Company Secretarial Practice PDF

Chapter 1 COMPANY SECRETARIAL PRACTICE The role of the Company Secretary a. Who is a Company Secretary? The company secretary is a hold...

Chapter 1 COMPANY SECRETARIAL PRACTICE The role of the Company Secretary a. Who is a Company Secretary? The company secretary is a holder of a senior position in an organization and is responsible for the efficient administration of a company, particularly with regard to ensuring compliance with statutory and regulatory requirements and for ensuring that decisions of the board of directors are implemented. He is also responsible for best Governance practices being adopted in an Organization relating to Board and sub-committee compositions. He acts as the gateway for information, communications, advice and arbitration between the company, its shareholders and the regulatory authorities, such as Registrar of Companies. In order to fulfill the roles effectively, the company Secretary must be fully aware of the rights, duties and obligations of these groups so that he can provide independent, impartial advice and support. As an officer of the company at the center of the decision making process, the company secretary is in a powerful position. He should assist and advise the board on any statutory and regulatory guidelines applicable to the company in the pursuit of profit and growth, but should also act with integrity and independence to protect the interests of the company, its shareholder and its employees. The company secretary is the key to the efficiency and effectiveness of the board and to the smooth running of the company. To fulfill the role, he must not only keep up to date with the relevant legal, statutory and regulatory requirements, but also be able to give impartial advice and support to directors. b. The legal recognition of Company Secretary in Sri Lanka Under Section 221 of the Companies Act No.7 of 2007, every company shall have a secretary. No person shall be appointed as a secretary of the company unless he has complied with the following Sec 221 (2)(a) Consented to be the secretary by submitting the prescribed form 19 (Annex B) to the Registrar of Companies along with the form 20 (Annex D) and Sec 221 2(b) Certified that such person has the qualifications as may be prescribed in relation to that company, under Sec 222 of the Companies Act The other aspects relating to the tenure, appointment, removal etc. Sec 221(3) Tenure of office – a person named as the secretary of a company in an application for incorporation or in an amalgamation proposal can continue to hold office as the secretary from the date of incorporation of the company or the date of amalgamation of the proposal becomes effective (as the case may be) until that person ceases to hold office under any provision of the Act or any provisions contained in the Articles of the company. Sec 221 (4) Appointment/Removal – unless the Articles of the company otherwise provides the board of directors of the company has the power to appoint or remove the secretary of the company. The details on appointment and resignation/removal of a company secretary is detail below in the Notes. 1  Sec.223(1) Particulars in the Register of Directors and Secretaries - Every company is required to keep (at its registered office or at such other place as may be notified to the Registrar under the Sec.116, a register of its Directors and Secretaries containing the particulars specified in the Act. Generally, in the case of individuals, the full name/former name (if any) usual residential address business occupation and in the case of a corporate being a secretary, the name of the firm, registered address secretary’s registration number and date of appointment. Sec. 223 (2) & (3) Notice of change - Any change (including a new appointment) in the secretary of the company or particulars contained in the Register of Directors and secretaries, in respect of a secretary of the company should be notified to the Registrar in the prescribed form (form 20) (sec 223(2) within twenty working days. (sec.223(2) & (3)) Failure to give the required notice is an offence (sec. 223(4)) and the Company will be guilty of an offence and be liable to a conviction to a fine not exceeding Rs 100,000/- and every officer of the company who is in default shall be guilty of an offence and be liable on conviction to a fine not exceeding Rs 50,000/- c. Prescribed Qualifications for a Secretary The Secretary of a Company is required to have the prescribed Qualifications (sec 221(1)) As no Qualifications have yet been prescribed under the Act, the Qualifications prescribed under the 1982 Act shall still apply. The Secretary of every company having turnover or stated capital of an amount prescribed under the Act should have such Qualifications as may be prescribed, having regard to the nature of the duties the secretary will be called upon to discharge. The requisite Qualifications for the post of Secretary prescribed by the regulations made under the Companies Act No.17 of 1982 and published in the Government Extraordinary Nol.471/6 of 14 th September 1987 are still in operation because of Sec. 530(1). No person shall be entitled to act as the secretary of a company having a turnover of One Million Rupees or more per annum or stated capital of Five Hundred Thousand Rupees or more unless - (a) He is a citizen of Sri Lanka and is ordinarily resident in Sri Lanka and (b) (i) he is an Attorney-at-law or ii) he is a member of the Institute of Chartered Accountants of Sri Lanka; or iii) he