Importance of Company Law and Role of Company Secretary in a Company

There have been considerable changes in Company Law in the last few years. And the changes

have put more responsibility on the shoulders of Director. A Company has to comply with a lot

of procedures as covered under Companies Act. Listing Agreement, SEBI Act and Regulations.

Moreover, Corporate Governance is now actively being implemented in various corporate houses

and is going to be compulsory by the Government in a phased manner.

It is essential that Directors are aware of existing, new proposed legislation and take the best

advice on how to meet its requirements. Director must have access to the best advice on how to

meet its requirements. This is important commercially as well as legally. For example, Directors

should ensure the Articles of Association reflect not only the Law but also the Company’s needs

and best practices. Director must also have the necessary technical assistance to cope with

internal reorganizations, buyouts, mergers and acquisitions. Our role is not only to give

constructive advice on matters of Company Law but also to ensure that routine but vitally

important details are not overlooked. In addition the late filing of Accounts, Annual Return &

other documents at Registers of Companies can lead to the imposition of substantial late filing

penalties upon a Company and the possibility of criminal action against the Director.

Now the question arises, who is responsible to the Directors?

Every Company requires an officer who will be responsible to the Director for securing its

compliance with Company Law; this is the Company Secretary. He should be available to the

Board for day to day advice on such matters. Both the importance of the Company Secretary and

the level of his or her responsibilities are increasing as a result of the new Law and the emphasis

being placed on upon Corporate Governance. As a result all Companies should have access to a
qualified Company Secretary. Very large Companies may be able to fully justify the employment

of a full time Company Secretary but by using our services any Company can obtain the best

advice on all aspects of Company Law and Company Secretarial practice whenever it is needed.

The Company Secretary is also Known as KMP in the Companies Act 2013 and his appointment

is been mandatory by the Law for the Companies having Paid up Capital of more than Rs. Ten

Crore or more which in itsself tell the importance of Company Secretary

As per Section 205 of Companies Act, 2013 describes the functions of Company Secretary:

The functions of the Company secretary shall include,—

(a) to report to the Board about compliance with the provisions of this Act, the rules made

thereunder and other Laws applicable to the Company;

(b) to ensure that the Company complies with the applicable secretarial standards;

(c) to discharge such other duties as may be prescribed in rule 10 of Companies (Appointment

and Remuneration of Managerial Personnel) Rules, 2014

The duties of Company Secretary shall also discharge, the following duties, namely:-

(1)   to provide to the Director of the Company, collectively and individually, such guidance as

they may require, with regard to their duties, responsibilities and powers;

(2)   to facilitate the convening of meetings and attend Board, committee and general meetings

and maintain the minutes of these meetings;

(3)   to obtain approvals from the Board, general meeting, the government and such other

authorities as required under the provisions of the Act;

(4)   to represent before various regulators, and other authorities under the Act in connection with

discharge of various duties under the Act;

(5)   to assist the Board in the conduct of the affairs of the Company;

(6)   to assist and advise the Board in ensuring good corporate governance and in complying with

the corporate governance requirements and best practices; and

(7)   to discharge such other duties as have been specified under the Act or rules; and

(8)   such other duties as may be assigned by the Board from time to time.

The secretary is the main administrator of the Company; s/he ensures that all regulatory and

mandatory documents are timely filed either with the Registrar of Companies or the Registry in

the location where your Company is registered. In short, a professional secretary will make sure

that you comply with all due diligence, statutory, and jurisdictional requirements.

Security and Exchange Board of India recognized the importance of the Company secretary in

listed Companies to get assured best practices and good governance into the Companies. Hence,

it is mandatory as per Regulation 6(1) of SEBI (Listing Obligation and Disclosure Requirement)

Regulation, 2015 that a listed entity shall appoint a qualified Company secretary as the

compliance officer.

The Company secretary manages and informs Director about all matters regarding the

development, changes, implementing of Company legislation, regulations and best practice in the

jurisdiction where the Company is registered. The secretary will also advise on the effects to the

Director(s) of any legislative changes.

