What are the legal requirements which a company must comply with while borrowing?

The Companies Act does not expressly empower companies to borrow money and, therefore, most of the companies expressly provide for such borrowing powers in the Memorandum. In such cases, where Memorandum authorises the company to borrow, the Articles provide as to how and by whom these powers shall be exercised. It may also fix up the maximum amount which can be borrowed by the company.

A public company cannot exercise its borrowing powers until it secures the certificate to commence business [Sec. 149 (1)]. A private company may, however, exercise the borrowing powers immediately after its incorporation.

The power to borrow money is generally exercised by the Directors but Articles normally provide for certain restrictions on their power to borrow, to the aggregate of the paid-up capital of the company and its free reserves. Section 293 also limits the power of the Board of Directors to borrow not beyond the aggregate of the paid-up capital and free reserves. It reads: “The Board of Directors of a public company, or a private company which is a subsidiary of a public company, shall not, except with the consent of such public company or subsidiary in general meeting borrow moneys where the moneys to be borrowed, together with the moneys already borrowed by the company (apart from temporary loans obtained from the company’s bankers in the ordinary course of business) will exceed the aggregate of paid-up capital of the company and its free reserves, that is to say, reserves not set apart for any specific purpose.”

Every trading company has an implied power to borrow (General Auction Estate Co. Vs. Smith) but it is wise to include an express power to borrow in the objects clause of the Memorandum. Non-trading companies, however, must be expressly authorised to borrow by their Memorandum.

A power to borrow whether express or implied includes the power to charge the

assets of the company by way of security to the lender.

Board of Directors

The company wishes to increase the strength beyond (a) Advise ABC Ltd. the procedure to be followed for increasing the strength ofthe Board of Directors beyond 12.(b) What will be the procedure to be adopted in a private limited company whichis not a subsidiary of public limited company?(a) For theprovisionswith respecto increaseof thestrengthof theBoardbeyond12,pleaseseediscussiononSection259underanswerisequallyapplicabletoadeemedpubliccompany.Moreover,aspertheCompanies(Amendment)Act, 2000conceptof deemedpubliccompanyis nolongerrelevant.1. The proposal for increase in the strength of the Board should first be placedbefore the Board itself for its consideration. In case the Articles of Associationof the company already provide for a strength of the Board beyond 12 and theincrease contemplated falls within the strength permissible under the Articles,the company shallnot require:(a) alteration of the Articles, and(b) permission of the Central Government.In other cases, the Board should decide upon the date, time and place of anextraordinary general meeting for special resolution to be passed for amendingthe Articles.. The company secretary should be authorised to issue noticesand do all other requisite acts for the purpose.2. If the shares are listed on a stock exchange (s), an intimation with regard tothe proposed changes should be sent to it/them; copies of the resolution andArticles as amended shall alsO’be sent.3. The general body in its meeting should pass the special resolution subject tothe approval of the Central Government, where such approval is necessary.Another special resolution should be passed to amend the Articles, where theproposed strength exceeds the provision in the Articles.4. Within 30 days of passing the special resolution(s), a copy thereof should befiled
For getting the approval of the Central Government, where necessary, anDepartment application should be made to the of Company Affairs in FormNo. 24 of the Companies (Central Government’s) General Rules and Forms,1956. The Form should be accompanied with the following:(i) a copy of the Memorandum and Articles of Association;(ij) a copy of the resolution passed and the proceedings of the general meeting;(iii) a challan or demand draft evidencing the payment of the requisite fee; and(iv) a copy of the general notice (see step 6 below) together with a certificateof the company as to the due publication thereto.Before application to the Central Government, as aforesaid, is made, thecompany should give general notice in terms of Section 640 B of the CompaniesAct, to the members indicating the nature of the application proposedto be made. The notice must be published at least once in a newspaper in theprincipal language of the district in which the registered office of the companyis situated and circulating in that district and at least once in an Englishnewspaper circulating in that district.Forward copies of the general notice to the stock exchange as per the listingagreement.Forward a copy of the application made to the Central Government alongwiththe enclosures thereto to. the Registrar of Companies [Rule 20 A of theCompanies (Central Government’s) General Rules and Forms, 1956].directors. Thus, the increase in the strength of the Board can be effected by merely passing an ordinary resolution, provided the total number’ does not go beyond the maximum permissible under the Articles. However, where the increase is beyond Articles, special resolution must first be passed and Articles amended.Rest of the procedure (except relating to obtaining permission from the Central Government and provisions related thereto) remains the same as noted above.State the legal position where:The Articles of Association of a company provided for minimum share qualification. Mr. Xwho was appointed as a Director of the company, failed to obtain qualification shares within the specified time limit..9lns. Please see under answer to
X Co. Ltd. wants to make a contract with a partnership. Four 6i the five directors of the company are partners of such partnership. How can the contract be executed?The given problem relates to a situation whre a director is interested in a contract. An interested director must not vote on any contract or arrangement in which he is interested. Moreover, interested director is not counted towards quorum:J!1 the present case, since 4 out of 5 directors are interested directors, unless ArtiCles ‘permit otherwise (i.e., Articles may even allow interested directors to attend and vote), valiq meetinof the Board cannot tak p...!!ceJ:egardiug the contracl!n-9uestion being 1 /3rd ofthe total strength of the Board or 2 directors, whichever is it should be noted th_at there is to enter iEto a £ontract in which direc1oror direttors are rested. Section 299 of the Cornparues Act only requires the interest to be disclosed. Thus/ in the present case, the Board of Directors having been rendered incompetent, the contract can be executed by the general body ofshareholders by passing an ordinary resolution to that effect
MIs XYZLtd., with a paid-up capital of Rs. 5 crores, has nine directors on its Board and as per its Article, the quorum for a Board meeting is 3 (three). A meeting of the Board was called to consider a contract relatlog to purchase of raw materials from another company ABC (P) Ltd., in which A and B, the Directors of XYZLtd., are also major shareholders. In the Board meeting (If xYz Ltd. three Directors including‘A’ and ‘B’ attended. The matter was discussed ‘and the three Directors voted for the contract. ABQ (P) Ltd. wants to enforce the cQntract. Will it succeed? Would it make any difference if ABC Ltd., is a public company? Discuss. ,..9lns. The problem relates to interested directors. In this case, A and B are interested directors and accordingly must disclose their interest as per Section 299. .Further, interested director under Section 300 is forbidden to take part in the discussion or vote on any contract or arrangement entered into by or on behalf of the company where he is directly or indirectly interested in it.Still further, interested director is not to be counted for quorum and the quorum for a Board’s meeting is, as per Articles, fixed at minimum 3 directors [Section 287]. resolution However, Section 287 provides that if at any time, the number of interested directors exceeds or is equal to 2/3rd of the total strength, the remaining directors, that is to say, the number of directors who are not interested, present at the meeting, being not less than two, shall be the quorum. In the given case such a dis-interested director being only one, meeting is not valid.Thus, in the instant case, the ABC (P) Ltd., cannot enforce the contract. ABC (P) Ltd. were a public company, then also the situation would have unchanged because The arrectors A and B are its major shareholders. Exemption of Section 300 (2) (d) is not available.in such a case.P. 17. State with reference to the provisions of the Companies Act, 1956 whether the following companies can make donations to political parties and if so the conditionsto be complied with in this regard:

Director of XYZ Machineries

(i) ABC Forgings Private Limited where ‘X’, a director of XYZ Machineries
Limited, is interested as a director and member.
(ii)DEF Casting Limited, where ‘Y’, a director of XYZ Machineries Limited, is
interested as a member holding 25 per cent of the paid-up share capital.
State briefly the legal requirements to be complied with under the Companies Act
to give effect to the above proposals. Will the age’ementscontinue to be valid after the
paid-up share capital of XYZMac’N..neriL,.td.jS’inCreased to Rs.4 crores in December
1995 by further issue of shares?
(i)Under Section 297, it will require a resolution of the Board of Directors to be
passed at its meeting.
Besides, approval of the Central Government is required where the paid-up share
capital of the company is Rs. 1crore or more. But, applicability of the Section is to
be determinedat the timeof enteringinto the contract.Ifno pennission under this
section is required at the time of entering into the contract, subsequent pennission
is not necessary even though there may be a change of circumstances which would
require pennission to be taken for a fresh contract.
Thus, it appears that, where contract was entered into by the company when
its paid-up capital was less than Rs.1crore, and raised upwards subsequently
[Rs. 4 crores in the given case], approval of the Central Government would
not be necessary until the expiry of the contract.
Also, under Section 299, ‘X’ must disclose his interest to the Board and not
participate in the said meeting/ deliberations. .
(ii) Section 297 does not cover cases of public limited companies. Thus, the
aforesaid approvals shall not be necessary.
State the legal position in the following circumstances:
The Articles of Association of a company provide for minimum share qualification.
Mr X, who was appointed as a director of the company, failed to obtain qualification
shares within the specified time limit.
Following effects shall follow:
1. He shall be liable to fine up to.Rs. 500 for every day until he stops acting as
such
2He shall be liable to a further penalty under Section 283 (2A) up to Rs. 5,000
for each day he functions as a director. It appears that the penal provisions of
Sections 272 and 283 (2A) will cumulatively apply.
3.He automatically vacates the officeunder Section 283 (1) (a).
Board of Directors of Colourful Textiles Ltd. having a’1effective capital of Rs. 4
crores propose to appoint one of its Directors, Mr. Shyam, as managing director for 5
years with effect from 1st December 1996 on a consolidated monthly salary of Rs.
40,000 per month. Mr. Shyam is already the managing director of Unique Yam Ltd.
receiving a consolidated salary of Rs. 35,000 per month. The effective capital of Unique
Yam Ltd. is Rs. 2 crores. What are the legal requirements to be complied with by
Colourful Textiles Ltd. to give effect to the proposed appointment? Will your answer
be different if Unique Yam Ltd. is a private company? fC.A. (Final)Nov., 1996J
Schedule XIII allows a company to pay its managing director up to 5% of its
net profits for a financial year. Monetary ceilings have been removed except for
loss-making companies or companies with inadequate profits. Presently’, in case a
person is managing director in more than one company, he may draw remuneration
from both or from anyone of them provided that the total remuneration drawn from
the companies does not exceed the higher maximum limit admissible from anyone of
the companies of which he is a managerial person.
Thus, assuming that the two companies in question do not have adequate profits,
the managing director, Mr. Shyam, cannot receive more than Rs. 1,00,000p.m:’ as
salary from both the companies, taken together. Accordingly, no approval of the
Central Government shall be required to be obtained.
Again, please note that the approval of the Central Government shall not be
necessary for his appointment as per conditions of Schedule XIII,since Mr. Shyam is
the managing director of only one other company will not bedifferentevenif Unique Yarn Ltd is a private companysincethe wtntment issoughtto bemadein apubliccompany.ScheduleXIII shall, Your company has received a notice from a shareholder holding shares,
paid-up value of which is Rs. 60,000 which is equal to 5per cent of the voting power
of the company, proposing himself for appointment as a Director of the company in
place of a retiring director. How would you, as the company secretary, deal with the
matter? Pleaseseeunder answer to
undertheheading-“ Appoinmentof Directorsother
thanthoseretiring”.
Mr. X who was apP9inted as a Director at the last annual general meeting
resigned. The Board filled up the casual vacancy by appointing Mr. Y. But within a few
days of his becoming Director, Ydied. The Board wishes to fill up the casual vacancy
by appointing Mr. Zin place of Mr. Yin the next Board meeting.
State the legal position.
Section 262provides that in the case of a public company or a private company
which is a subsidiary of a public company, if the office of any director appointedby the
companyingeneralmeetingis vacated before the expiry of his term of officein the normal
course, the resulting casual vacancy may, subject to any regulations in the Articles of the
company, be filled by the Board of Directors at a meeting of the Board.
It would thus be noted that Board of Directors is empowered to fill a casual
vacancy only in respect of a director appointed by the company in general meeting. If
a casual vacancy arises in the office of a director appointed in the casual vacancy under
Section 262, there is no casual vacancy within the meaning of Section 262 and cannot
be filled up by the Board of Directors. Consequently, Board should not be empowered
to appoint Mr. Z in place of Mr. Y. However, the Deptartment of Company Affairs has
opined that the vacancy may be filled by the Board as a casual vacancy. Certain
commentary writers do not subscribe to this view and suggest that vacancy should be
filled not as a casual vacancy but by appointing the person as an additional director
so that he ceases to hold office by the next AGM.
who was appointed as an additional director of a public limited company
for the first time, filed his consent with the company by way of a letter. He also signed
his consent in Form No. 29 and gave it to the company for filing with the Registrar of
Companies. Due to inadvertence the aforesaid consent was not filed within the
prescribed period of one month. What will be the state of X as director?
Section 264 which deals with filing of consent by a director has two parts. Under
the first part covered under sub-section
(I) it is provided that every person proposed to
be a candidate for the office of a director of a public company shall sign and file with the
company, his consent in writing to act as a director, if appointed.
In the given situation, this requirement has been duly complied with.The second part covered under sub-sec.
(2) requires that a person shall not act asa director of the company unless he has within 30 days of his a.E£2intplent signed and filed with theRegistrarhis consent in writing to act as such Anadditionl direct is exempted to filesuch consent in case of his appointment as a director or re-appointment as additional director. But, in the given case appointment being for the first time, n’on-filing of the consent within 30 days shall result in non-compliance of Section 264 (2).However,failure to file the consent with the Registrar, in the opinion of the Department of
Company Affairs, shall not result in the vacation of the office as director. The only
consequence shall be that penalty under Section 629-1):would become attracted. Such
consent may be filed after the e2Rir of 30 days on payment of additional fee as
contemplated under Section 611 ABC Ltd. is a deemed pu lic company. The present strength of the Board of Directors of ABC Ltd

