Punishments under the Companies Act

This article is written by Ruchi Jain, a student of MATS Law School, Raipur, on the role of a company secretary under Companies Act, 2013.


The Companies Act, 2013 has considerably enhanced the role and responsibilities of company secretaries both in employment and in practice. Company secretary is a key managerial person in a company, responsible to ensure the effective and efficient administration of the company and certifying the company’s compliance with the provision of the Act.

This article will highlight the differences in the role of company secretaries in employment and in practice as provided under the old company law and in new company law, and finally will enlist the strengthened role of company secretary in Companies Act, 2013.

Role and need of company secretary under Companies Act 2013

The present Companies Act has strengthened the role of company secretaries. Some of the key areas that have directly impact the role of company secretaries in employment or in practice due to this Act are as follows:

  1. Introduction of secretarial audit

Secretarial Audit is the process to check whether the company is adhering to the legal and procedural requirements and a process to monitor the company’s compliance with the requirements of the stated laws. The objective behind the introduction of secretarial audit is to improve corporate governance and compliance.

According to Section 204 of the Companies Act 2013, it is the duty of the Company Secretary in practice to perform secretarial audit of every listed company and any such other class of prescribed companies. The Central Government has prescribed the such other class of prescribed companies as-

  • Every public company with a paid-up share capital of Rs. 50 Crore or more.
  • Every public company with a turnover of Rs. 250 Crore or more.
  1. Secretarial standards

The objective behind the formulation of secretarial standards is to integrate, harmonize and standardization of diverse secretarial practices. The Companies Act, 2013 under Section 118 has made the compliance of Secretarial Standards compulsory on meeting of the Board of Directors and on general meetings.

  1. Annual return

Annual return is a comprehensive document contains information regarding share capital, directors, shareholders, changes in directorships etc about the company. Under the old Companies Act of 1956 the annual return of the listed companies are required to be signed by the company secretary in practice. The new Companies Act, 2013 under Section 92 has widened this requirement by providing that annual returns of companies having such paid up capital and turnover to be signed and certified by the company secretaries in practice.

  1. Appointment of whole-time key managerial personnel

Under Section 203 of the new Companies Act, 2013, the companies has to compulsorily appoint the whole time Key Managerial Personnel in respect of certain class of companies as prescribed by the Central Government to ensure good corporate governance and regulation. The company shall have the following whole-time Key Managerial Personnel (KMP):

  • Managing Director, or Chief Executive Officer or manager and in their absence, a whole-time director.
  • Company Secretary.
  • Chief Financial Officer.

So this made the appointment of whole-time Company Secretary mandatory for better efficiency.

  1. Functions of company secretary

According to Section 205 of the Companies Act, 2013 the Company Secretary shall discharge following functions and duties, this is the first time that the duties of the company secretary have been specified in the company law:

  • To report to the Board about the compliance with the provisions of this Act.
  • To ensure that the company complies with the applicable secretarial standards.
  • To provide to the directors of the company the guidance they require in discharging their duties, responsibilities and powers.
  • To facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these meetings.
  • To obtain approvals from the Board, general meeting, the government and such other authorities as required under the provisions of the Act.
  • To assist the Board in the conduct of the affairs of the company.
  • To assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance requirements and best practices.

Difference between old and new company law relating to the issue of compliance certificate by company secretary

Company Secretaries in practice are those persons who are independently carrying on public practice. Under the old Companies Act, 1956, these company secretaries in practice have a duty to issue compliance certificate to the companies who have paid-up capital of more than 10lakh Rupees but not more than 5Lakh Rupees.

Whereas the new Companies Act, 2013 has enhanced the role of company secretaries in practice by providing with the opportunities such as promotion, formation and incorporation of companies, secretarial audit and certification services, signing of annual return, appointment of company liquidator, assistance to company liquidator, and many more.

Difference between old and new company law relating to the issue of employment of company secretary

According to section 383A of the Old Companies Act, 1956, every company who has a paid up capital of about Rs. 5 Crore or more had to appoint a whole-time company secretary for the purpose of ensuring better administration of the company. If a company fails to comply with the aforesaid provision, then the directors and any other officer who is in default shall be liable for the penalty which may extend to Rs 500 per day till the default continues. But on the other hand, Companies Act 1956 had a big loophole in it for the appointment of company secretary. It provided that if a company is not in a position to appoint a whole-time company secretary due to financial problems they can be excused from the same.

Covering these defects, Companies Act 2013 came into effect on 1 April, 2013. According to Section 203 of the Companies Act 2013, every listed company and any other company including the public companies has the obligation to appoint a whole-time company secretary having a paid-up capital of Rs 10 Crore or more. If a company fails to appoint a whole-time company secretary, Companies Act 2013 imposes a heavy penalty both on company as well as its directors and every officer who is in default. The company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to Rs 5 lakh. And every director and key managerial personnel of the company who is in default shall be punishable with fine which may extend to Rs. 50,000 and where the contravention is continuing one, with a further fine which may extend to Rs. 1,000 for every day after the first during which the contravention continues.


The need and the role of the company secretaries have been increased with the advent of the new Companies Act 2013, and if the company does not comply with the aforesaid provisions there is a penalty for the same.

Follow the links below to get more insights on some of the other interesting topics:


Appointment Of Additional Directors In A Company

How Can A Foreigner Be A Director Of An Indian Company?

Procedure To Change The Name Of A Private Company

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