Companies Act Section 205

Companies Act, Section 205: Functions of Company Secretary

Section 205 of the Companies Act, 2013 defines the functions and responsibilities of the company secretary within the framework of corporate governance. The company secretary plays a crucial role in ensuring that the company adheres to legal and regulatory requirements, maintains compliance with applicable laws, and follows the principles of good corporate governance. This section lays out the specific duties and obligations of the company secretary, as well as the legal context in which they operate.

1. Reporting on Compliance

Reporting to the Board of Directors

One of the primary functions of the company secretary is to ensure that the Board of Directors is fully informed about the company’s compliance with relevant laws and regulations. Specifically, under Section 205(1)(a), the company secretary is tasked with reporting to the Board about the company’s adherence to:

The provisions of the Companies Act, 2013
The rules made under the Companies Act
Other applicable laws and regulations
The role of the company secretary in this context is critical because it ensures that the Board is continuously updated on the company’s legal obligations. The company secretary must inform the Board if there are any potential violations, lapses, or areas of non-compliance, thus helping the Board take timely corrective actions.

The company secretary acts as the legal advisor for the Board, helping it navigate complex legal landscapes and ensuring that the company avoids legal risks. This responsibility underscores the importance of the company secretary as a key governance officer who is deeply involved in the company’s regulatory oversight.

2. Ensuring Compliance with Secretarial Standards

Compliance with Secretarial Standards

Section 205(1)(b) outlines that it is the duty of the company secretary to ensure that the company complies with the secretarial standards issued by the Institute of Company Secretaries of India (ICSI). These standards are essential for promoting good corporate governance practices and ensuring that companies operate with transparency, integrity, and accountability.

The company secretary is responsible for:

Implementing secretarial standards: These standards, once approved by the Central Government, provide guidelines on various aspects of corporate governance, including the conduct of meetings, maintenance of corporate records, and handling of shareholder communications.
Advising the company: The company secretary must keep the company informed about the latest secretarial standards and assist the company in incorporating them into its day-to-day operations.
Secretarial standards ensure that the company's actions are consistent with legal and ethical practices. The company secretary must monitor all aspects of the company’s governance structure to ensure that these standards are adhered to, whether it pertains to board meetings, shareholder meetings, or internal controls.

3. Discharge of Additional Duties as Prescribed

Other Prescribed Duties

Under Section 205(1)(c), the company secretary may be required to discharge additional duties that are prescribed under the law or by the company’s internal regulations. This could involve various administrative, legal, and governance functions that are vital to the company’s compliance and operational efficiency.

These duties may include, but are not limited to:

Preparation of compliance reports
Liaising with regulatory authorities
Managing corporate filings and documentation
Advising on corporate governance matters
The company secretary may be required to take on other roles that enhance the company’s compliance infrastructure and improve the company's internal controls and governance framework.

Explanation of Secretarial Standards

The Explanation to Section 205 clarifies that secretarial standards refer to the standards issued by the Institute of Company Secretaries of India (ICSI), which is a body constituted under Section 3 of the Company Secretaries Act, 1980. These standards must be approved by the Central Government before they are enforceable. The standards are designed to ensure that companies follow best practices in secretarial and corporate governance matters, contributing to effective administration, legal compliance, and transparency in the company’s operations.

The ICSI plays a crucial role in developing these standards and in ensuring that company secretaries across India follow a consistent and professional approach to corporate governance.

4. Non-Interference with the Duties of Other Company Officials

No Impact on Other Roles in the Company

Subsection (2) of Section 205 makes it clear that the duties of the company secretary, as outlined in this section, do not interfere with the functions or responsibilities of other key individuals within the company. Specifically:

Board of Directors: The duties and functions of the Board of Directors under this Act or any other applicable law are not affected by the provisions related to the company secretary. The Board remains responsible for overseeing the management of the company and making high-level decisions about the company’s direction and strategy.
Chairperson, Managing Director, or Whole-Time Director: Similarly, the chairperson and the managing or whole-time directors have their own distinct functions within the company. These functions include strategic oversight, operational management, and financial decision-making, which are separate from the secretarial functions of ensuring compliance and corporate governance.
The company secretary’s role is complementary to, but distinct from, the roles of other company officials. This ensures that there is no overlap or confusion in the responsibility for governance, and each individual or group of individuals operates within their own sphere of responsibility.