is a member of the Association of Chartered Secretaries & Administrators (now the Institute of Chartered Secretaries & Administrators in Sri Lanka); or iv) he is a member of the Institute of Cost & Management Accountants (now the Chartered Institute of Management Accountants) or; v) he is a member of an Association o Institute approved by the Minister, which provides a course of Company Law or Company Secretarial Practice; or vi) he is a person who has obtained or any special qualification in relation to company secretarial work from an institution or other body approved by the Minister; or vii) he is a person who by virtue of his holding or having held any other position, or of his being a member of any other body in the public or private sector for a period not less than twenty years, appears to the Registrar to be capable of discharging the functions of a secretary of a company; or 2  viii) he has on the day immediately prior to the date of coming into operation of Companies Act No.17 of 1982 held the office of Secretary or Deputy Secretary or Assistant Secretary of a company and satisfied the Registrar of his competence to discharge the duties of a Secretary. For the purpose of the abovementioned provisions, a corporate body or a firm may function as secretary of a company if a director of such corporate body or all the partners of the firm, as the case may be, possess the qualifications set out in item (a) and any of the qualifications set out in item (b) above. Any partner or firm or any other person shall not act as secretary of a company if such firm or such other person acts as auditors or auditor of such company. No public company or a private having a turnover of Rupees One Million or more per annum (Rs. 1,000,000/-) or paid-up capital of Five Hundred Thousand Rupees (Rs.500,000/-) or more shall have a secretary who is not registered as a secretary under these regulations. d. Appointment of a Company Secretary On incorporation of a new company the person named as company secretary in Form 1 is deemed to have been appointed as the company secretary of the company. The form 1 is delivered to the Registrar of Companies along with the consent of the Secretaries (Form 19) and consent of the Directors (Form 18 – Annex c) together with the Articles of Association signed by the subscribers. Once the Company secretary has been appointed the name and other particulars has to be entered in the Register of Directors and Secretaries indicating the date of appointment in the remark’s column. When a new company secretary is appointed the following action must follow: 1. In the event the Company is a Listed Entity, a corporate disclosure should be made to the Colombo Stock Exchange. 2. The details of the Company Secretary must be entered in the Register of Directors and Secretaries and the Form 20 (Changes in Director/Secretary) and the Form 19 (consent)should be filed with the Registrar of Companies withing 20 working days along with the extract of the Resolution appointing the secretaries. 3. An internal communication to the staff should be made on the appointment/resignation of a company secretary A Company, if permitted by the Articles, may appoint an Assistant Company Secretary or a Joint Company Secretary. Please note that only the appointment of a joint company secretary should be informed to the Registrar of Companies by filing the Form 20 & 19. A Company Secretary in a Bank or Non-Bank Financial Institution is considered a Key Management Personnel (KMP) and prior approval needs to be obtained from Director Bank Supervision/Supervision of Non-Bank Financial Institution before such appointments are made. e. Resignation and Removal of a company Secretary Unless the Articles otherwise provide the Board of Directors of the company has full power to remove the company Secretary by simple majority and appoint a replacement thereof. The Company Secretary may resign by giving notice in writing to the Board and the following procedure should be followed. 3  1. A board resolution needs to be passed by the Board of Directors for removal or accepting the resignation of the Company Secretary and to appoint a new company Secretary. 2. The changes must be entered in the Register of Directors and Secretaries immediately and the relevant forms (20, 19) should be filed with the Registrar of Companies within 20 working days. 3. In the case the Company is a listed entity, a corporate disclosure needs to be made immediately on the change of the secretaries i.e., resignation/removal/appointment. f. The legal recognition of Company Secretary The Company secretary is a principal officer of the company with regard to secretarial functions of the management of the company. Under Sec. 529 of the Act “officer’ is defined to include the Secretary of the company. The company secretary is an officer of the company charged with the duty of ensuring that affairs of the company are conducted according to the provisions of the Companies Act, the Articles of Association and the law. The appointment of secretary, the qualification of the secretary etc. are laid down under the provisions of the new law. Unless new Regulations are introduced in this regard, the existing regulations shall continue to be in force in view of Section 530(1)(a) of the Act. The legal position of a company secretary may be explained as follows – (a) The secretary of a company, whose duty is to act in accordance with the instructions given to him by the directors. In the performance of his duties, therefore, the secretary can