Company Law and the Rights of Businesses

Understanding Company Law and the Rights of Businesses

Meta Data: Understanding company law isn’t always easy. But it does mean a lot for when

you’re trying to navigate the world of business, so here’s a guide that can help you.

What is Company Law, and How Does Corporate Law Affect You?

The world of company law is vast. It encompasses so many different elements. From the

company formation to the director’s duties, everything can be contained within this law.

Therefore, it’s so important for people to understand how it works and what you need to know to

navigate the corporate world safely.

Because the world is so vast, it can be tricky to figure everything out. There’s so much you need

to know, and to explain absolutely everything would be impossible. Instead, what we’re going to

do is to make sure that we define the basics, and give you a good grounding in corporate law.

So, let’s begin with a definition of company law. Corporate law is an umbrella term for all the

processes that make up running a business. So whether you’re an investor, stakeholder, customer

or CEO, these rules apply to you. These rules govern how people interact with the world around

them, from a business point of view.

What you’ll find is that the main points which make up corporate law are all taken from the

common law in England. If you’re any of the following things, you’re going to find yourself

dealing with company law:

A corporation

A limited company
A partnership

A not-for-profit organisation

A limited partnership

An unlimited company

A sole proprietorship

A company limited by guarantee

Company law affects all of these types of businesses because in essence, it governed what they

can and can not do with their power. While this isn’t the case in modern business, for the longest

time it meant that all business had to understand how the laws worked and what restrictions it put

in place for them.

Why Do You Need to Understand Corporate Law?

So, there’s no doubt that company law can play a big part in how you own a business, but many

people still don’t get why they need to understand corporate law and all its many mysteries.

Well, you don’t want to wind up in prison, and you don’t want to find yourself accused of

something you don’t understand. Things can go wrong in business, and you may come into the

office one day to see that someone has taken you to court. As a situation, this can be deeply

challenging, and so it’s crucial that you know to protect yourself from whatever problems you

may face.

So How is Corporate Law Maintained?

When looking at company law, you have to make sure that you’re aware of one thing, and that’s

the Companies Act 2006. This law is the most extended piece of legislation to ever come out of

the UK, and it has several purposes. It serves as a way to simplify company law, codify the

duties of directors, which recategorised them, makes sure that shareholders have individual

rights, and also removes some of the administrative burdens that are faced by companies all

across the UK.

The Act changed a lot, and we’re going to summarise the main points here to help you

understand:

The director of a company now has individual rights and obligations they must fulfil, including

promotion of the company, being considerate of the environment and customers, and giving

shareholders the benefits that they deserve.

Many of the processes that are required from an admin perspective can now be done

electronically to give businesses more time to focus on their projects.

Indirect shareholders are entitled to more rights than before, including the right to sue a company

if they are suspicious that fraud or negligence is going on.

Companies can provide a service address for the sake of identifying themselves, meaning that

their actual headquarters can remain off the public records.

Shareholders in the company can now choose to have an electronic copy of news and

information about the said organisation, and the business must honour this.

Company Rights and Workers

Company law exists to protect everyone and not just the major players in an organisation, which

is why corporate law also makes provision for the rights of workers. Understanding what

freedoms and benefits your employees are legally entitled to is crucial for avoiding internal

conflicts.

A lot of these rights are what you might expect when it comes to giving workers a fair

environment – the chance for a good wage, the right to have a pension, to be able to be free of

discrimination and having breaks from their work – all pretty standard stuff. However, things

like training contracts to advance their skillset and vacation schemes can also fall into this

category. A lot of workers are supported by a workers union, which basically ensures that they

are looked after, and these are corporations which you will want to keep on side. They won’t

hesitate to try and bring you to justice for mistreatment of workers, and that’s damaging in many

ways.

Duties of the Director

Directors, listen up because this is about you. When you’re a company which has all of these

rights and regulations, company law also plays a big part in the director’s duties. Under UK law,

you’re required to do certain things for the good of the company.