Articles of Association

Accordingly, the resolution as aforesaid shall be required to be passed.
'A’ was appointed as Managing Director for life by the Articles of Association of a
private company incorporated on 1st June, 1970. The Articlesalso empowered X’to appoint
a successor. X’ appointed, by will,’G to succeed him after his death. Answer the following:
(i)Can ‘G succeed ‘X’ as Managing Director after the death of ‘X?
(ii)Is it possible for the company in general meeting to remove ‘X’ from his office
of directorship during his lifetime? [CA. (Final) Nov., 1995J
5lns.
(i)‘G’ can succeed ‘X’. Appointing a successor under a power conferred under
the Articles is not considered as ‘assignment of office’ which is prohibited
under Section312 [OrientalMetal Pressingvs. BhaskerKashinathThakoor[1961]
31Comp. Cas. 143 (SC)].
‘(j)’)In case of private companies only, directors appointed for life up to 1st April, 1952 V cannot be removed.
Any other director can be removed under Section 284, i.e.,by passing an ordinary
resolution of which special notice had been given.
(i) In Parween Woodcraft Co. Ltd., Mr. James was named in the list of first
directors. He, however, died before he could assume office. How can the problem
reg. g the appointment of a director be solved in this case?
(ii)case of appointment of directors of a company, all the directors were not
vote on individually, but were appointed by one resolution and no shareholder
objected to it. Discuss the position under the provision of the Companies Act.
(i) The vacancy in question is not a casual vacancy under Section 262 and
cannot, therefore, be filled by the Board of Directors. Accordingly, it will be necessary
for the subscribers to the Memorandum (who will then be only members) to convene
a meeting for the appointment of the director. To the extent to which the Articles do
not make any other provision in this behalf subscribers who would be entitled to
requisition a meeting may call the meeting. A meeting is not necessary if all the
subscribers concur in the appointment.
(i’i)Section 263 stipulates that in the case of a public company or a private company
which is a subsidiary of a public company a motion shall not be made for the
. appointment of two or more persons as director of the company by a single resolution
unless a resolution that it shall be so made has been first agreed to at the meeting
without any vote being given against it [Section 263(1)]. A resolution which is in
contravention of Section 263 (1) shall be void, whether or not objection was taken at
the time of its being so moved [Section 263 (2)]. Hence the appointment of directors
will be void. But, this does not exclude operation of Section 290 which validates acts
where defects are afterwards discovered.XYZMachineries Ltd. having a paid-up share capital of Rs. 80 lakhs proposes
to enter into contract with the following parties for the supply of certain components for a period of five years with effect from 1st January, 1995

Legal requirements

Legal requirements to be complied with by a public company
to give effect to the following proposals:
(i)Payment of Rs. 50,000 as minimum remuneration to the ordinary directors in
a financial year when the company has suffered a loss. The directors have
been receiving remuneration by way of cmmission on net profits’within the
prescribed limits.
(ii)Payment of minimum remuneration to a whole-time director in a financial year
when the company has suffered a loss. The appointment has been made in
accordance with the conditions specified in Schedule XIII to the Companies
Act and he is being remunerated by way of commission on net profits.
(iii)Appointment of a person as Managing Director without remuneration in
accordance with the conditions specified in Schedule XIII to the Companies
Act, when he is already holding position of Managing Director in a Private
Company. [C.A. (Final) May, 1995]
lemuneration by way of commission can be paid to an ordinary director only
with the sanction of a special resollllion .Fresh special resolution is required t be passed afterevery five years
The concept of minimum remuneration, however, has no relevance with
reference to ordinary””airectors.
Depending upon the effective capital of the company, a wholetime director can be paid @Rs. 75,000 p.m. to Rs. 2,00,000 p.m. as per Schedule XIII (w.e.f. .
2. 3. 2000). It is immaterial as to whether the ?mount is paid by way of salary ., or commISSIon.
Section 31d along with Schedule XIII, provides that no public compapy and no private company which is a subsidiary of a public company shall
appoint or employ any person as managing director, it he is either the
managing director or the manager of any other company including a private
company which is not a subsidiary of a public company except by passing a
resolution at a meeting of the Board with the consent of all the directors
present at the meeting and of which meeting, and of the resolutions to be
moved thereat, specific notice had been given to all the directors then in India.

The Board of Directors of a publiccompany

The Board of Directors of a publiccompany in the private sector having made
an average profitof Rs. 1 crore during the last three financialyears propose to donate
during the current year the followingamounts:
(i) Rs. 1,00,000 to a school run exclusivelyforthe benefit of employees,
(ii) Rs.40,000to a generalcharitablefund,and
(iii) Rs.4,00,000to a politicalparty.
Advise the Board of Directors about their powers in respect of the above explaining
the relevant provisions of the Companies Act. fC.A. (Final) May, 1995J
There are some restrictions on the powers of the Board in the matter of
donations. The Board of Directors of a public company, shall not, except with the
consent of the company in general meeting contribute to charitable and other funds
not directly relating to the business of the company or the welfare of its employees,
any amounts the aggregate of which will, in any financial year, exceed Rs. 50,000,or
5 per cent of its average net profits as determined in accordance with the provisions
of Sections 349 and 350 during the three financial years immediately preceding,
whichever is greater [Section293(1) (e)].
. The contribution referjQj.D..the bove clause relates to charitable and other
IV’ funds which do not directly relate to the business of the company or the
welfare of the employees. The power of the Board as regards contribution to
funds which directly relate to the business of the company or the welfare of
its employees is unrestricted. Hence, the Board of Directors of the company.
in the given case is competent to donate Rs. 1,00,000 to a school run exclusively
the benefit of employe amount of donation being less than Rs. 50,000, the same shall be in order
and not require the approval of the shareholders
(iv)According to Section 293A of the Companies Act, 1956, only a company which
is not a government company and which has been in existence for not less
than three financial years can contribute to a political party or for a political
purpose. The aggregate of the amounts in any financial year should, however,
not exceed five per cent of its average net profits for the last three financial
years. Accordingly, the company15emgTn the private sector and having been
in existence for more than three years, the Board of Directors can contribute
Rs. 4 lakhs (being less than 5% of Rs. 1 crore). However, the name of the
political party and the amount contributed must be disclosed in the profit and
loss account of the company.
Also, please note that the resolution for the purpose must be passed at a meetingof the Board and not by circulation