properly act only under the order of the directors. The secretary cannot, for instance, summon a general meeting on his own authority or register a transfer of shares unless instructed to do so by the directors or borrow money for the purposes of the company without the like authority. Further he has no implied authority to bind the company by making any representation. (b) The Secretary of a company, being the Chief Administrative Officer of the company by virtue of his office, is also an agent of the company in a restricted sense. He has ostensible authority to enter into contracts on behalf of the company as regards matters connected with office administration, e.g. employment of office staff, ordering of office equipment, the hiring of vehicles. As agent, he must conduct the business with reasonable care and diligence and shall be made liable to account for any secret profits made by him in the course of his employment. The company is liable in respect of all such acts of its secretary as are done by him within the scope of his authority, and it is immaterial whether the secretary was acting in his own interests, or in the interest of the company. It may be noted that the secretary is not an agent of the company like directors. He is an agent in the capacity of a servant and cannot act for the company without authority from the directors except as regards matters covered within his administrative function. (c) The secretary is also an officer of the company. As ‘officer’ of the company, (under Sec. 529 of the Companies Act “officer’ is defined to include the Secretary) he may incur liability to statutory penalties by reason of non-compliance with the requirements of the Act, for instance, he may held liable for default in holding the statutory meeting and filing the statutory reports, for default in registering certain resolutions and agreement as required by the Act. The secretary like other officer of the company, will be punishable with imprisonment, if he falsifies the books of the company, or if he willfully and knowingly makes a material false statement in the Balance Sheet or in certain returns, reports, certificates or other document of a company which is being wound up. Again, misfeasance proceedings may also be taken up against him in a winding up if he has misapplied any money or property of the company or has been guilty of breach of trust. 4 The law does not state explicitly what the company secretary should do, in practice, however the company secretary plays a central role in the governance and administration of a company, with particular responsibilities in the three main areas – The Board – the company secretary provide essential practical support to the chairman and other directors, both as a group and individually, ensuring that statutory and regulatory requirements are met for the conduct and running of board meetings, and that the board has access to the information it requires. The secretary should also facilitate the acquisition of information by all board and committee members so that they can maximize their ability to contribute to board meetings, discussions etc. The company secretary should assist in compilation of board papers and to filter them to ensure compliance with the required standard of good governance. It may also be part of the company secretary’s role to raise matters which may warrant the attention of the board. The Company – the company secretary is responsible for ensuring that the statutory and regulatory requirements are met, particularly in relation to Companies Act and related legislation governing the reporting of activities of the company (for e.g. filing statutory returns.) and that due regard is paid to the specific business interests of the company. For example a manufacturing company may require different approach from that of a bank or a financial service company. The company secretary needs to assist in the implementation of corporate strategies by ensuring that the board’s decision and instructions are properly carried out and communicated. The Shareholders (Members) – The company secretary is the primary point of contact for all shareholders and is principally responsible for the maintenance and management of shareholders records, such as the register of members, and organizing shareholders-related events, such as paying dividends, producing and issuing the annual report and accounts and coordinating general meetings. The company secretary needs to communicate with the shareholders as appropriate and to ensure that due regard is paid to their interest. Throughout these main areas of activity the company secretary is charged with the responsibility for ensuring that the business is called on according to principles of good corporate governance. The company secretary should be aware of the company’s Articles of Association and also needs a detailed working knowledge of the Articles of Association, which contains requirements and procedures which cover all three of the areas. (Model Articles, the legal effect of the Articles, Alteration of Articles) g. Core-duties of a Company Secretary The duties and responsibilities of the company secretary vary from company to company. The following identifies the co-duties. 1. The secretary should be present at all meetings of the company and of the directors, and is the coordinator of such meetings. He is responsible for drafting the agenda and agreeing it with the chairman and CEO, as well as collecting organizing and circulating the papers required at the meetings. He is also responsible for organizing board committees meeting and acting as a channel of communication for non-executive directors. 