Default in Appointment of Whole-Time Company Secretary: MCA Imposes Penalty
Appointment of a Whole-Time Company Secretary (CS) is one of the important statutory compliances under the Companies Act, 2013. The Ministry of Corporate Affairs (MCA) still underscores the importance of having a trained CS for better governance, compliance with law, and sound corporate management. Failure to appoint a CS where it is required mandatorily draws severe penalties under the law.
Statutory Requirement under the Companies Act, 2013
According to Section 203 of the Companies Act, 2013, read with Rule 8 and Rule 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the following companies are required to appoint a Whole-Time Company Secretary as Key Managerial Personnel (KMP) mandatorily:
- All listed companies
- All public companies having a paid-up share capital of ₹10 crore or more
- All private companies with a paid-up share capital of ₹10 crore or above
A company that does not meet the above limits is not obligated to appoint a whole-time company secretary. But such companies can voluntarily appoint a CS to promote compliance and governance.
It should be noted that the company secretary who is appointed as a KMP cannot occupy office in more than one company at a time, other than its subsidiary.
Penalty for Non-Compliance
If there is a statutory violation of this section that is of 203 of companies act, 2013 the following are the penalties for company and officer in default.
1. Penalty on the Company for violation
- A fine of maximum ₹5 lakh is levied on the company.
2. Penalty on Every Defaulting Officer
Every defaulting officer, including directors and KMPs, is liable to pay:
- A fine of ₹50,000
- Further fine of ₹1,000 per day for every day of ongoing default, up to a maximum of ₹5 lakh
Functions and Role of a Company Secretary
A Company Secretary is key to ensuring compliance with the law, regulatory requirements, and smooth execution of the Board of Director decisions. Under the Companies Act, 2013 and associated rules, the roles of a CS are:
- Ensuring Secretarial Standards compliance
- Providing legal and regulatory advice to the Board
- Conducting and recording Board and General Meetings
- Assisting the Board to discharge corporate governance requirements
- Appear on behalf of the company before regulators and authorities
- Signing documents as Principal Officer where so authorized
- Signing share certificates and annual returns
- Coordinating with depositories and stock exchanges in the event of dematerialized shares
- Helping with company formation documents such as MOA and AOA
- Executing other duties directed by the Board
Risk of non-appointment
In the case of companies compulsorily required to appoint a CS, non-compliance subjects them to:
- Financial penalties
- Reputational risk
- Likelihood to affect statutory filings and regulatory permissions
Companies who are not required to appoint a CS might not have statutory sanctions, but must nonetheless meet compliance with relevant provisions of the Companies Act. Such companies can outsource and appoint a practicing company secretary (PCS) or company secretary firm to manage their compliances.
Who Can Be Appointed as a Company Secretary?
A Company Secretary should be a member of the Institute of Company Secretaries of India (ICSI). The ICSI is the professional governing body that oversees the profession and enforces ethical and professional standards.
Advantages of Hiring a Company Secretary
- Even when not obligatory, hiring a professional CS has a number of advantages:
- Assures legal compliance and minimizes risk of penalties
- Provides expertise in corporate governance, finance, and law
- Makes Board functioning more efficient and regulatory reporting easier
- Serves as a risk and compliance strategy advisor
A CS brings invaluable value as a trained professional who incorporates legal, financial, and administrative expertise into the decision-making process of the company.
Conclusion
The appointment of a full-time Company Secretary is not merely a legislative imperative—it’s a strategic imperative in contemporary corporate governance. Those companies below the mandatory threshold need to follow the law to escape substantial fines, while others can gain by voluntary appointment. A professional CS ensures that the company remains compliant, transparent, and professionally governed, consistent with long-term business viability and trust.
Read More-
ICSI Notification Draft of Company Secretaries (Amendment) Regulations, 2023