External Role as Co-ordinator

External Role as Co-ordinator
(a) Relating to the Shareholders. For maintaining cordial relations with the shareholders, the company secretary has to maintain proper link or liaison between the Board and the shareholders. Under the Companies Act, shareholders have the right to receive share certificates, notices of meetings, dividend warrants, etc. in time, to inspect books and registers of the company and have extracts of registers on payment of prescribed fees. The secretary must ensure that these rights of shareholders are honoured in time and the extracts of registers demanded by shareholders are supplied to him within the statutory periods.
The secretary should ensure that all letters and complaints from shareholders are
promptly dealt with and their queries are answered without violating the statutory
provisions. He should be polite and courteous while dealing with shareholders.
(b) Relating to the Government. The company secretary has a very important role vis-a-vis the Government. The secretary has to ensure that the provisions of the Companies Act and other laws of the country are complied with strictly. He must see to it that the company is implementing the policies of the Government in their true spirit. He should advise the Board about the changing policies of the Government. While sending information and reports to the Government, the secretary should make
sure that they are factually correct and are in accordance with the law.
(c) Relating to the Society. It has been well recognised that a company has some responsibility towards the society .We find that leading companies are making important contribution in providing more employment opportunities, imparting technical education, establishing schools, colleges and hospitals. The secretary should advise the Board regarding the areas where the company can make useful contribution.
Companies supplying goods and services should be more careful in discharging their
social responsibility by supplying goods and services at reasonable rates.
PRACTICAL PROBLEMS
1. The Board of Directors of Mis ABC Motors Ltd. made the following appointments
at its meeting held on 1st January, 1994:
(i) Mr.X, a Director of its subsidiary company, namely, Mis ABCForgings Ltd., was appointed as Purchase Manager on a consolidated salary of Rs. 11,000
per month witheffect from 1st January, 1994.
(ii) Mr. Ywas appointedas theSalesManageronaconsolidatedsalaryofRs. 11,000 per monthwitheffectfrom1st January, 1994.Answerthe followingexplainingthe
relevant provisions of the Companies Act: .
Pouny Ltd. is a public company which was being mismanaged due to which rtain parties applied to the CLBfor relief.The Central Government, pursuant to a recommendation by the CLB,by its order under Section 408, appointed Mr.Pureesh (an lAS, Officer)as a director of the company for a period of four years. The said Mr. Pureesh is a member of a joint Hindufamilyis which Mr.Paresh who is a director of the company is also a member.
Mr.Ramesh another directoron the Company’s Boardchallenges the action ofthe
Central Government on the ground that the consent of the company by a special
resolution was not obtained before appointing Mr.Pureesh (as he is a relative of Mr.
Paresh) and, therefore, the government nominee should forthwithvacate his officeand
refund the remuneration received tilldate. Examinethe provisions of law applicable to
the facts of the case, and give a well-deliberatedanswer.
this case, the appointment of Pureesh was made by the Central Government,
purse recommendation of the CLB, under Section 408 of the Act; more so,
because he was a Government servant, an IAS officer, not because of his relationship
with any other director on the Board of the company.
Section 314, deals with appointment of a person who is a relative of certain persons
(such as directors of a company) to an office or place of profit in the company. There
is no doubt that Paresh and Pureesh are relatives under section 6 of the Act. But, ‘office
or place of profit’, in relation to a director, means that he is appointed to an office or
place whictl entitles hj!!1J:a..hi!!! as a dus, holding oroffice oTaGirector in itself cannot be said to
constitutean ‘office or place of profit’. Moreover, Section 314(4) enacts that “nothing
contained in this section shall apply to a person, who being the holder of any office of
profit in the company is appointed by the Central Government, under Section 408, as
a director ofthe company”.
Therefore, Ramesh’s challenge of the appointment of Pureesh, would fail.
There is thus no question of Pureesh vacating his office and/or refunding his
remuneration, given the above legal position. The action of the Central Govern-
.. ment is valid, and the challenge of Ramesh is not maintainable in law. However,
the appointment under Section 408 can be made for not more than thg: years at one time. Thus, th apointment of Mr. Pureesh shall be valid for tree years
and not for four years.

Internal Role as a Co-ordinator

Internal Role as a Co-ordinator
(a)Relating to the Board, Chairman and Managing Director. The secretary is
responsible for convening the meetings of the Board and shareholders. He has to keep
the Board informed about the activities of the company and the progress made in
different areas. He has to inform them about the various legal obligations imposed on
them and keep them informed with the latest changes and developments taking place
in the corporate world. He is to guide the Board of Directors. He helps the Board in
taking various decisions. That is why it is said that “while the directors are the brain
of the company, the secretary is its ears, eyes and hands.”
The secretary is responsible for communicating the decisions of the Board to
different executives and the outsiders. The secretary is not vested with managerial
powers, he has to work under the managing or whole-time director. He has to act as
a connecting link between the officials and in the process to maintain utmost secrecy.
The secretary is to see that work of the company is carried on according to the
provisions of the law and that various returns, reports, etc. are sent in time. The
secretary is responsible for collecting the information from different operating units
and communicate the same to the top management. In this way the secretary helps the
management in taking right policy decisions.
(b)Relating to the Employees. The company secretary plays an important role as a
coordinator of the personnel policy of the company. Though for employing persons,
there may be a separate personnel department, but even then the secretary has to
advise the top management on manpower planning and formulation of recruitment
policy and seeing that the good labour relations are maintained. Whenever an
agreement is made with the trade union, the secretary should make a proper note
of the same so that there may not be any misunderstanding or dispute later on. The
secretary must see to it that the provisions of different labour welfare laws are
strictly complied with. The secretary has an important action, he must ensure that
the legal formalities and procedures are followed. The secretary must make every
possible effort to maintain cordial relations with the employees, it is then only that
objectives of the company could be achieved. The creative activities of employees
should be encouraged and wherever possible grants and subsidy from the company
should be given.
(c)Relating to the Auditors. Every company is required to get its accounts
audited by a qualified auditor and submit the annual audited accounts before
thegeneralbodyofshareholdersa ttheannualgeneralmeeting.Apartfromsta tu tory
audit, auditor’s certificates are also required under various other laws. The secretary
has, therefore, to co-ordinate with the auditors. The company secretary has to ensure
that the appointment of auditors is made in accordance with the requirements of the
Companies Act. The secretary has to see that all books and documents, resolutions,
etc. required by auditors for and its work are made available to them in time.