In the past, directors generally were the face of the company and left a lot of the internal affairs

to their staff. However, the Companies Act 2006 meant that this was no longer the case.

Typically, it is the case that a director must demonstrate sufficient understanding of the law and

enough business sense to lead the corporation into its many endeavours. They are unbiased, and

can not allow personal interest to dictate how the company is run. They aren’t allowed to make
choices that might benefit them but instead must operate on the basis that is for the good of the

company.

Company law also means that if a director has failed in their goal of providing proper

leadership, and has instead steered the business into a noticeable loss, you will find that the

actual company can personally hold the director accountable. It’s also the case that as a director,

you can not use your power for anything other than a proper purpose. So for example, changing

who owned shares in the company to stop a takeover bid would be seen as improper use of

power, and thus banned.

Corporate Lawyers

Now that we’ve mentioned company law, we can begin to talk about corporate lawyers and the

role that they play within an organisation and their aid when it comes to case law. They’re a vital

part of company law because of no matter which side of a dispute you happen to find yourself

on. They’re going to be there to make sure that you’ve got the support you need. They represent

a small group of lawyers which are the elite – there’s nothing a corporate lawyer can get

involved with at this level.

Knowing about the corporate lawyers is so important because they really can help you. Their

training is the best it can be, and they represent clients with millions of pounds in the balance.

You have to know a good one and make sure you’re aware of what they’re prepared to do for

you.

Legalities
Hopefully, you’re on top of everything that we’ve mentioned here. There’s a lot to process, so

we’re going to try and introduce just a few more basic principles here to try and help you

understand company law even more.

What you might not fully appreciate about corporate law is that it divides the entire concept of

owning a company into two distinct categories. The company is, in essence, an entirely different

entity to the director and is legally treated as such. This means that the property of the company

belongs to it, and the goods and assets do not belong to the director, founder or shareholders.

Even people who own the entirety of a company can be tried for stealing from it. So many

different people forget that when it comes to your company, you can’t just conduct shady

business deals on the site, or try and deceive some extra money, because if you’re caught, you

can be put on trial and lose everything.

Another key principle to understand is that as a company, the debts and liabilities that they have

are entirely their problem. Shareholders, directors or any other third party are not legally required

to pay a penny, and it’s all down to the company to make sure that all of their debts and bills are

paid.

Limited Companies – What They Need to Know

Okay, so. There’s a bit about limited companies and how their finances work, and it’s important

enough to go over. Limited corporations will often issue limited liability to their shareholders, as

a form of protection.

What this means is that once a shareholder has paid in full for their shares, they have no liability

to the company. So even if everything went wrong and the company is sued until it has no usable

assets anymore, and there’s absolutely nothing a shareholder is accountable for. You can’t ever
have someone hold you to ransom for the rest of the payment, so everything is protected. It’s

something that both shareholders of limited companies and indeed the organisation themselves

need to make sure that they’re aware of before anyone enters into an agreement concerning

shares.

Company Law and Shareholders

The relationship between corporations and their shareholders is an important one, and so it is

obviously something that falls within the umbrella term of company law. We’re going to be

looking into their rights and regulations a little more, because it’s an important part of

everything.

So, any company that issues shares to someone is automatically classed as a separate legal entity

from the shareholder. Typically, as a shareholder, you’re only liable for the amount of money

that you still owe on your shares, and nothing more. You’ll probably be required to sign a

company constitution, which is basically a document that will outline your relationship with the

company and what you have to do when things go wrong, or what you’re entitled to as part of

your shareholder agreements.

The actual rights of shareholders will vary from one person to the next, and the amount they

own. Different shareholders will have different powers, whether this means that they can

influence the appointment of directors, have the prerogative to be notified if there’s a significant

business decision being made, and a whole host of other options. However, regardless of what

you’re going to do as a shareholder, remember that you can not be liable for anything more than

the amount you’ve not yet paid.

Five Parts of Corporate Law

Now that we’ve looked at everything else, we can get into some of the good stuff. We’re going

to be examining the five different parts of corporate law that are agreed on by most of the

world. These tenets help to make up a lot of what you’ll be dealing with, so it’s so important to

get to know them.

