • a share and stock broker,
    • a secretarial auditor or consultant,
    • an adviser to a company on management, including any legal or procedural matters
    • issuing certificates on behalf of, or for the purposes of, a company; or
  4. holds himself out to the public as a Company Secretary in practice; or
  5. renders professional services or assistance with respect to matters of principle or detail relating to the practice of the profession of Company Secretaries; or
  6. renders such other services as, in the opinion of the Council, are or may be rendered by a Company Secretary in practice;

Register of Members of ICSI [Section 19 of CS Act, 1980]
The Council shall maintain in the prescribed manner a Register of the members of the Institute. The Register shall include the following particulars about every member of the Institute, namely:—

  • his full name, date of birth, domicile, residential and professional addresses;
  • the date on which his name is entered in the Register;
  • his qualifications;
  • whether he holds a certificate of practice; and
  • any other particulars which may be prescribed.

The Council shall cause to be published in such manner as may be prescribed a list of members of the Institute as on the 1st day of April of each year, and shall, if requested to do so by any such member, send him a copy of such list on payment of such amount as may be prescribed.

Every member of the Institute shall, on his name being entered in the Register, pay such annual membership fee as may be determined, by notification, by the Council, which shall not exceed Rs. 5000

But Council may with the prior approval of the Central Government, determine the fee exceeding Rs. 5000 which shall not in any case exceed Rs. 10,000.

Removal from the Register [Section 20 of CS Act, 1980]
The Council may remove from the Register the name of any member of the Institute—

  1. who is dead; or
  2. from whom a request has been received to that effect; or
  3. who has not paid any prescribed fee required to be paid by him; or
  4. who is found to have been subject at the time when his name was entered in the Register, or who at any time thereafter has become subject, to any of the disabilities mentioned in section 8, or who for any other reason has ceased to be entitled to have his name borne on the Register.

The Council shall remove from the Register the name of any member in respect of whom an order has been passed under this Act removing him from membership of the Institute.

Disabilities [Section 8 of CS Act, 1980]
A person shall not be entitled to have his name entered in, or borne on, the Register if he—

  • has not attained the age of 21 years at the time of his application for the entry of his name in the Register; or
  • is of unsound mind and stands so adjudged by a competent court; or
  • is an undischarged insolvent; or
  • being a discharged insolvent, has not obtained from the court a certificate stating that his insolvency was caused by misfortune without any misconduct on his part; or
  • has been convicted by a competent court whether within or without India,
    • of an offence involving moral turpitude and punishable with imprisonment or
    • of an offence, not of a technical nature, committed by him in his professional capacity unless in respect of the offence committed he has either been granted a pardon or, on an application made by him in this behalf, the Central Government has, by an order in writing, removed the disability; or
  • has been removed from membership of the Institute on being found on inquiry to have been guilty of professional or other misconduct

Disciplinary Mechanism against Misconduct by Company Secretaries

Disciplinary Directorate [Section 21 of CS Act, 1980]
The Council of ICSI has established a Disciplinary Directorate headed by an officer of the Institute designated as Director (Discipline) and such other employees for making investigations in respect of any information or complaint received by it.

Action by Director (Discipline) on receipt of information/complaint
On receipt of any information or complaint, the Director (Discipline) shall arrive at a prima facie opinion on the occurrence of the alleged misconduct.

If the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the First Schedule

He shall place the matter before the Board of Discipline

Where the Director (Discipline) is of the opinion that a member is guilty of any professional or other misconduct mentioned in the Second Schedule or in both the Schedules

He shall place the matter before the Disciplinary Committee.

Withdrawal of Complaint
Where a complainant withdraws the complaint, the Director (Discipline) shall place such withdrawal before the Board of Discipline or as the case may be, the Disciplinary Committee, and the said Board or Committee may, if it is of the view that the circumstances so warrant, permit the withdrawal at any stage.

Where Director (Discipline) is of the opinion that there is no prima facie case
The Director (Discipline) shall submit before the Board of Discipline all information and complaints where he is of the opinion that there is no prima facie case and the Board of Discipline may,

  • if it agrees with the opinion of the Director (Discipline), close the matter or
  • in case of disagreement, advise the Director (Discipline) to further investigate the matter.