2. The secretary is responsible for ensuring that the General Meeting follows the appropriate procedures and complies with the requirements of Companies Act No.7 of 2007 and the company’s Articles of Association. He will usually coordinate the administration of the meeting. 3. The secretary is usually responsible for the minuting General and Board Meetings and maintain such minute Books. 4. The secretary will communicate the instructions of the board of directors to relevant officers for actioning purposes and follow up on the action items of the meeting. 5 5. The secretary is responsible for ensuring that the company complies with its Articles, drafting and incorporating amendments in accordance with the correct procedures. 6. If the company is listed, the secretary is responsible for ensuring compliance with the Listing Rules, rules on takeovers and mergers and managing relations with the Listing authority (Colombo Stock Exchange) through the company brokers. 7. The Secretary must ensure compliance with the Companies Act and all other relevant regulatory requirements. 8. The secretary is responsible for the registrar functions within the company, and in particular for the maintenance of statutory registers, such as - a) Register of Members, including monitoring movements to identify any ‘stake-building’ and the beneficial owners of holdings and Index of shareholders b) Register of company charges c) Attendance Books d) Register of directors and secretary e) Register of debenture holders (if kept) f) Interest Register g) Minute books of the proceedings of meetings of company and its directors h) Accounting records i) Maintenance of company seal register In addition to the above, Section 116 of the Companies Act No7 of 2007 requires the Company to maintain the following records at the Registered Office a. The Certificate of Incorporation and the Articles of Association of the company; b. Minutes of all meetings and resolutions of the shareholders passed within the last ten years; c. Minutes of all meetings held and resolutions of director passed and directors’ committees held within the last ten years; d. Certificates required to be given by the directors under this Act within the last ten years; e. Copies of all written communications o all shareholders or all holders of the same class of shares during the last ten years, including annual reports prepared under section 166; f. Copies of all Financial statements and Group financial statements required to be completed under this Act for the last ten completed accounting periods of the Company; g. The Counting records required to be kept under Section 148 for the current accounting period and for the last ten accounting period. 9. The Secretary must file statutory returns and certain documents with the Registrar of companies to comply with periodic filing requirements or to notify of changes regarding the company, for example include a) Annual Returns b) Report and Accounts c) Amended Articles of Association d) Changes to Share Capital e) Notice of appointments, removals and resignations of directors and secretaries The Secretary coordinates the publication and distribution of the company’s Annual Report and Accounts and interim statements and the preparation of the Directors’ Report. 10. The Secretary may implement and administer directors’ and employees’ share schemes 6 11. The Secretary ensures the safe custody and proper use of common seal (if the company has one) and maintains a register of sealing. 12. The Secretary is responsible for the administration of any subsidiary companies and for maintaining the record of the group structure. 13. The Secretary is the focal point for shareholder communication and is the shareholders’ first point of contact with the company. He is responsible for organizing the distribution of announcements and circulars, arranging payment of dividends, issuing documentation regarding rights and capitalization issues, and maintaining good relations with institutional shareholders. 14. The Secretary conducts all correspondence with shareholders as regards dividends, calls, transfers, forfeitures, issue and other general enquiries in respect of shares. 15. The Secretary is responsible for registering share ownership, dealing with transfers, and other matters affecting shareholdings. 16. The Secretary is responsible for maintaining the statutory requirements for a registered office address, allowing public inspection of documents when required under the law and for ensuring that all business communications whether in hard copy for electronic form letters, invoices, website show the name and any other required details of the company and comply with the current stature and regulation. 17. The company secretaries are deemed to be an officer of the company and as such have certain responsibilities and potentially have liabilities. The company secretary will often be the only expert in many areas of compliance (e.g., The Annul Returns requirement) and hence the directors will be reliant on him to take responsibility for ensuring full compliance with such areas. Company Secretaries operate in a niche area where not many people in an organization will have knowledge. There is, therefore, a considerable onus on a company secretary to be professional in his duty to ensure compliance. 