The Institute of Company Secretaries of India (ICSI) is a premier national professional body under the Ministry of Corporate Affairs, GoI. It has objective of promoting, regulating and developing the profession of company secretaries in India. Devendra Deshpande, President, ICSI spoke to Kishore Kumar Biswas.
Q. Why should a student study company secretaryship? What is the scope of employment in India or outside India for a company secretary?
A. Company Secretary (CS) is a professional degree, where the course focuses on laws related to the corporate sector and makes the degree holder an expert to undertake a wide gamut of work. A company secretary acts as a key functionary in the corporate pyramid, rendering their expertise and service in various laws like corporate, securities, accounting, taxation and other allied laws.
With the Companies Act, 2013 conferring a special status to the company secretary as the Key Managerial Personnel or KMP, bracketing him along with the MD, CEO, Manager, Whole-time Director(s), and CFO and mandating secretarial audit by a practicing company secretary, the role has become more expansive and inclusive. While these roles are designated under the Companies Act, the responsibilities and recognition for company secretaries extend to laws rolled out by SEBI, GST Act, Insolvency and Bankruptcy Board of India (IBBI), Consumer Protection Act, Depositories Act, Competition Act, Intellectual Property Rights, and so on. The recent recognition received from the University Grants Commission (UGC), equating the company secretary degree to a post graduate degree, has leveraged the profession further.
If we talk about the opportunities outside India, ICSI has a Memorandum of Understanding with the Corporate Governance Institute, CGI (formerly known as ICSA), London, for providing reciprocal exemptions to subjects as well as training requirements to each other’s members. The MoU has been extended to nine divisions of ICSA namely Australia, New Zealand, Southern Africa, Zimbabwe, UKRIAT, Canada, Hong Kong/China, Malaysia and Singapore.
Q. What are the new challenges before the newly passed out students of your institute?
A. A young CS should develop an understanding of the needs and expectations of the Company and should enhance his/her skillsets accordingly. Company Secretaries should have a thorough understanding of not just the domestic and international regulatory regimes but also should be oriented towards the intricacies of interpretation of laws and be skilled in drafting important legal documents.
Q. How far compulsory inclusion of at least one woman in the Board of Directors of a business organisation has been successful in running a company in India?
A. While the law mandates the presence of a one-woman director on the Corporate Boards, long ago back in 2006, a research study had stated that in order to truly reap the value of women’s contributions, a board needs at least three female directors. But then again, going on to the business side of the discussion – for one, they broaden boards’ discussions to better represent the concerns of a wide set of stakeholders, including employees, customers, and the community at large. And secondly, they tend to bring a more collaborative approach to leadership, which improves communication among directors and between the board and management.
Women bring to the boardroom, a different set of perspectives, experiences, angles, and viewpoints altogether leading to robust intra-board deliberations. With their emotional intelligence, they think about the people behind the numbers.
Q. In the pandemic period, Indian government changed the definition of MSME. Many observers think it has benefited the bigger units. What is your experience?
A. From a professional and an economic point of view the said change of definition is indeed commendable. Not only will it give relief to the growing MSMEs on the verge of moving beyond their limits to expand and grow without the fear of extended legislation, but the same will also accord much-needed support to the newly sprouting enterprises. The other added advantages and benefits in the form of Collateral free loans, Liquidity facilities, and credit guarantees shall go on a long way in placing greater faith in these enterprises and bringing about holistic development of the nation.
Q. The return of the creditors has been slowing down while the distressed firms are being resolved through the IBC route. The creditors had to haircut up to 90% in the last months of the last FY. Do you think the IBC route may not be a good way to resolve or liquidate defaulted or distressed business units? What is your suggestion in this regard?