Board of Discipline [Section 21A]
The Council has constituted a Board of Discipline consisting of–

  • Presiding Officer – a person with experience in law and having knowledge of the disciplinary matters and the profession;
  • Two members
    • one of whom shall be a member of the Council elected by the Council and
    • the other member shall be the person designated under section 16(1)(c) [an officer of the Council or the Institute to carry out the administrative functions of the Institute as its chief executive];
  • Secretary of the Board – Director (Discipline).

The Board of Discipline shall follow summary disposal procedure in dealing with all the cases before it.

Where the Board of Discipline is of the opinion that a member is guilty

Circumstances

Order by Board of Discipline after giving reasonable opportunity of being heard

Where the Board of Discipline is of the opinion that a member is guilty of a  professional or other misconduct mentioned in the 1st Schedule

Any or all of the following

  • reprimand the member;
  • remove the name of the member from the Register up to a period of 3 months;
  • impose such fine as it may think fit which may extend to Rs. 1 lakh.

Disciplinary Committee [Section 21B]
The Council has constituted a Disciplinary Committee consisting of

  • Presiding Officer – the President or the Vice-President of the Council and
  • Two members to be elected from amongst the members of the Council and
  • Two members to be nominated by the Central Government from amongst the persons of eminence having experience in the field of law, economics, business, finance or accountancy

Council may constitute more Disciplinary Committees as and when it considers necessary.

Where the Disciplinary Committee is of the opinion that a member is guilty

Circumstances

Order by Disciplinary Committee after giving reasonable opportunity of being heard

Where the Disciplinary Committee is of the opinion that a member is guilty of a professional or other misconduct mentioned in the Second Schedule or both the 1st Schedule and the 2nd Schedule

Any or all of the following:

  • Reprimand the member;
  • Remove the name of the member from the Register permanently or for such period, as it thinks fit;
  • impose such fine as it may think fit, which may extend to Rs. 5 lakhs.

Appeal against decision of Board of Discipline and Disciplinary Committees [Section 22E]
Appeal by Member within 90 Days
Any member of the Institute aggrieved by

  • any order of the Board of Discipline or the Disciplinary Committee imposing on him any of the penalties,

may within 90 days from the date on which the order is communicated to him, prefer an appeal to the Authority

Appeal by Director (Discipline) within 90 Days
Director (Discipline) may also appeal against the decision of the Board of Discipline or the Disciplinary Committee to the Authority if so authorised by the Council, within 90 days.

Appeal after 90 days
The Authority may entertain any such appeal after the expiry of the said period of 90 days, if it is satisfied that there was sufficient cause for not filing the appeal in time.

Order by Authority
The Authority may,

  • after calling for the records of any case,

revise any order made by the Board of Discipline or the Disciplinary Committee and may —

  • confirm, modify or set aside the order;
  • impose any penalty or set aside, reduce, or enhance the penalty imposed by the order;
  • remit the case to the Board of Discipline or Disciplinary Committee for such further enquiry as the Authority considers proper in the circumstances of the case; or
  • pass such other order as the Authority thinks fit.

Provided that the Authority shall give an opportunity of being heard to the parties concerned before passing any order.

Who is the Appellate Authority? [Section 22A]
The Appellate Authority constituted under Section 22A of the Chartered Accountants Act, 1949, shall be deemed to be the Appellate Authority for the purposes of this Act.

Fee and procedure for investigation of a complaint or information to be followed by the Director (Discipline), Disciplinary Directorate and procedure for inquiry by the Disciplinary Committee. [Applicable to a complaint or information received on or after 17-11-2006.]

  1. Every complaint other than a complaint filed by or on behalf of the Central Government or any State Government, or any statutory authority shall be accompanied by a fee of Rs. 2500.
  2. Each such complaint or information shall be dealt with in accordance with the procedure specified in the Company Secretaries (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007.