18. Company secretaries can employ professional, management and control techniques to ensure that the many different compliance obligations are not overlooked and that their work schedule is properly planned. Typical methods company secretaries use to ensure compliance include. - Establishing and maintaining checklists for all standard procedures (e.g. appointment of a director, filing of annual accounts) - preparing detailed timetables for scheduled events (e.g. dividend payments) - For large companies, using a specialist software package (essentially a database) for holding the statutory registers. The software package have features which help ensure compliance (for e.g. they can check the validity of entries made on the database and reminders can be set to ensure compliance events are not overlooked) - ensuring that company secretaries make use of comprehensive and up-to-date reference material, such as CA 2007, new Inland Revenue Act, and for listed companies the various Listing Rules. This should be accompanied by sufficient continuing professional development. - acting promptly after an event has occurred (for e.g., a company secretary should prepare the minutes of a board meeting as soon as possible after the meeting and should ensure that signed minutes are entered into the minute book without delay). 7  - if there are more than one person in the company secretary’s department, it is helpful to hold regular meetings to ensure that progress on all compliance matters is being met. The secretary’s signature is an important feature on many documents such as Annual Returns it is a statutory requirement. When signing any document on behalf of the company, he should take care to negative his own personal liability, by ensuring that he signs in a representative capacity, for example For and on behalf of …………..Co. Ltd. (signed) …………………..] Secretary He should also ensure that the company is correctly described by name, as a slight variation in the name, or even the omission of the word ‘Limited’ from the name, may render him personally liable. h. Practical applications of company secretary’s duties before during and after a Board Meeting Before the board meeting (a) In consultation with the chairman, decide both the date time, and place of the meeting (if these had not been fixed beforehand) (b) Dispatch the notice of meeting well in time to all the directors, indicating the date, time and venue of the meeting and the agenda of the business to be done (c) Advice the company’s managers, whose presence may be required at the meeting, of the date time and place of the meeting and of any business to be done which comes within the range of responsibilities of each of them., (d) Circulate the members of the board, as early as possible before the date of the meeting any financial statements, reports and other board papers so that they will have sufficient time to study them before they attend the meeting (e) If the meeting is to be held elsewhere, other than the company’s board room make the necessary arrangements well in time to hold the meeting at the selected venue; (f) Get ready with all the documents that will be required at the meeting, such as the directors’ attendance book(or attendance sheet), minutes to be approved, the seal book, board papers and any other documents or stationery that will be needed, including the necessary papers to enable him to take down the notes of the meeting’s proceedings; and (g) On the day of the meeting, ensure that all the boardroom, or other selected venue, is ready for the meeting and arrange for any refreshments necessary to be served at the meeting. During the Board Meeting 1. When the meeting proceeds to business, ensure that the required quorum, in terms of company’s articles, is present 2. Place before the chairman the agenda for the meeting and the minutes of the previous meeting for attention by him 3. Pass the directors’ attendance book (or attendance sheet) round for signature of the directors present. 4. Report to the chairman any excuse given by a director for his inability to attend the meeting, and also note it down for recording in the minutes 5. As the meeting progresses, take down the notes of the proceedings and the decisions reached 6. Be ready to advise the chairman or the board on any point of procedure, practice or the law which comes within the purview of the company secretary 7. Call into the meeting, any manager whose presence is needed for any matter under discussion 8. It is the practice to fix the date, time and the venue of the next meeting before the conclusion of the meeting, remind the chairman about it. 9. At the conclusion on of the meeting and after everybody has left, take charge of any papers which may be lying on the table and instruct that the room ‘cleared’ 8 After the Board Meeting 1. If the company is a listed company, an announcement has to be made forthwith to the Colombo Stock Exchange of any decision of the board to pay any interim dividend, or to recommend the payment of final dividend to the company’s members, or to make a rights or bonus issue of shares; 2. Notify department or branch manager of any decision of the board which affects them and on which any necessary action taken by them. 3. Take any necessary action on any board decision which affects the company secretary’s own sphere of duties and responsibilities 4. Make a diary note of any matter which has been deferred by the board for future consideration, and 5. Prepare draft minutes of the board meeting and deal with them according to the normal practice and procedure followed by them. i. Draft Format for the Appointment of a Company