Legal Framework Governing Company Secretaries: formula sheet

Key formulas

Company Secretary

Company Secretary = a person who is a member of the Institute (s. 2(1)(c))

Members are Associates or Fellows. Every member in practice must use the designation Company Secretary; others may (s. 7).

Companies Act meaning

"Companies Act" = Companies Act, 2013 or any previous company law as defined in s. 2(67) of that Act

Words undefined here but defined in the Companies Act take that meaning (s. 2(1)(m)).

Prescribed vs specified

Prescribed = by regulations under the Act; Specified = by rules of the Central Government

Regulations come from the Council; rules from the Central Government. Do not swap them.

Test for being in practice

In practice = member + (alone or in partnership) + remuneration received or to be received + listed service (s. 2(2)(a) to (f))

Unpaid services do not meet the test. The list is wide and includes a catch-all in clause (f).

Fellow eligibility

Associate with 5 years' continuous practice in India, or 5 years' continuous membership plus prescribed qualification or experience (s. 5(3))

Entered on application, in the prescribed manner, on payment of fees fixed by Council notification. Time with the dissolved company counts towards continuous Associate period.

Letters

Associate: A.C.S.; Fellow: F.C.S. (s. 5)

Using them without membership is an offence under s. 24.

Penalty for falsely claiming membership (s. 24)

First conviction: fine up to ₹1,00,000. Later conviction: imprisonment up to 6 months, or fine up to ₹5,00,000, or both

Applies to a non-member who claims to be a member, uses the designation Company Secretary or A.C.S./F.C.S., and to a member without a certificate of practice who practises or claims to be in practice. Subject to s. 7.

Penalty for misusing Institute's name (s. 25)

First conviction: imprisonment up to 6 months, or fine of ₹1,00,000 to ₹5,00,000, or both. Later conviction: imprisonment up to 1 year, or fine of ₹2,00,000 to ₹10,00,000, or both

Covers identical names or seal, awarding similar degrees or designations, and seeking to regulate the profession.

Branch offices (s. 37)

More than one office in India: each office in separate charge of a member; send Council a list of offices and persons in charge, and report changes

The Council may exempt suitable cases from the separate-charge rule.

Section 3: Incorporation

Members on the Register = body corporate named the Institute of Company Secretaries of India

Covers persons on the old Register at commencement and those entered later, so long as their names stay on the Register.

Section 3(2): Legal character

Perpetual succession + common seal + power to hold property + sue and be sued in its own name

These four features define a body corporate. Cite them together.

Section 31: Dissolution

Old registered company stands dissolved on commencement; members' rights extinguished

Claims against it or its officers are barred, except as needed to enforce the Act.

Section 32: Transfer

Assets + liabilities of dissolved company vest in the Institute; contracts enforceable; pending proceedings do not abate

Assets include cash, reserves, investments, deposits and books of account. Liabilities include all existing debts and obligations.

Section 15A: Institute's functions

Examination, training, Registers, fees, removal and restoration of names, library, Council elections, certificates of practice

These are the Institute's functions. Section 15 sets the Council's duties, which are different.

Commencement

Act in force from 1 January 1981 (notification S.O. 989(E) dated 27 December 1980); extends to the whole of India

Section 1 allowed the Central Government to appoint the date.

Classes of members (Section 5(1))

Members = Associates + Fellows

Associate uses A.C.S.; Fellow uses F.C.S. A person entered in the Register is deemed an Associate (Section 5(2)).

Fellowship eligibility (Section 5(3))

Associate + at least 5 years of continuous practice in India as a Company Secretary, or Associate for at least 5 continuous years with qualifications or experience prescribed by the Council as equivalent

Apply in the prescribed manner and pay the fee notified by the Council. A certificate of practice under Section 6 counts as practice, even if the member did not actually practise.

Designation (Section 7)

Member in practice: shall use 'Company Secretary'. Other member: may use it. No other description in addition or in substitution.

The proviso permits other institute memberships recognised by the Council, other qualifications, and a firm name 'Company Secretaries' where all partners are members in practice.

Entry without entrance fee (Section 4(2))

Section 4(1)(a) and (b) persons: entered without entrance fee

Persons under clauses (c), (d) and (e) apply and pay the fee determined by the Council (Section 4(3)).

Register of members (Section 19)

Council maintains Register; list of members published as on 1 April each year

Every member pays the annual membership fee determined by the Council.

Removal from Register (Section 20)

Council may remove: dead, on request, non-payment of prescribed fee, disability under Section 8 or ceasing to be entitled. Council shall remove: where an order removes him from membership

A name removed for non-payment can be re-entered on application, with arrears and an additional fee notified by the Council.