A. I would say that the IBC’s performance should not be assessed based on the data of a couple of quarters and the size of realizations should not be the primary yardstick. Over the five years since it took effect, the Insolvency and Bankruptcy Code (IBC) has helped recover `2.5 lakh crore or around one-third of the admitted financial claims from insolvent firms, marking a significant shift in the insolvency resolution process and credit culture in India. A closer look at the data would show that the recovery rate and resolution timelines have a lot more room for improvement. This requires a continuous strengthening of the code and stabilisation of the overall IBC ecosystem. Indeed, while the IBC has tilted the power equation in favour of creditors from debtors and helped to strengthen India’s insolvency resolution ecosystem, its performance against its twin objectives – maximisation of recovery and time-bound resolution – has been a mixed bag.
Q. Would you please mention some of the changes that are necessary to create a vibrant labour market in India?
A. In 2019 and 2020, 29 central labour laws were amalgamated, rationalised and simplified into four labour codes, viz., the Code on Wages, 2019; the Industrial Relations Code, 2020; the Code on Social Security, 2020; and the Occupational Safety, Health & Working Conditions Code, 2020.
The new laws were in tune with the changing labour market trends and at the same time, accommodating the minimum wage requirement and welfare needs of the unorganised sector workers, including the self-employed and migrant workers, within the framework of legislation.
The labour reforms initiatives will reduce the complexity in compliance due to the multiplicity of labour laws and facilitate the setting-up of enterprises and thus create the environment for the development of business and industry in the country and generating employment opportunities without diluting basic aspects of safety, security, and health of workers.
Labour reforms are progressing steadily as at least 17 states have pre-published draft rules for four labour codes. The Labour Codes once operational, will balance the interests of both employers and employees and create a vibrant labour market in India that can help both the labour and the business units.
Q. Financial literacy has been low in India. How can it be increased? Does your organisation take regular initiatives to enhance it among the common people?
A. Being an emerging economy, home to 17.7 % of the world population, India has had gender, income, and educational inequalities. It is indeed a mammoth task to achieve financial literacy close to the global standards. However, the government along with the regulatory bodies is fostering focused efforts in building a financially educated and independent nation. RBI’s National Strategy for Financial Education (NSFE) 2020-2025, is one such initiative that will play a pivotal role in realizing this vision.
The government has planned a 5 Cs’ approach’, that is Content, Capacity, Community, Communication, and Collaboration, for disseminating financial education across India. The ICSI, with its fleet of equipped members, has joined this initiative of the government as the 6th C – i.e. Company Secretary and is contributing immensely to the proliferation of financial education among the masses. The institute organises regular investor awareness programmes in association with the Investor Education and Protection Fund Authority of India (IEPFA) of the Ministry of Corporate Affairs to create a legion of financially educated investors and professionals.
Q. What is your view about the continuing subdued business investment phase which had started before pandemic? Is the low aggregate consumption level of the Indian economy main responsible factor for this?
A. When the global economy is in a slowdown mode, emerging economies cannot grow at their normal pace. But in the post-pandemic scenario, the Indian economy expanded 4.1% year-on-year in the first three months of 2022 which is slightly higher than market forecasts of 4%. In the fiscal year ended in March 2022, the economy advanced by 8.7% and the RBI estimates the GDP growth rate for FY 2023 at 7.2%.
Private consumption is also estimated to have improved significantly to recover 97% of the corresponding pre-pandemic output level. Also, there has been considerable improvement in consumer sentiments due to the rise in digital transactions, notably in UPI payments owing to the pandemic-induced shift to contactless payments. Private consumption is poised to see a stronger recovery with rapid coverage in vaccination and faster normalisation of economic activity.
Q. What is the role of a company secretary to check shell companies or activities of the companies involved in law evasion and window dressing?
A. With duty and responsibility cast upon these professionals and faith placed in by the regulatory authorities, the company secretaries make sure that the sparks of the above issues are tackled at the initial stages and not fanned by ignorance.
The mere presence of a professional ensures compliance - it confirms the fact that activities of the likes of law evasion and window dressing or even companies existing as shell companies cannot find ground in the corporate arena and it instils faith in the minds and hearts of all the stakeholders and investors alike.