Legal personality is something that we’ve covered a bit in here already, but we’re going to talk

about it correctly here. When you have a company, they are considered to be an entirely different

entity than you. What happens to them doesn’t have to be something you’re accountable for – so

if they don’t make a payment, you don’t have to step up and take the personal cost if you don’t

want to.

Another vital part of corporate law is limited liability. This protects individuals who are

connected to the company, for example, the director or a shareholder. It means that when the

company is under threat of a fine, the money can only come from within the organisation, and

not come from the people themselves.

The third corporate law is all about transferrable shares. This basically means that if the owner

decides that they don’t want the company anymore, they can’t shut it down and walk away.

Instead, the shares are given to someone else. What this tenet means is that the rights of the

employees are protected, and the company is given a chance to grow under the ownership of

another.

The fourth tenet talks about something known as delegated management. In essence, it refers to

an agreed structure on how a company is built and maintained. This consistent structure means

that no matter where you go, there’s the same strengths. The structure always makes sure that

there’s a structure that distributes the various responsibilities, and makes sure that there’s more
than one person or group making a choice to prevent any kind of vested interest. There’s usually

a group of officers who run the company every day, and the board of directors would typically

meet to discuss different problems.

Investor ownership is the fifth and final tenet, and it basically refers to the fact that as an owner

of the company, you have a say in how the company is run and what happens, but you don’t have

sole control. It protects the company from someone trying to steer the entire company to suit

their own agenda.

Everything Else!

So, we’re nearly at the end of the guide here, and so we’re going to cover just a few odds and

ends to make sure you’ve got a good understanding of company law.

If you live in the United Kingdom and run a business here, then obviously you’re going to be

subject to all of the different legal restrictions and laws that we’ve outlined here because that’s

how it is. However, it’s also important to know that there’s a lot of other processes and laws

which vary from one country to another, so if you operate on an international basis, you do need

to make sure you’re careful. As we previously mentioned, a lot of the laws apply across the

world, whether it’s company formation, entering into the stock exchange, or anything else that

pertains to a general corporation and it’s everyday running.

When looking into share capital, you should remember that company law means that

shareholders are typically entitled to the return of their share capital following the sale of their

stake in the company or the liquidation of the company.

It’s also imperative to take notice of your rights as a customer. When you click on the button that

says ‘by using this site you agree…’, you’re entering into a contract of sorts with the

organisation. They agree to follow all the laws and regulations when it comes to company law,

and you, in turn, agree to follow any rules that are laid down by the corporation to ensure your

safe use of the site.

Wrapping Up

So here we go, we’ve arrived at the end! As you can tell, there’s a lot to think about when it

comes to corporate law, and it’s a pretty big area to get involved in. There’s a reason why

corporate lawyers take years training to make sure that they can understand every facet. There’s

so many different areas to familiarise yourself with, and it can make all the difference for people

who are going to be looking into business and trying to ruin a company. When you own a

corporation, you have to operate legally. It’s so critical to follow all the rules and know what you

have to do for workers, shareholders, the environment and the community. If you were to

disregard your responsibilities, then there would be a lot of corrupt companies.

As a director, there’s a considerable amount of responsibility on you to make the right choices,

and in a lot of ways this can help you. It’s so easy to get caught up in all of the different

responsibilities and choices that need to be made, so it’s actually quite a relief to have

instructions on what to do and how to move forward. As the company is a legally separate entity,

you can find yourself in hot water if you don’t look after it properly and safeguard its interests.

The world of business can be challenging, and you have to make sure that you’re ready to deal

with all of the different challenges and struggles you may face. Things can go wrong and you can

make mistakes, and to avoid absolute catastrophe you have to make sure you’re doing the
absolute best to learn company law and know how it works. It’ll help if you need to hire out a

corporate lawyer, or you need to make decisions for the good of the company. We hope that this

has helped you to gleam some understanding of company law, and how it affects a handful of

different parts of a business