Misconducts by Members under CS Act, 1980

All the misconducts are divided into 2 categories:

  • Misconducts listed under Schedule I
  • Misconducts listed under Schedule II

Misconducts listed under Schedule I
Under Schedule I, all the misconducts are divided into 4 Parts:

  • Part 1 – Professional misconduct in relation to Company Secretaries in Practice (11 Points)
  • Part 2 – Professional misconduct in relation to members of the Institute in service (2 Points)
  • Part 3 – Professional misconduct in relation to members of the Institute generally (3 Points)
  • Part 4 – Other misconduct in relation to members of the Institute generally (2 Points)

Misconducts listed under Schedule II (Here penalties are more severe)
Under Schedule II, all the misconducts are divided into 3 Parts:

  • Part 1 – Professional misconduct in relation to Company Secretaries in Practice (10 Points)
  • Part 2 – Professional misconduct in relation to members of the Institute generally (4 Points)
  • Part 3 – Other misconduct in relation to members of the Institute generally (1 Points)

Misconducts listed under Schedule
Part 1

A Company Secretary in Practice shall be deemed to be guilty of professional misconduct, if he

1.

allows any person to practice in his name as a Company Secretary unless such person is also a Company Secretary in practice and is in partnership with or employed by him;

 

Interpretation:

 
  • This rule is intended to ensure that the professional work is done by a qualified professional so as to protect the client’s/public interest.
  • Only a CS in practice who is the partner or employee of another CS in practice can practice in the name of such another CS in practice.
  • It should be noted that an associate who is not a part of decision making process does not become a partner. Only sharing of profit does not create partnership.

2.

pays or allows or agrees to pay or allow, directly or indirectly

 
  • any share, commission or brokerage in the fees or profits of his professional business, to any person other than,
  • a CS in Practice (sharing of fee/profit with CS in employment is prohibited) or
  • a partner or a retired partner or
  • the legal representative of a deceased partner, or
  • a member of any other professional body or with such other persons having such qualifications as may be prescribed for the purpose of rendering such professional services from time to time in or outside India.
 

Interpretation:

 
  • For the time being at least, council has not permitted PCS to have Partnership with CA/CWA and other professionals for attestation works like signing Secretarial Audit Report. Then, how is it possible for a PCS to share fee/profit with other non-CS professional with respect to such work.
  • Other Professional Bodies (for the purposes of clauses (2), (3) and (5) of Part I of the First Schedule to the Act)
    • ICAI, ICWAI, Bar Council of India, Indian Institute of Architects, Institute of Actuaries of India
    • the membership of the professional bodies or institutions whose qualifications relating to Company Secretaryship are recognized by the Council
  • Persons qualified in India (for the purposes of clauses (2), (3) and (5) of Part I of the First Schedule to the Act)
    • Chartered Accountant, Cost Accountant
    • Actuary
    • Bachelor in Engineering, Bachelor in Technology, Bachelor in Architecture, Bachelor of Law, MBA from a University established by law or an institution recognized by law.

3.

accepts or agrees to accept any part of the profits of the professional work of a person who is not a member of the Institute.
Provided that a member may enter into profit sharing or other similar arrangements, including receiving any share commission or brokerage in the fees, with a member of such professional body or other person having qualifications, as is referred to in item (2) of this part;

4.

enters into partnership, in or outside India, with any person (other than a CS in practice or such other person who is a member of any other professional body having such qualifications as may be prescribed or whose qualifications are recognized by the Central Government or the Council for the purpose of permitting such partnerships);

For the purposes of entering into partnership under clauses (4) and (5) of Part I of the First Schedule to the Act, a person shall be a member of any of the following professional bodies, namely:

  •  ICAI, ICWAI, Bar Council of India, Indian Institute of Architects, Institute of Actuaries of India
  • the membership of the professional bodies or institutions whose qualifications relating to Company Secretaryship are recognized by the Council

5

secures,

 
  •  either through the services of a person who is not an employee of such company secretary or who is not his partner
  • or by means which are not open to a Company Secretary,
 

any professional business:

Provided that nothing herein contained shall be construed as prohibiting any arrangement permitted in terms of items (2), (3) and (4) of this Part;

 

Interpretation:

  • Main purpose of this clause is to restrict the obtaining of work by unethical means.
  • Council has issued guidelines for advertisement by PCS.