Secretary as a Co-ordinator

Secretary as a Co-ordinator
The secretary holds a high administrative position in the company. The Board of
Directors of a company are responsible for managing the affairs of the company and
they lay down the broad policies to be followed by the company. It is the duty of the
secretary to ensure that the policies and decisions of the Board are effectively implemented.
In this connection, it should be noted that a secretary cannot be regarded as
equal to a manager performing managerial functions. He has to co-ordinate the work
of executives at different levels. The secretary is an important link between the Board
and other executives. He can be said to be the “mouthpiece of i’1L Board”. The
company secretary plays the role of a coordinator not only within me company, but
also with the outsiders such as shareholders, society and different Government departments.
The secretary’s role as a co-ordinator has two aspects-internal and external.
His role as an internal coordinator consists of his activities between the Board,
managing director and the chairman on the one hand and other line and staff executives,
trade unions and auditors of the company on the other. His role as an external
coordinator relates to the relationship of the company with shareholders, Government
and society.

Administrative Officer

Administrative Officer
As a general administrative officer, he is responsible for efficient administration of the
company. The secretary has to ensure that the policies of the company are duly carried
out. He has to, at times, supervise, control and co-ordinate the functioning of different

departments such as finance, personnel. The best possible results can be achieved by
having a sound organisational structure. The company secretary is in such a position
that he can have an overall view of different aspects of company administration and
can develop a strong and efficient organisational structure.
The company secretary has to play an important role in financial administration.
He is to analyse the financial statements and recommend suitable steps. Though in
large-sized companies, the financial part is looked after by a financial expert, the
secretary is to assist the Board in laying down the policies and dealing with the
Government and financial institutions. The secretary has also an important role to play
in the personnel administration of the company. He can render valuable advice to the
Board regarding the recruitment, training, remuneration, promotion, retirement, discharge,
discipline of the staff.
The company secretary has to ensure the safety and proper maintenance of the
assets and properties of the company. He has to ensure that they are not misused. He
has to see that the property and other records are properly insured against loss by fire
and other risks. The company secretary has to ensure that the records are maintained
properly. With the fast changes taking place, a company secretary is expected to play
a still more important role in the administration of the company.
Explain the term ‘secretary’ and elucidate his role as a co-ordinator.
The Companies (Amendment) Act, 1988 has defined the term ‘secretary’ in
“Secretary means a company secretary within the meaning of clause © of subsection
(1) of Section 2 of the Company Secretaries Act, 1980, and includes any other
individual possessing the prescribed qualifications and. appinted to perform the
duties which may be performed by a secretary under this Act and any other ministerial
or administrative duties.”
This definition has brought the definition of ‘secretary’ in line with the definition
of ‘company secretary’ contained in the Company Secretaries Act, 1980. Act defines a company secretary as a person who
is a member of the Institute of Company Secretaries of India.
As per Section 383-A of the Companies Act, every company having a paid-up
share capital of Rs. 2 crores or more (w.e.f. 11.6.2002) must appoint a whole-time
secretary. The Companies (Amendment) Act, 1988 has added a new sub-section (I-A)
to Section 383-A providing penal provisions for non-compliance of statutory requirement
of appointment of a whole-time secretary.
Now, a company secretary plays an important role in the company administration.
He plays a three-fold role-as a statutory officer, as a co-ordinator and .as an
administrative officer.

Balance Sheet and Profit and Loss Account

Balance Sheet and Profit and Loss Account
The secretary is responsible for holding meetings of directors and shareholders.
He has to be present at all suc.h meetings and is required to make proper minutes of
the proceedings. According to Section 5 of the Companies Act, he is regarded as an
officer in default and he shall be held liable for any non-compliance of any provisions
of the Act.
As a statutory officer, the company secretary is also responsible to comply with
the provisions of other Acts, such as Income-tax Act, M.R.T.P. Act, F.E.M.A, Indian
Stamp Act, Sales Tax Act, various labour laws like Factories Act, Minimum Wages Act,
Payment of Wages Act, Industrial Di.sputes Act, etc.
As a Corporate Manager
A company secretary, besides being a statutory officer under the Companies Act and
other statutes, is also recognised as a corporate manager. He has to play the role of a
co-ordinator between the Board of Directors and other executives of the company as
well as act as a general administrative officer.
As Co-ordinator
A company secretary is the link between the Board of Directors and other executives
of the company. The Board lays down the policy decisions, but it is the secretary who
ensures their proper implementation. In the process, the company secretary plays the
role of a co-ordinator or a link between the Board and other executives, as well as
between the executives at different levels. In a company where there are several
independent departments such as sales, purchases, personnel, etc., he acts as a co-ordinator
with these functionaries for ensuring that the policy decisions are duly carried
out and if there are some matters which require further consideration or modification,
the secretary shall place them before the Board and convey the decision of the Board
to the concerned department.
The company secretary also acts as a co-ordinator between the company on the one
hand, and outsiders like the shareholders, customers, trade unions, Government and the
community at large on the other. He has to deal with the shareholders and has to comply
with various provisions in this regard; for example, issue of share certificates, notices of
meetings, inspection of books and registers of the company within the time prescribed by
law. He has to correspond with shareholders and to answer all their queries and complaints.
It is now widely accepted that the company has some responsibility towards the
society as well. The secretary can advise the Board regarding the matters where the
company can contribute to the welfare of the society.

What are the rights of a company secretary?