Secretary RESOLVED That Mr. x of ………..be, and is hereby, appointed secretary of the company on a monthly salary of Rs. …. exclusive of allowances. The said appointment is subject to ….months’ notice of termination on either side.” The person acting as pro tem or the provisional secretary during the pre-incorporation period has no defense if after incorporation he is to be so employed. His position does not improve even if he is so named in the Articles of the Company, as Articles of Association constitutes a contract between the company and the appointed Secretary is also executed. A Corporate body or a firm(partnership) may function as the Secretary of a company. However, one of the Directors/Secretary should possess a license to act as a registered secretary. If the company secretary will be one of the signatories on the company’s bank account, the bank will require a specimen signature and it may be appropriate to notify the company’s staff, suppliers, and customers of the appointment. The company auditors must also be informed. Director as Secretary - A director of the company may also be appointed as its secretary provided a director and secretary cannot act in the same capacities (i.e. director and secretary). Thus, legally a director may be appointed as the company secretary. But it is advisable not to do so in practice., especially in the case of companies having directors just equal to the statutory minimum (one directors in the case of private company). He can perform his duties at a time either as a director or as a secretary. A sole director cannot also act as secretary. Where the act require anything to be done or authorized by a Director and the Secretary, the same person cannot act in dual capacity as both Director and Secretary j. The relationship between the Secretary and the Board The company secretary is responsible to the Board and should be accountable to it through the Chairman on all matters relating to his core duties as an officer of the company. In connection with non- core duties, the company secretary should report to CEO or to any other director as chosen by the Board. The company secretary’s remuneration and the benefits should be decided by the board or the remuneration committee of the Board. This will prevent the secretary from being exposed to the influence of a single director. The main task of the secretary is to be ready to advise the chairman or the board on any point of procedure, practice or the law which comes within the purview of the company secretary. The onus is on the company secretary to advice the board if they are acting in breach of certain legal requirements. In order to do this properly if is essential that he has detailed knowledge of statutes such as Companies Act, Stamp Duty Act, 9 SEC rules and also of the company’s articles of Association. The company secretary should act as the Board’s communicator, particularly in matters of public awareness. If the company is a listed company, an announcement has to be made forthwith to The Colombo Stock Exchange of any decision by the Board to pay any interim dividend, or to recommend the payment of final dividend to the company’s members, or make a rights issue or bonus issue of shares. Take any necessary action on any board decision which affects the company secretary’s own sphere of duties and responsibilities. He should also bring up any matters, which has been deferred by the board for future consideration. k. Liabilities of a Company Secretary Liabilities of a company secretary may be studied under two headings – 1. Statutory liabilities and 2. Contractual liabilities Statutory liabilities – a reference has already been made to the obligations imposed on the company secretary, being the chief administrative officer of the company, under the Companies Act, and SEC rules etc. Obviously, failure to perform the duties entrusted to him under the various Acts exposes the Company Secretary to penalties and imprisonments. The specific punishments prescribed by the Companies Act, a few statutory liabilities of the Company Secretary under different sections of the companies act are listed below. Failure to file statutory documents with the ROC, such as a Return of Allotment of shares (Form 6) within 20 working days. Failure to maintain statutory books, such as Register of Members, Registrars of Directors and Directors shareholdings etc. For default in holding the Annual General Meeting and other Statutory Meetings and filing of statutory reports/accounts. Meetings and Proceedings - Annual General Meeting 133. (1) Subject to the provisions of subsection (2) and of section 144, the Board of a company shall call an annual general meeting of Shareholders to be held once in each calendar year— (a) not later than six months after the balance sheet date of the company; and (b) not later than fifteen months after the previous annual general meeting. (2) A company is not required to hold its first annual general meeting in the calendar year of its incorporation, but shall hold that meeting within eighteen months of its incorporation. Section 133 (6) Where default is made in holding a meeting of the company in accordance with the provisions of subsection (1) or in complying with any directions of the Registrar under the provisions of subsection (3) or in complying with the provisions of subsection (4)— (a) the company shall be guilty of an offence and be liable on conviction to a Fine not exceeding one hundred Thousand Rupees; and (b) every officer of the company who is in default shall be guilty of an offence, and be liable on conviction to a Fine not exceeding fifty thousand rupees. Failure file annual returns 131. (1) Subject to the provisions of subsection (3), every company shall at least once in every year deliver to the Registrar an annual return in the prescribed form, containing the matters specified in the Fifth Schedule hereto. 