In a recent case, the Regional Director has singled out the Company Secretary, holding them solely accountable for the company’s adherence to Secretarial Standards and compliance. As defined in Section 2(60) as “Officer who is in default,” this includes various company officers such as whole-time directors, key managerial personnel, and those directly responsible for financial records and accounts and company secretaries, among others.
Madras Fertilizers Limited Case
The move by the Government to uphold Corporate Governance is appreciated. For instance, the ROC Chennai imposed penalties on a company, its managing director, and whole-time director for failing to meet secretarial standards mandated by the Companies Act, 2013. The case of “Madras Fertilizers limited” highlights this.
Case Background:
a. As per Sec. 118(10) of the Companies Act, 2013, companies must follow secretarial standards for general and board meetings.
b. Clause 14 of Secretarial Standard prohibits distribution of gifts or cash to members during meetings.
c. Despite this, the company issued SBI cards to minority shareholders.
d. This action violated Sec. 118(10) along with SS-2, Clause 14 of Secretarial Standard.
ROC’s Decision:
The Registrar of Companies, Chennai, penalized the company under Section 454 of the Companies Act, 2013, for non-compliance. Penalties were imposed on the company, managing director, and whole-time director.
Appeal to the Regional Director:
a. The appellants claimed the non-compliance was unintentional due to circumstances.
b. They explained that the 54th AGM held via video conferencing necessitated a change in how refreshments were handled.
c. The company provided gift cards to shareholders instead, without malicious intent.
d. According to Section 205(1)(b) of the Companies Act, 2013, the Company Secretary is responsible for ensuring compliance with Secretarial Standards.
e. The Regional Director emphasized the Company Secretary’s primary duty in compliance matters, holding them solely accountable in this case.
Regional Director’s Decision:
i. The Company Secretary is primarily responsible for ensuring compliance with Secretarial Standards.
ii. The company’s violation falls under the Company Secretary’s purview.
iii. The penalty imposed on others besides the Company Secretary is deemed unlawful.
iv. The ROC is directed to take action solely against the Company Secretary as per Section 205(2) of the Companies Act.
Conclusion
In conclusion, the Regional Director’s ruling underscores the heightened responsibility of Company Secretaries in ensuring Companies Act compliance. Non-compliance places the entire penalty burden on the Company Secretary, emphasizing their responsible role in corporate governance.
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