Election of office-bearers (Section 12(1))

Council at its first meeting elects 2 of its members: President + Vice-President

Whenever either office falls vacant, the Council chooses a person to fill it.

Tenure of President and Vice-President (Section 12(3), (4))

1 year from date of choice, not beyond Council term; eligible for re-election

They continue in office after the Council's or their own term ends until a new President and Vice-President are elected and take charge.

Acting President (Section 12(5))

Vacancy or inability (absence, illness, any other cause) → Vice-President acts

On vacancy, the Vice-President acts until the newly elected President enters office. On inability, until the President resumes duties.

Standing Committees (Section 17(1))

Executive + Finance + Examination

The Council must constitute them from among its members.

Composition of each Standing Committee (Section 17(3))

President + Vice-President (ex officio) + minimum 3 and maximum 5 elected Council members

Elected by the Council from among its members.

Co-option (Section 17(6))

Co-opted members ≤ one-third of total committee membership

Applies to committees under Section 17(2), with Council sanction. Co-opted members are members of the Institute and have full rights of a member of the Committee.

Chairman of a committee (Section 17(7))

President is Chairman if a member; else Vice-President if a member; else committee elects its own

The Vice-President chairs in the President's absence if he is a member of that committee.

Disciplinary Committee (Section 21B)

President or Vice-President (Presiding Officer) + 2 Council members + 2 Central Government nominees

Penalties: reprimand, removal from Register permanently or for a period, fine up to ₹5,00,000.

Secretary of the Council (Section 16(3))

May participate in Council meetings; no vote

The Council appoints the Secretary and a Director (Discipline).

Right to practise

Practice allowed = Member + certificate of practice from the Council (Section 6(1))

Applies in India or elsewhere. A member without a COP cannot practise.

COP fee timing

Annual fee payable on or before 1 April each year (Section 6(2))

Form and fee are as determined by the Council by notification. The old ceiling of ₹3,000 was omitted in 2022.

Cancellation of COP

Council may cancel COP in prescribed circumstances (Section 6(3))

Circumstances are in regulations, not in the Act itself.

Meaning of 'in practice'

Member + individually or in partnership + remuneration received or to be received + any service in Section 2(2)(a) to (f)

Remuneration is essential. Partnership must be with members in practice or members of prescribed recognised professions.

Designation rule

Members in practice must, other members may, use 'Company Secretary' (Section 7)

No other description may replace or be added to it. Other qualifications or membership of recognised institutes may be added.

Penalty, Section 24

First conviction: fine up to ₹1,00,000. Subsequent: imprisonment up to 6 months or fine up to ₹5,00,000, or both

Covers non-members using the designation, A.C.S. or F.C.S., and members without COP who practise.

Multiple offices

Each office in India in separate charge of a member; list of offices sent to Council (Section 37)

Council may exempt in suitable cases (Section 37(1) proviso).

Firm

Firm includes LLP and sole proprietorship registered with the Institute (Section 2(1)(fa))

Useful for questions on who can practise as a firm.

Meaning of misconduct (Section 22)

Professional or other misconduct includes any act or omission in any Schedule

The list is not exhaustive. Section 21(1) lets the Director (Discipline) inquire into other conduct.

Routing of cases (Section 21(3))

First Schedule → Board of Discipline; Second Schedule or both Schedules → Disciplinary Committee

The Director (Discipline) decides the routing after forming a prima facie opinion.

Board of Discipline penalties (Section 21A(3))

Reprimand; removal from Register up to 3 months; fine up to ₹1,00,000

Any one or more. The member must be heard first. The Board follows summary disposal procedure.

Disciplinary Committee penalties (Section 21B(3))

Reprimand; removal from Register permanently or for such period as it thinks fit; fine up to ₹5,00,000

Any one or more. The member must be heard first.

Board of Discipline composition (Section 21A(1))

Presiding officer with law experience + 2 members + Director (Discipline) as Secretary

One member is a Council member elected by the Council. The other is the person designated under section 16(1)(c).

Disciplinary Committee composition (Section 21B(1))

President or Vice-President as Presiding Officer + 2 elected Council members + 2 Central Government nominees

Nominees are persons of eminence in law, economics, business, finance or accountancy. The Council may constitute more Committees.

Civil court powers (Section 21C)

Summoning and examining on oath; discovery and production of documents; evidence on affidavit

Held by the Authority, Disciplinary Committee, Board of Discipline and Director (Discipline).