10 (2) The annual return shall be completed within thirty Working Days from the date of the annual general meeting for the year, whether or not that meeting is the first or only meeting of the Shareholders in the year. The company shall forthwith forward to the Registrar a copy of the return, signed both by a Director and the Secretary of the company. (3) The provisions of this section shall not apply to a company in the year of its incorporation. (4) Where a company fails to comply with the requirements of subsection (1) or subsection (2)— (a) the company shall be guilty of an offence and be liable on conviction to a Fine not exceeding one hundred Thousand Rupees; and (b) every officer of the company who is in default shall be guilty of an offence and be liable on conviction to a Fine not exceeding fifty thousand rupees. Registration of Financial Statements 170. (1) Every company that is not a private company, shall ensure that within twenty Working Days after the financial statements of the company and any group financial statements are required to be signed, copies of those statements together with a copy of the Auditor’s report on those statements are delivered to the Registrar for registration. (2) The Registrar may by Notice in writing require a private company to deliver to him within twenty Working days, the financial statements of the company and any group financial statements in respect of such accounting periods as may be specified in the notice, together with copies of any Auditor’s report on those statements. (3) The copies delivered to the Registrar under this section shall be certified to be correct copies by two Directors of the company or where the company has only one Director, by that Director. Annual Report to Shareholders 166. (1) The Board of every company shall within six months after the balance sheet date of the company, prepare an annual report on the affairs of the company during the accounting period ending on that date. (2) Where the Board of a company fails to comply with subsection (1), every Director of the company who is in default shall be guilty of an offence and be liable on conviction to a Fine not exceeding one hundred thousand rupees The Company Secretary may be liable with the directors to defaults fines for non-compliance with the Companies Act. Penalties vary depending on the offence, in accordance with the Act. Even with the liability insurance cover, the principle of law is that one cannot insure against the effects of an illegal act and wording of many policies is such that one cannot insure against the effects of fully defended, the policy will not pay out the damages must be paid for out of personal assets. The company secretary is held liable only where he himself is in default or where he knowingly and willfully permits the default. There is no excuse if the secretary allows himself to remain ignorant in an attempt to avoid liability. It is the duty of the company secretary to ensure compliance with the Companies Act, but as a matter of operating policy, the Registrar of Companies does not generally proceed against the company secretary unless he is also a director. Failure to deliver accounts and annual returns on time to the Registrar is an offence. 2. Contractual liabilities A company secretary has also certain liabilities arising out of his contract of service with the company. So long as he acts within the scope of his authority, in good faith, bona fide and take reasonable care in the discharge of his duties, he incurs no personal liability. But he will be held personally liable to make the good the loss to the company for willful negligence or misconduct or fraud committed within the scope of his employment. He also becomes personally liable if he acts beyond his authority, for any loss suffered by the company or any third party on account of his action. However, he is not liable for fraud committed by his assistants unless his connivance (ignorance) is proved. 11 12 ANNEXURE A Given below are the extracts of the relevant sections from the Companies Act No.7 of 2007 221 of the companies Act No.7 of 2007 (1) Every company shall have a Secretary. (2) No person shall be appointed as a Secretary of a company unless such person has, in the prescribed form— (a) consented to be the Secretary of such company; and (b) certified that such person has such qualifications as may be prescribed in relation that company, under section 222. (3) A person named as the Secretary of a company in an application for incorporation or in an amalgamation proposal, shall hold office as a Secretary from the date of the incorporation of the company or the date the amalgamation proposal becomes effective, as the case may be, until that person ceases to hold office under any provisions of this Act or any provisions contained in the articles of the company. (4) Unless the articles of the company otherwise provide, the Board shall have the power to appoint or remove a Secretary of the company. 