6.

solicits clients or professional work, either directly or indirectly, by circular, advertisement, personal communication or interview or by any other means:

Provided that nothing herein contained shall be construed as preventing or prohibiting–

  • any company secretary from applying or requesting for or inviting or securing professional work from another company secretary in practice;
    • a member from responding to tenders or enquiries issued by various users of professional services or organizations from time to time and securing professional work as a consequence;

Note:
Following shall be the considered as misconduct under Clause 6

  1. Circular or advertisement in newspapers indicating the range of services offered by him.
  2. A circular letter offering secretarial services and professional work.
  3. Any circular, advertisement or communication which creates an impression that certain professional work would be done much more expeditiously than is normally the case. Like for instance, registration of a company in, say, two days’ time or registration of a charge in one day’s time, etc.
  4. Circular, advertisement or personal communication highlighting any provision of any law, to person other than existing clients, which provides for certification/authentication by a Company Secretary in Practice of any form/return/application/document.
  5. Issuing hand bills covering matters in (1) to (4) above.
  6. Publication in the telephone directory, name and address in extra bold typeface or opting for more than one listing. However, where separate sections are devoted in the telephone directory (yellow pages, for instance) for a classified list, publishing the name and address by a member in such sub-section in the directory would not be treated as misconduct. But any kind of message or writing which indicates tall claims, supremacy and superiority in professional attainments will tantamount to solicitation of clients, indirectly.
  7. Communicating or holding out, as being prepared to provide professional services at fees that are less than reasonable and appropriate in the circumstances, in order to obtain professional work.
  8. Communicating or describing himself as a ‘specialist’ in any branch of law/work or knowingly permitting himself to be so described.
  9. A member allowing a company to carry in its prospectus or other circular letters that ‘Mr. X a specialist in corporate laws is the adviser to the company’ would offend clause (6). However printing the name of Practicing Company Secretary as Secretarial Auditor in Annual Report will not violate the provisions of the Act.
  10. Requesting his client(s) to recommend his/their acquaintances to him for professional work.
  11. Frequent press announcements or circulars about his not being available for professional work for a certain period at the place whereat he normally has his office.
  12. Highlighting or causing to be highlighted in public interviews over the television, AIR, etc. their professional attainments, more than just necessary or warranted by the circumstances of such an interview, making tall claims, indicating supremacy over other professional colleagues, etc. However sending bio data to organizers of the programmes/seminars, etc., where they have been invited as a faculty, is not violative of this clause.
  13. Writing to any institution/agency that though, he is in the panel; no work has been allotted to him. Even approaching through a third person is violative of this clause.
  14. Approaching any trade association/chamber of commerce/ business forum, communicating his ready availability for rendering any professional service to the constituents of any association or chamber.
  15. Sending his profile to persons/companies/firms without any requisition for the same.
  16. Including names of other professionals in his profile circulated to various persons.

Following would not fall into the mischief of clause (6):

  1. Publishing in the journal of the Institute or newspaper any change in the professional address;
  2. Publishing in professional journals, newspapers and magazines in any classified column, any advertisement for recruitment of staff without in any way giving an impression about the services that he can render, or in other manner smacking of solicitation of work;
  3. Publishing information regarding changes in the constitution of firm, provided the information contained therein is limited to bare facts and consideration given to appropriateness of the area in which the newspaper or magazine is circulating and the number of insertions
  4. Sending New Year or any other seasonal greetings without narrating the list of services, professional attainments, supremacy or any kind of indication seeking clients.
  5. Appearance in AIR, TV or any stage in private capacity as a speaker, actor or otherwise on programmes having no nexus with his profession. Any reference to him only as a Company Secretary and nothing beyond that in such programmes would not offend clause (6);
  6. Appearance or participation in professional capacity in the AIR/TV or other forums where a reasonable amount of biographical material may be given without in any way referring to the member as specialist in any branch of work;
  7. Editing/publishing any professional journal, newspaper and magazines;
  8. Writing articles/comments in professional journals, magazines and newspapers;
  9. Associating with charitable, other welfare associations and trade associations without in any way using such position to solicit clients/ professional work;
  10. Writing to his existing clients about implications/interpretations of any law or amendments thereof by way of any circular, newsletter or any personal communication or by way of print/electronic means of communication.
    The Council of the Institute in a case held that the Conduct of the member in practice by mentioning against his name ‘Company Secretary’ in the issue of ‘Secretarial Aid’ a journal edited by him was violative of Clause (6) of Part I of First Schedule to the Act. It was observed that the words ‘for further clarification please contact the Editor’ was an indirect attempt to solicit professional work. Responding to a specific letter or a follow up of personal discussions and sending a profile of a firm/individual to specific addresses is not prohibited.
  11. Stating the assignments handled by him in his profile. However, the name of the clients should be supplied only against specific request of the client for the same.
  12. Issuing advertisement in Chartered Secretary for opening branch or seeking partnership with other members.
  13. Issuing advertisement or launching website within the frame work of guidelines issued by the council about advertisement by PCS.
  14. Securing professional work from another PCS is now expressly permitted
  15. Responding to tenders or enquires issued by various users of professional services and securing professional work as a consequence is now expressly permitted.