What are the rights of a company secretary?
Rights are given to the secretary by the Companies Act, Board of Directors and the
general meetings of shareholders. He also derives some rights out of his service agreement
with the company. A secretary has the following rights :
(i) He has the right to control and super,vise the working of his department.
(ii) As a principal officer of the company, he has the right to sign a document or
proceeding requiring authentication by the company.
(iii) He has a right to be indemnified by the company for any loss suffered by him
whil.e discharging his duties.
(iv)As an employee of the company, he has the right to receive remuneration. In
the event of winding-up of the company, he has a right to be treated as a
preferential..creditor for his salary, subject to a maximum of Rs. 1,000.
But a company secretary has no right to borrow money in the name of the company
or to make allotment of shares or register transfer of shares without the express
authority or consent of the Board of Directors. He has no authority to convene a
meeting of the company, or to remove a name from the register of members, or to take
policy decisions.
Explain the role of a company secretary in the functioning of a company.
OR
Discuss the role of a ‘Company Secretary’ as a statutory officer and as a corporate
manager.
The company secretary plays an important role in company administration.
From the position of a clerk, he has risen to the level of an officer of the company. The
scope of his role depends on the size and nature of the company. He is liable not only
to the company, but also to its shareholders, creditors, employees, consumers, society
and government.
Generally speaking, the company secretary plays a three-fold role-as a statutory
officer, as a co-ordinator and as an administrative officer.
As Statutory Officer
As a principal officer of the company, the company secretary is responsible for strict
compliance with the various provisions of the Companies Act and the requirements
of other Acts. HE!has a very important role to play from the incorporation stage to the
winding up of the company. The secretary is required to make statutory declaration
of compliance at the time of incorporation and commencement of business. He is
responsible for proper maintenance of books of accounts and other registers. He hasto sign several documents such as annual returns, return of allotment, etc

Contractual Liabilities

Contractual Liabilities
A company secretary enters into a service contract with the company and accordingly he has several contractual liabilities which arise out of his service agreement. These may be as follows:
(i) The secretary derives his powers from the Board, therefore, he should carry
out the orders given to him.
(ii) He should work for the company and should never allow his personal interest
to clash with the interest of the company.
(iii) He shall be liable to account for the secret profit made by him by virtue of his
position as a secretary.
(iv) He shall be personally liable if he acts beyond his authority.
(v) He shall be liable for any loss or damages caused to the company by wilful
misconduct or negligence in the discharge of his duties.
(vi) He shall be liable to indemnify the company for any loss suffered by the
company as a result of disclosure of some secret information relating to the
company.
(vii)He shall be liable for any fraud or wrong committed in course of his employment.
However, if the secretary performs his duties diligently and honestly, he shall not
be liable. The secretary shall also not be liable for’any fraud by his assistants unless he
is a party to such fraud.

Statutory Liabilities

Statutory Liabilities
The Companies Act has recognised the secretary as a principal officer of the company, and as such various liabilities have been imposed upon him. As per Section 5 of the Act, a secretary has been included in the list of 1/ officers in default” and is made liable to heavy penalties for any default or non-compliance of the provisions of the Act. The company secretary is responsible for conducting the affairs of the company in accordance with the provisions of the Companies Act. He is also responsible to comply with the requirements of other laws of the country. Thus, the company secretary may be held liable for various acts of omission or commission in the management of the company.
The company secretary may be held liable for the following matters under Companies Act:
(i) Default in Filing Returns as to Allotment. If a default is made in filing returns as to allotment of shares within the prescribed time, he shall be punishable with fine which may extend to five thousand rupees for every day during which the default continues
(ii) Default in the Preparation of Share Certificates, Etc. Share certificates and debenture certificates should be ready for delivery within three months after allotment and within two months after the application for registration of transfer; otherwise, a fine up to Rs. 5,000 for every day of default may be imposed
(iii) Default Regarding Register of Members. Failure to maintain register and index of members and debentureholders as required under the Act shall make him liable for a fine up to Rs 500 (iv) Default in Making Entries on the Issue of Share Warrants. When share warrants are issued in respect of fully paid shares, necessary entries should be made in the register of members. If a default is made, he shall be punishable with fine which may extend to five hundred rupees for every day during which the default continues
(v) Default in Registration of Charges on Properties Acquired Subject to Charge. When a company acquires any property which is subject to a charge of any kind, the necessary particulars of the charge should be filed with the Registrar, failing which a fine up to Rs. 5000 may be imposed
(vi) Default in the Filing of Particulars Regarding Charges. If a default is made in filing with the Registrar the particulars of any charge created by the company, he shall be punishable with fine which may extend to Rs. 5000 for every day during which the default continues
(vii) Default Regarding the Publication of Name of Company. If a default is made in getting the name and address of the registered office of the company painted or affixed outside every office or place of business, a fine up to Rs. 500 for every day of default can be imposed. If a default is made in engraving the name of the company in legible characters on its seal and on all its business letters, bill heads, etc., a fine up to Rs. 5000 may be
(viii) Default in Filing of Annual Returns. If a default is made in filing the annual returns as per the provisions of Sections. 150, 160 and 161, he shall be liable for a fine which may extend to Rs. 500 for every day of default
(ix) Default in the Holding of the Statutory Meeting. If a default is made in holding the statutory meeting, he shall be liable to a fine which may extend to Rs.
(x) Default in Holding Annual General Meeting. Default in holding the annual general meeting in accordance with the provisions of Sections. 166 and 167, shall make him liable for a fine which may extend to Rs. 50,000 and in the case of continuing default, with a further fine up to Rs. 2500 for every day during which the default
(xi) Default in Circulation of Members’ Resolutions. If a default is made in circulating members’ resolution of which they have given notice to the company, he shall be
puishable with fine which may extend to Rs. 50,000
(xii)Default in Registering Certain Resolutions and Agreements. This default shall be punishable with fine which may extend to Rs. 200 for every day during which the default (xiii) Default in Recording the Minutes of the Meetings. If a default is made in recording the minutes of all proceedings of every general meeting and meetings of the Board, a fine up to Rs. 500 may be imposed
(xiv)Default in Maintaining Minutes Book or Allowing Inspection or Furnishing Copies of Minutes to Members. If a default is made in furnishing a copy of the minutes within seven days after the date of request by any member or if inspection is not allowed, a fine up to Rs. 5,000 may be imposed
(xv)Failure to Give Notice of Board’s Meeting. The notice must be given in writing to every director for the time being in India and at his usual address in India to every other director, otherwise a fine up to Rs. 1000 may be imposed
(xvi)Failure to Maintain the Register of Directors. If a default is made in maintaining the register of directors, he shall be liable to be punished with fine, which may extend to Rs. 500 for every day during which the default continues
(xvii)Failure to Maintain the Register of Directors’ Shareholdings. For this default a fine up to Rs. 50,000 may be imposed
(xviii)Failure to Maintain Register of Inter-corporate Loans and Investments. For this default a fine up to Rs. 5,000 plus a further fine up to Rs. 500 per day of default may be imposed In addition to the above-mentioned liabilities under the Companies Act, a company secretary is responsible for deducting income tax from the salaries of the staff and from dividends or interest and depositing the same in Government treasury under Income-tax Act.
Under the Indian Stamp Act, a secretary is responsible to ensure that documents like share certificates, share warrants, debenture certificates, transfer forms, etc. are properly stamped as per the provisions of Indian Stamp Act.
In case the company is a manufacturing concern the secretary shall also be responsible for complying with the requirements of the various labour laws such as Employees’ State Insurance Act, Factories Act, Minimum Wages Act, Payment of Wages Act, Industrial Disputes Act, etc. The company secretary is also responsible to fulfil the duties cast upon him under the Foreign Exchange Management Act (F.E.M.A.) and the Monopolies and Restrictive Trade Practices (M.R.T.P.) Act.