222. The Secretary of every company having a turnover or stated capital of an amount prescribed under this Act, shall have such qualifications as may be prescribed, having regard to the nature of the duties the Secretary will be called upon to discharge. REGISTER OF DIRECTORS AND SECRETARIES 223. (1) Every company shall keep at its Registered office or at such other place as may be notified to the Registrar under section 116, a Register of its Directors and secretaries containing with respect to each of them, the following particulars: — (a) in the case of an individual, the present name and surname, any former name or surname, usual residential address and business occupation; (b) in the case of a Secretary which is a corporation, its corporate name and Registered or principal office. (2) The company shall ensure that Notice in the prescribed form of— (a) a change in the Directors or the Secretary of the company; or (b) a change in the particulars contained in the Register in respect of a Director or Secretary of the company, is delivered to the Registrar for registration. (3) A Notice under subsection (2) shall— (a) Specify the date of the change; (b) in the case of the appointment of a new Director or Secretary, have annexed to the Notice the form of consent and Certificate required under section 203 or subsection (2) of section 211, as the case may be; and (c) be delivered to the Registrar within twenty Working Days of— (I) the change occurring, in the case of the appointment or resignation of a Director or Secretary; or (ii) the company first becoming aware of the change, in the case of the death of a Director or Secretary or a change in the particulars contained in the Register in respect of a Director or Secretary. (4) Where a company fails to comply with this section— (a) the company shall be guilty of an offence and be liable on conviction to a Fine not exceeding one hundred thousand rupees; and (b) every officer of the company who is in default shall be guilty of an offence and be liable on conviction to a Fine not exceeding fifty thousand rupees. 13  ANNEXURE B FORM 19 (Section 221(2)) CONSENT AND CERTIFICATE OF SECRETARY/ SECRETARIES Section 221(2) of the Companies Act No. 7 of 2007 [If there is insufficient space on the form to supply the information required, attach a separate sheet containing the information set out in the prescribed format] No. of Company Company Name First Name(s) of Last Name(s) of Secretary/ Secretaries* Secretary/ Secretaries Residential Address *We/I consent to be Secretary/ Secretaries* of the above company and certify that we/I* are/am* qualified to be appointed to hold office of Secretary/Secretaries Date of Appointment Day Month Year Registration No. (If applicable ) Signature: Full Name: Date : Day Month Year Email (Optional) Presented by Telephone: Facsimile: 14 * Delete if not applicable ANNEXURE C FORM 18 (Section 203) CONSENT AND CERTIFICATE OF DIRECTOR Section 203 of the Companies Act No. 7 of 2007 [If there is insufficient space on the form to supply the information required, attach a separate sheet containing the information set out in the prescribed format] No. of Company Company Name Last name of Director First Name of Director Residential Address Occupation NIC No/ Passport No* (Specify Country) Date of Appointment Day Month Year I consent to be a director of the above company and certify that I am not disqualified from being appointed or holding office as a Director of a company. Signature: Full Name: Date : Day Month Year Email (Optional) Presented by Telephone: Facsimile: * Delete what is not applicable 15 ANNEXURE D FORM 20 (Page 1) Section 223(2) Notice of CHANGE OF DIRECTOR/SECRETARY AND PARTICULARS OF DIRECTOR/SECRETARY Section 223(2) of the Companies Act No. 7 of 2007 [If there is insufficient space on the form to supply the information required, attach a separate sheet containing the information set out in the prescribed format] No. of Company Company Name Indicate the purpose for which this notice is given by placing✓ in the appropriate box Change of Director and/or particulars of Directors. Change of secretary and/or particulars of secretary. Directors/Secretary ceasing to hold office Office e.g.: Director/ Date on which he ceased Full name * Residential address Reason** Secretary to hold office Appointment of new Directors/Secretaries NIC No or Office Email Date of Passport No Full name * Director/Secretary Residential Address Address appointment (Specify *** (optional) *** Country) In the case of appointment of a new Director/Secretary, the consent and certificate of the new Director/Secretary must be attached to this Form. (Please use Form 18or 19(as the case may be) for this purpose) Email (Optional) Presented by Telephone: Facsimile: *Please give first name(s) followed by surname in Block letters: ** State whether resignation/death 16 *** in the case of the secretary please give the registration number if applicable.  FORM 20 (Page 2) Change of name or residential address of Director/Secretary Complete only those details that apply [Attach separate sheets for multiple entries] Name of Director/Secretary Former Name of Director/Secretary First names Former first names Residential address Former Residential address Date of change Day Month Year Set out below are the names and residential address of every person who is a Director/Secretary of the company from the date of this notice Full name * Residential Address Signature of Director / Secretary ** Full Name of Director / Secretary**: Date: Day Month Year Notice should be delivered to the Registrar of Companies, within 20 working days of the change occurring. * Please give first name(s) followed by surname in Block letters: ** Delete what is not applicable 17 18