Regulation-making power (Section 39)

Council + Gazette notification + previous publication + Central Government approval = valid regulation

Section 39(2) is without prejudice to the general power in Section 39(1). Section 39(3) imposes the publication and approval condition.

Rule-making power (Section 38A)

Central Government + notification = rules

Covers matters like Council elections, complaint form and fee, and procedure of Boards of Discipline and Disciplinary Committees. Do not mix up rules (Government) and regulations (Council).

Offence by a company (Section 28(1))

Company + every person in charge of and responsible for its business at the time = deemed guilty

Defence in the proviso: offence without knowledge, or all due diligence exercised. The person must prove it.

Officer liability (Section 28(2))

Consent or connivance, or attributable to neglect, of a director, manager, secretary or other officer = officer also guilty

The offence must be proved to be linked to consent, connivance or neglect.

Meaning of terms in Section 28

Company = any body corporate, including a firm or association of individuals; Director of a firm = partner

Wider than the Companies Act meaning of company.

Directions of Government (Section 35)

Directions bind the Council; persistent default + opportunity to be heard = Council may be dissolved

On dissolution, the Government may authorise a person or body to take over management until a new Council is constituted.

Designation (Section 7)

Member in practice must use Company Secretary; other member may; no other description

A firm whose partners are all members in practice may be known as Company Secretaries. Members may add letters showing other recognised memberships or qualifications.

Quick revision

• Company Secretary means a person who is a member of the Institute.
• The Companies Act means the Companies Act, 2013 or any previous company law as defined in its Section 2(67).
• A firm includes an LLP and a sole proprietorship registered with the Institute.
• Section 7: a member in practice must, and any other member may, use the designation Company Secretary.
• A member using the designation must not use any other description in addition or substitution.
• A member may add letters showing membership of another recognised institute or other qualifications.
• Being in practice requires acting for remuneration, individually or in partnership as the Act allows.
• Holding yourself out to the public as a Company Secretary in practice also counts as being in practice.
• Section 9: not more than fifteen elected Fellows and not more than five Central Government nominees on the Council.
• A person holding a post under the Central or a State Government cannot be elected to the Council under the elected category.
• Section 17: Standing Committees are Executive, Finance and Examination, each with the President and Vice-President ex officio plus three to five elected members.
• Co-opted members of a Section 17(2) committee cannot exceed one-third of its total membership.

Common mistakes

• Treating any service by a member as practice. Fix: Always state that practice needs remuneration received or to be received, and a listed service.
• Confusing prescribed with specified. Fix: Prescribed means by regulations under the Act; specified means by Central Government rules.
• Saying the Institute is still a company registered under the Companies Act. Fix: Remember that Section 31 dissolved the old company. The present Institute is a statutory body corporate under Section 3.
• Saying pending suits against the old company end when it is dissolved. Fix: Section 32 says pending suits, appeals and proceedings do not abate. They continue by or against the Institute.
• Saying only members in practice may use the designation Company Secretary. Fix: Write: members in practice shall use it, any other member may use it.
• Treating a person who has only passed the exams as a member. Fix: State that Section 4 also needs completed training, plus an application and fee, and that membership begins on entry in the Register.
• Saying the President and Vice-President hold office for the full Council term. Fix: Remember one year from the date of choice, capped by Council membership, with re-election allowed. They continue until successors take charge.
• Writing that the Vice-President replaces the President permanently when the President is ill. Fix: In inability, the Vice-President discharges functions only until the President resumes. In vacancy, only until a newly elected President takes office.
• Saying every member can practise. Fix: State that Section 6(1) requires a COP for every member who wants to practise.
• Ignoring remuneration when deciding if a member is 'in practice'. Fix: Quote the words 'in consideration of remuneration received or to be received' from Section 2(2) every time.

Exam tips

• Write the definition first, then apply it. Markers reward the provision-facts-conclusion order.
• In practice questions, always mention remuneration and the listed services in s. 2(2).
• Quote the penalty amounts for s. 24 and s. 25 correctly and keep the two sections apart.
• Do not quote section numbers you are unsure of; describe the rule in plain words instead.
• Write the section numbers 3, 31, 32 and 15A in your answer, but only where you are sure. A correct rule in plain words earns marks even without a number.
• In a case question, give the provision first, then apply it to the facts, then conclude in one line.
• For a list of functions, give at least five items from Section 15A and keep them separate from the Council's duties in Section 15.
• In answers on the old company, always mention that pending suits do not abate and that contracts continue against the Institute.