7.

advertises his professional attainments or services, uses any designation or expressions other than Company Secretary on professional documents, visiting cards, letterheads or sign boards, unless it be a degree of a University established by law in India or recognized by the Central Government or a title indicating membership of the Institute of Company Secretaries of India or of any other institution that has been recognized by the Central Government or may be recognized by the Council.

 

Interpretation:

 

A PCS cannot include in his advertisement following particulars like

  • the infrastructure available in his own office,
  • details of Associate PCS,
  • details of his networking in other places within & outside India,
  • infrastructure at such networked offices,
  • number of trainees who have completed training from his office,
  • certain landmark achievements like
    • number of companies incorporated since he started his practice,
    • number of appearances made before CLB/NCLT, CBDT, Tribunals , Regulatory Authorities, Commissions,
    • number of Foreign Collaborations handled,
    • number of Merger & Acquisitions handled,
    • number of due diligence carried out etc.

Note:

 

  •  PCS can be permitted to allow his clients to use his name in their brochure/hoardings etc. e.g.
  • A PCS is permitted to allow his name to be used as one of the satisfied customers of particular software.
  • Where in the letterhead or visiting card, a member in practice mentions that he was or is holding directorships in any company; it would be offending this clause.
  • Where a member in practice had described himself in visiting cards and letter heads as “Company Secretary & Advocate, High Court”, the Council held the member guilty of professional misconduct under this clause.

8.

accepts a position as a Company Secretary in practice previously held by another Company Secretary in practice without first communicating with him in writing;

 

Interpretation:

 

In respect of following it shall not be mandatory (though desirable) to send a prior written communication to the earlier incumbent (PCS):

 

  •  Certifying e-forms for various companies.
  • giving Due Diligence Certificate for consortium borrowers.
  • holding assignment as retainer for a company or group of companies .
  • issuing search reports.
  • Issuing certificates as contemplated under SEBI (LODR) Regulation, 2015.
  • Giving legal opinion.

 

In the following cases it shall be mandatory to send a prior written communication to the earlier incumbent (PCS):

 

  •  Signing / Certification of Annual Return
  • Issuance of Secretarial Audit Report in terms of Section 204 of the Companies Act, 2013
  • Issuance of Certificate of Securities Transfers.
  • Certificate of reconciliation of capital, updation of Register of Members, etc.
  • Conduct of Internal Audit of Operations of the Depository Participants.
  • Certification of corporate governance under SEBI (LODR) Regulation, 2015

 

Note:
Communication using electronic medium viz., SMS, Whats App and such other Messenger apps is also permitted.

9. charges or offers to charge, accepts or offers to accept, in respect of any professional employment, fees which are based on a percentage of profits or which are contingent upon the findings, or result of such employment, except as permitted under any regulation made under this Act;

Interpretation:
The fee should be more related to the expertise required and the time spent on a particular case without in any way linking the fee with the final results.

Note:
If the PCS were to quote remuneration in an MCA Fee Refund case, as a percentage of the final amount of refund that may be ordered by an appellate authority, it would be hit by this clause.

10. engages in any business or occupation other than the profession of Company Secretary unless permitted by the Council so to engage;

Note:

  • Nothing contained herein shall disentitle a Company Secretary from being a director of a company.
  • Regulation 168(2) of the Regulations provides that a Company Secretary may act as a secretary, trustee, executor, administrator, arbitrator, receiver, appraiser, valuer, internal auditor, management consultant or as a representative of financial matters including taxation and may take up appointment that may be made by the Central or any State Government, Courts of Law, labour tribunals, or any authority.
  • The Council has expressly permitted a PCS to take up following vocations:
    • Acting as editor of professional journals
    • Authoring Books and Articles
    • Holding of Life Insurance Agency License for the limited purpose of getting renewal commission.
    • Holding of public elective offices such as M.P., M.L.A., M.L.C. and others.
    • Honorary office-bearership of charitable, educational or other non-commercial organisations.
    • Acting as Justice of Peace, Special Executive Magistrate and the like
    • Acting as Private tutor
    • Teaching assignment under the Coaching Organisation of the Institute and other Institutes such as ICWAI, ICAI, Management Institutes, Universities and any college affiliated to a University, and such other organisation as may be recognised by the Council of the Institute from time to time,
      • Max engagement in teaching shall not exceed average 3 hours in a day.
    • Carrying out valuation of papers, acting as a paper-setter, head examiner or a moderator, for any examination.
  • In the following cases, members require specific prior permission from Executive Committee of Council
    • Engagement or association in family business enterprises.
    • Office of MD or WTD of a body corporate

11.allows a person not being a member of the Institute in practice, or a member not being his partner to sign on his behalf or on behalf of his firm, anything which he is required to certify as a Company Secretary; or any other statements relating thereto;

Misconducts listed under Schedule I
Part 2

Professional misconduct in relation to members of the Institute in service
A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he, being an employee of any company, firm or person–

  1. pays or allows or agrees to pay, directly or indirectly, to any person any share in the emoluments (salary) of the employment undertaken by him;
  2. accepts or agrees to accept any part of fees, profits or gains from a lawyer, a Company Secretary or broker engaged by such company, firm or person or agent or customer of such company, firm or person by way of commission or gratification.

Misconducts listed under Schedule I
Part 3

Professional misconduct in relation to members of the Institute generally
A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he –

  1. not being a Fellow of the Institute, acts as a Fellow of the Institute;
  2. does not supply the information called for, or does not comply with the requirements asked for, by the Institute, Council or any of its Committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority;
  3. while inviting professional work from another Company Secretary or while responding to tenders or enquiries or while advertising through a write up, or anything as provided for in items (6) and (7) of Part I of this Schedule, gives information knowing it to be false.

Misconducts listed under Schedule I
Part 4

Other misconduct in relation to members of the Institute generally
A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, if –

  1. he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term not exceeding six months;
  2. in the opinion of the Council, he brings disrepute to the profession or the institute as a result of his action whether or not related to his professional work

Following may amount to misconduct under Clause 2 of Part IV of the First Schedule;

  • Sending an e-mail to number of members (e-groups) criticizing the decisions of the Council in derogatory and filthy language.
  • Discussing through e forums failures of the Council/ president/ secretary by using derogatory and filthy language.
  • Writing letter(s) in an aggressive, loud and filthy language to the Ministry of Corporate Affairs, about working of ROC offices/ MCA site, inability to upload forms etc.
  • Arranging DHARANA/ agitations at the gates of the Govt. Offices/Institute’s offices in a manner not befitting a professional.
  • Instigating Students or other members by creating a pandemonium in or around Institute’s offices by raising issues pertaining to syllabus, training, examination or any other reason what so ever.
  • Misusing the confidential data available with the offices of the Institute for personal purposes.
  • Inviting Govt. Officers for Chapter’s / Regional Council’s Programs by spending heavily on their travel & stay arrangements, with an intention to get personal mileage.
  • Tampering with the Books of Accounts/ Minutes of the meetings of the Managing Committees of Chapter/Regional Councils

Misconducts listed under Schedule II
Part 1

Professional misconduct in relation to Company Secretaries in Practice
A Company Secretary in practice shall be deemed to be guilty of professional misconduct, if he–

  1. discloses information acquired in the course of his professional engagement to any person other than his client so engaging him, without the consent of his client, or otherwise than as required by any law for the time being in force;
  2. certifies or submits in his name, or in the name of his firm, a report of an examination of the matters relating to company secretarial practice and related statements unless the examination of such statements has been made by him or by a partner or an employee in his firm or by another Company Secretary in practice;
  3. permits his name or his name of his firm to be used in connection with any report or statement contingent upon future transactions in a manner which may lead to the belief that he vouches for the accuracy of the forecast;
  4. expresses his opinion on any report or statement given to any business or enterprise in which he, his firm, or a partner in his firm has a substantial interest;
    Note:
    Here ‘substantial interest’ means an interest to the extent of 25%.
  5. fails to disclose a material fact known to him in his report or statement but the disclosure of which is necessary in making such report or statement, where he is concerned with such report or statement in a professional capacity;
  6. fails to report a material mis-statement known to him and with which he is concerned in a professional capacity;
  7. does not exercise due diligence, or is grossly negligent in the conduct of his professional duties;
  8. fails to obtain sufficient information which is necessary for expression of an opinion or its exceptions are sufficiently material to negate the expression of an opinion;
  9. fails to invite attention to any material departure from the generally accepted procedure relating to the secretarial practice;
  10. fails
    • to keep moneys of his client (other than fees or remuneration) or money meant to be expended in a separate banking account or
    • to use such moneys for purposes for which they are intended within a reasonable time.

