Body Blow

Section 383A of the Companies Act, 1956, states that every company with a paid-up capital of Rs 50 lakh shall have a whole time company secretary. However, the new draft companies bill proposes that only a company with a minimum paid-up capital of Rs 2 crore or more should be required to have a company secretary. This new clause will deal a major blow to the community of company secretaries. At present, the registered members of the Institute of Company Secretaries of India (ICSI) number 12,900. This figure is expected to touch 13,900 by March 31, 1998 (at the present growth rate of 8 per cent). Several new entrants to the profession face the very real threat of not securing any employment in future, while experienced hands could undergo retrenchment.

 

The new clause will also not reduce the various ills pointed out in the annual report on working & administration of the Companies Act for the year ended March 31, 1992. The report pointed out that more than 1.89 lakh documents were returned for rectification, with most of the errors arising on account of mis-interpretation or ignorance of law. Consequently, about 10,000 prosecutions are launched every year against defaulting companies under the Companies Act. Every year, defaulting companies shell out Rs 50 lakh in the form of fines, apart from the huge waste of time and energy. The registrar of companies is already struggling to cope with a heavy backlog. Is it really fair to increase its responsibilities by reducing those of company secretaries?

Mr K R Chandratre, former ICSI president and member of the review committee, correctly observed that the new clause is detrimental to protection of investors interests. Indeed, the bills presumption that only big listed companies need an in-house corrective is fundamentally flawed.