Duties under Income Tax Act

Duties under Income Tax Act
The company secretary has been considered to be a “principal officer” under the
Income-Tax Act and he is required to discharge the following duties:
(i) To ensure that income-tax is deducted at source from the salaries paid to employees, or from dividend or interest paid or payable to shareholders and debentureholders.
(ii) To ensure that a certificate in the prescribed form is issued for deduction of
tax at source.
(iii) To ensure that the tax so deducted has been deposited in the Bank or the
Government treasury in time.
Under the Indian Stamp Act, it is his duty to see that every legal document, share certificate, share warrants, transfer forms, debenture certificates, etc. are affixed with stamps of requisite amount as required under the Act. Under the Sales Tax Act, the secretary has to ensure the timely submission of returns and payment of tax.
The company secretary is also required to perform various duties under M.R.T.P. Act, F.E.M.A., and if the company carries on manufacturing business, then the company secretary has to see that various provisions of different labour laws are also complied with.
Discuss the statutory and contractual liability of a company secretary.
The liability of company secretary may be discussed under two broad heads:
(a) Statutory liabilities, and (b) Contractual liabilities.

What are the statutory duties of a company secretary?

What are the statutory duties of a company secretary?
A secretary is to perform duties which are required to be performed by him under the Companies Act. Besides he can also perform other administrative and ministerial duties which are entrusted to him. The actual duties to be performed by a company secretary vary with the type of business, the size of company and his status in the administrative set-up. The company secretary is required to comply with the various requirements of the Companies Act such as filing the documents and returns, maintaining the statutory books, etc.
In a small-sized company, the secretary attends to all routine duties including
maintaining accounts. But in a very big company having crores of rupees of share
capital, the routine work like accounting, correspondence, etc., is entrusted to different departments and the secretary is required only to co-ordinate the working of various departments. Sometimes, the Board of Directors may assign some managerial duties to the secretary. The secretary has even been placed as a director on the Board by some companies. It is in this context the statement that the “post of the secretary is wht the company and the individual make of it” seems very true. In modem times, :’1 large-sized companies, the secretary occupies a pivotal position in the administration of the company.
Nowa company secretary is not considered as a mere clerk but is an important officer along with directors, etc. As per Section 5 of the Companies Act, a company secretary is now included as “an officer in default” along with other managerial personnel, and he shall be liable for not complying with the requirements of the Act.
Statutory Duties
As the principal officer of the company the company secretary is responsible for complying with the various provisions of the Companies Act and other laws of the country. Some of the important statutory duties of a company secretary under the Companies Act are as follows:
(i) To verify and sign any document or proceedings requiring authentication by
the company
(ii) To deliver for registration returns of allotment and contracts relating to
allotment of shares for consideration other than cash
(iii) To give notice to the Registrar for increase of share capital
(iv) To deliver the share certificates within three months of allotment or within two months of registration of transfer
(v) To make entries in the register of members on issue of share warrants
(vi) To make available trust deed for inspection to every member or debenture
holder ‘on their request within seven days of rquest and on payment of prescribed
(vii) To deliver for registration to the Registrar particulars of mortgages and charges
(viii) To get painted or affixed the name or name plate of the company outside
every office or the place of its business, to get it printed on documents of the
company and to get it engraved on the seal of the company
(ix) To make the statutory declaration for obtaining the certificate of commencement of business
(x) To sign the annual return and certify the documents annexed thereto
(xi) To make available forinspection and furnish copies of the register of members
(xii) To send notices of general meetings to members as well as of Board.meetings to
(xiii) To file resolutions and agreements requiring registration with the Registrar
(xiv) To record the minutes of the proceedings of every general meeting and of
every meeting of the Board of Directors within thirty days of the conclusion of every such meeting
(xv) To make available for inspection the minutes book of general meetings
(xvi) To make available for inspection the register of directors
(xvii) To maintain statutory books like register of investments held by the company
in the name of its nominee register of charges, register of members , index of members , register of cOntracts in which directors are interested , register of directors, manager and secretary
, and register of directors’ shareholdings .

Link between the company and the outside world

The secretary acts as a link between the company and the outside world.
The ostensible authority of the company secretary to bind the company by his acts arises from the company’s relationship with the outside world. If the company represents to
outsiders that the secretary has the necessary authority to enter into contracts on behalf of the company, then the company shall be liable to third parties who have acted on such representations

The third parties can hold the company liable for such contracts provided it can be provided that
(i) a representation was made to outsiders that the company secretary had the authority to enter into such a contract;
(il) the representation was made by a person having actual authority to do so;
(iil) the outsider was actually induced to make the contract and he relied upon it;
(iv) the contract was within the powers of the company; and
(v) such powers were validly delegated to the secretary.
Even though a company secretary enjoys a unique position in the management hierarchy, it cannot be assumed that he has managerial powers. Actually, the secretary has no role in the formulation of policies, which is the function of the Board. He cannot be regarded as equal to a manager performing managerial functions. There is a distinct difference in the sphere of these functions. That is why, a company secretary is not included among ‘managerial personnel’ within the meaning of Section 197-A of the Companies Act and his remuneration is not taken into account for the purpose of calculating overall managerial remuneration under Section 198 of the Act.
However, as an agent of the company, managerial powers can be delegated to the secretary by the company and/ or the Board of Directors. There is nothing in the Act to prevent the Board to delegate him wider powers. But without such delegation, the secretary has no authority to exercise managerial powers. He cannot bind the company unless he has been expressly authorised with such powers.
The company secretary cannot exercise the following powers unless he has been
properly authorised:
(i) to allot shares or to register a transfer of shares;
(ii) to convene a meeting of the company;
(iii) to borrow money on behalf of the company;
(iv) to acknowledge a debt in any suit against the company; and
(v) to make an application to Company Law Board forrelief in cases of oppression
and mismanagement.
In conclusion, it can be said that a company secretary has no authority to make any representations or to enter into contracts on behalf of the company without express authority from the company or the Board. He shall be personally liable to third parties for representations for which he has no proper authority.
“The post of the secretary is what the company and the individual make of it.” Explain and discuss the statutory duties of a company secretary.

