The government on Monday amended the rules for company secretaries, giving a lifeline to the profession that faced a heavy blow from the new companies law.
A notification issued on June 9 also included an additional rule, saying all companies with paid-up capital above Rs 5 crore need to employ a fulltime company secretary.
The previous rules had raised the threshold to Rs 10 crore while altogether exempting private companies from the need for having a company secretary, thereby, vastly reducing the need for company secretaries. Under this rule, nearly 93% companies would have not needed a company secretary.
This change in scope had left the CS fraternity in a state of shock and led to huge disappointments among them, according to company law expert Vinod Kothari.
The Institute of Company Secretaries of India (ICSI) had been lobbying lawmakers for this change. This has raised hopes of the Cost and Management professionals, who also faced a similar curtailment of scope.
"The main concern of company secretaries (CS) was that under the rules, as notified in the first instance, private companies irrespective of their size were not required to appoint whole time CS. Since more than 90% of registered companies are private companies, it was rightly perceived that a large section of corporate world was virtually exempted from compliance with law," said A Sekar, a Mumbai-based practicing CS.
R Sridharan, president of the Institute of Company Secretaries of India, welcomed the development.
"This amendment would boost compliance and governance in the corporate sector including private companies, which is the professed objective of the new company law and would provide the much needed comfort to government and all the stakeholders."
"It would provide professional opportunity to company secretaries as well as increase companies' compliance cost," said S Santhana Krishnan, chairman of the corporate laws committee of the chartered accountants' institute and member of the rules committee of the corporate affairs ministry.
In the meanwhile, the development has boosted the morale of cost and management accountants, who, too, had been protesting a similar curtailment in scope under the new Companies Act.
"The relief given to the company secretaries has raised hopes of the cost and management accountant professionals for an equally fair treatment," said Dhananjay Joshi, former president of the Institute of Cost Accountants of India (ICAI).
The corporate affairs ministry is yet to announce final Rules on Cost Audit, but the draft rules announced in November 2013 had proposed a significant scope reduction for the profession.