Misconducts listed under Schedule II
Part 2

Professional misconduct in relation to members of the Institute generally
A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he–

  1. contravenes any of the provisions of this Act or the regulations made thereunder or any guidelines issued by the Council;
  2. being an employee of any company, firm or person, discloses confidential information acquired in the course of his employment, except as and when required by any law for the time being in force or except as permitted by the employer;
  3. includes in any information, statement, return or form to be submitted to the Institute, Council or any of its Committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority any particulars knowing them to be false;
  4. defalcates or embezzles moneys received in his professional capacity

Misconducts listed under Schedule II
Part 3

Other misconduct in relation to members of the Institute generally
A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, if he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term exceeding six months.

SECRETARIAL STANDARDS BOARD (SSB)

SSB was constituted in the year 2000. It was constituted for integration, harmonisation and standardisation of diverse secretarial practices prevalent in the corporate sector.

It consists of major industry associations viz,

  • The Federation of Indian Chambers of Commerce and Industry (FICCI),
  • Confederation of Indian Industry (CII),
  • The Associated Chambers of Commerce & Industry of India (ASSOCHAM),
  • PHD Chamber of Commerce and Industry,
  • Representatives of regulatory authorities, such as the
    • Ministry of Corporate Affairs,
    • Securities & Exchange Board of India,
    • Reserve Bank of India,
    • Bombay Stock Exchange,
    • National Stock Exchange of India Ltd. and
  • Representatives of the sister professional bodies viz.
    • the Institute of Chartered Accountants of India and
    • the Institute of Cost Accountants of India and
  • Eminent members of the ICSI in employment and in practice.

Functions of the Secretarial Standards Board
The main functions of SSB are:

  1. Formulating Secretarial Standards;
  2. Clarifying issues arising out of the Secretarial Standards;
  3. Issuing Guidance Notes; and
  4. Reviewing and updating the Secretarial Standards / Guidance Notes at periodic intervals.

Scope of Secretarial Standards
Secretarial Standards are issued in conformity with the provisions of the applicable laws. However, if, due to subsequent changes in the law, a particular Standard or any part thereof becomes inconsistent with such law, the provisions of the said law shall prevail.

Thus, Secretarial Standards do not seek to substitute Laws, they seek to assist existing laws, rules and regulations.

ICSI has so far issued the following Standards:

  • Secretarial Standards on Meetings of Board of Directors (SS-1)
  • Secretarial Standards on General Meetings (SS-2)
  • Secretarial Standard on Dividend (SS-3)

Section 118 (10) of Companies Act, 2013 provide that the every company shall observe

  • Secretarial Standards on Meetings of Board of Directors (SS-1)
  • Secretarial Standards on General Meetings (SS-2)

Compliance of Secretarial Standard on Dividend (SS-3) is voluntary.

Process of making Secretarial Standards

  1. Determination of areas in which Secretarial Standards need to be formulated
  2. Constituting Working Groups to formulate preliminary drafts
  3. Circulating preliminary drafts among
    • members of SSB
    • members of the Central Council
    • various professional bodies
  4. On the basis of suggestions received on the preliminary draft, an Exposure Draft of proposed Secretarial Standard will be prepared and published in the “Chartered Secretary”, the journal of ICSI, and placed on the Website of ICSI for inviting suggestions/comments from public at large.
  5. After taking into consideration the comments received, the draft of the proposed Secretarial. Standard will be finalised by SSB and submitted to the Council of ICSI.
  6. The Council will consider the final draft of the proposed Secretarial Standard and finalise the same in consultation with SSB.

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