How can a Company Secretary be dismissed?

How can a Company Secretary be dismissed?
A secretary may be removed from his office by a resolution of the Board of Directors. A secretary is an employee of the company, the general rules of employment of the company will also be applicable to him. He can be removed by giving the due notice in writing or compensation in lieu thereof. Even where the appointment of a secretary is for a fixed period, the company can dismiss him before the said period by giving due notice.
A secretary can, however, be dismissed without giving him a notice in the following cases:
(a) for wilful disobedience;
(b) for misconduct or moral turpitude;
(c) for negligence;
(d) for incompetence or permanent disability.
In the event of compulsory winding up of the company, the order of the court shall serve as a notice of discharge of officers and employees of the company, i.e., the secretary will also be automatically dismissed.
When the appointment of a secretary is terminated, necessary particulars in duplicate in
should be filed with the Registrar of Companies within thirty days of termination. Necessary changes should also be made in the Register of Directors, Managing Director, Secretary, etc.
The term ‘officer’ as defined in the Companies Act, 1956, includes secretary, as it does any director or manager. State the ostensible authority of a company. secretary to bind the company by his act and also give at least three examples where
he has no such authority.
According to Section of the Companies Act, 1956, the term “officer” includes any director, manager or secretary. This clearly shows that just like directors or a manager in a company, a secretary is also recognized as an officer of the company. Though, in the eyes of law, the secretary is a mere officer of the coir. any, in actual practice, he commands considerable influence with the directors. Plays an important role and enjoys a unique position in the management of the company.
The position of the secretary
changed considerably during the last thirty years. In Barnett Hoares & Co. vs. The South London Tramways Co. Ltd. (1887), “a secretary was termed as a mere servant; his position is that he is to do what he is told, and no person can assume that he has any authority to represent anything at all.” Therefore, the secretary had no original authority, he had to work under the full control of the Board of Directors. He had no authority to negotiate contracts or make representations. In Panorama Developments [Guildford Ltd. vs. Fidelis Furnishing Fabrics Ltd. (1971)J, it was observed by Lord Denning that” a company secretary is a much more important person nowadays than he was in 1887. He is an officer of the company with extensive duties and responsibilities. He is no longer a mere clerk. He regularly makes representations on behalf of the company, and enters into contracts on its behalf.” Mr. Justice Salmon also observed in this case that the secretary has “ostensible authority to sign contracts on behalf of the company”.
Now the company secretary has been bracketed with the managerial personne including directors, managing director and manager. He is recognised as a responsible officer of the c.ompany under Rule (2) (b) of the Company Rules. He is also responsible for observing and complying with the requirements of various other Acts such as M.R.T.P. Act, F.E.M.A., Income Tax Act, etc.
It is because of the important position of the company secretary, the Companies Act has specifically provided that companies having a paid-up share capital of Rs. 50 lakhs or more must appoint a whole-time secretary who should be a member of the Institute of Company Secretaries of India. Even for smaller companies the secretary must possess the prescribed qualifications.
It is true that the secretary has to carry out the instructions of the Board, but for routine day-to-day affairs, the secretary is responsible and he has the authority to carry out the work. As an agent of the company, the secretary has to carry out the policy decisions of the Board. The secretary should not appoint a sub-agent to do the company’s work without proper authority. If he delegates his powers in an unauthorised manner, the secretary shall be personally liable for the consequences.

The secretary is appointed by a formal resolution of the Board.

The pro-tern secretary must, immediately after the incorporation, secure his position by getting a resolution passed at the first Board meeting. This resolution appointing a person as the secretary of the company should contain the terms and conditions of his appointment.
The secretary is appointed by a formal resolution of the Board. If a director is interested in the appointment of the secretary, he must disclose such interest and should not participate in the discussion or voting.
If a director of the company or his relative is to be appointed as the secretary, a special
resolution should be passed at the general meeting for such an appointment.
In accordance with Section 303 (1) of the Act, the appointment of a person as secretary must be recorded in the Register of Directors, Managing Director, Manager, Secretary, etc. .
The particulars of such appointment should be filed in duplicate in form No. 32
with the Registrar within thirty days of the appointment.
The specimen form of resolution for appointment of secretary is as follows:
RESOLVED THAT: Shri who possesses the requisite qualifications under the
Companies (Appointment and Qualification of Secretary) Rules, 1988, be, and is hereby, appointed secretary of the company on the terms and conditions set out in the draft agreement, a copy of which is initialed by the Chairman for the purpose of identification and placed before the meeting for approval, with effect from ......
RESOLVED FURTHER: That the aforesaid agreement with Shri regarding his
appointment as secretary is hereby approved and the agreement will receive the seal.
of the company in the presence of Shri and Shri , directors of the company, who
will sign the same on behalf of the company.

How is the Secretary of a company appointed

Every company having a paid-up share capital of Rs. 2 crores or more must have a whole-time secretary. Only individuals can be appointed as

secretary and no individual can hold the office of a secretary in more than one company: Though it is not compulsory for companies having a paid-up

share capital of less than Rs. 2 crores to have a whole-time secretary, yet because of the complexities of the various laws, it

is desirable to appoint a secretary. .

The promoters of the company generally appoint the first secretary who helps them in fulfilling the various formalities. He is known as pro-tern secretary.

The pro-tern secretary appointed by the promoters mayor may not be appointed as regular secretary by the Board. Even when the name of the first

secretary is mentioned in the Articles, it does not bind the company to appoint that very person as its secretary, because Articles bin9 the company to its

members only and it does not constitute an agreement between the company and the outsiders. Therefore, if the pro-tern secretary is not appointed as

the first secretary by the Board after incorporation