Guidance Note on Professional Misconduct For Company Secretary

     

Guidance Note on Professional Misconduct For Company Secretary

First and Second Schedule to the Company Secretaries Act, 1980 contains professional and other misconduct in relation to Company Secretaries. The expression “professional and other misconduct” is defined in Section 22 of the Act.

First Schedule is divided into four parts and Second Schedule is divided into three parts.

Part I of the First Schedule which contains 11 items and Part I of the Second Schedule which contains 10 items are applicable to Company Secretaries in Practice.

Part II of the First Schedule which contains 2 items is applicable to members of the Institute in service.

Part III of the First Schedule which contains 3 items and Part II of the Second Schedule which contains 4 items are applicable to members of the Institute in generally.

Part IV of First Schedule and Part III of the Second Schedule deal with other misconduct in relation to members of the Institute generally.

This write-up elaborates Professional misconduct in relation to members of the Institute in service

Part II of the First Schedule

A member of the Institute (other than a member in practice) shall be deemed to be guilty of professional misconduct, if he, being an employee of any company, firm or person–

“(1) pays or allows or agrees to pay, directly or indirectly, to any person any share in the emoluments of the employment undertaken by him;”

This item restricts a member in employment from sharing emoluments of the employment with any other person not even a member. Both direct and indirect sharing of the emoluments is prohibited.

This item is analogous to clause (2) of Part I of the First Schedule in some respect. A member in employment shall not share emoluments of the employment with any other person, not even a member. Both direct and indirect sharing of the emoluments is prohibited. However, it may be noted that under Part I of the First Schedule, a member in practice can share the fee, commission or brokerage or profits with any other member of the Institute who is his partner.

“(2) accepts or agrees to accept any part of fees, profits or gains from a lawyer, a Company Secretary or broker engaged by such company, firm or person or agent or customer of such company, firm or person by way of commission or gratification.”

This item restricts a member of the Institute in service from accepting any secret benefit from the employment such as commission from its clients, customer, agent, broker; or any professional engaged by the employer. Employer can be a company, firm or person. It will maintain trust and confidence of the employer.

In addition to Part II of the First Schedule as above, Part III and Part IV of the First Schedule, and of Part II and Part III of the Second Schedule, are applicable to the members of the Institute in service,as under, -

A) Part III of the First Schedule which deals with Professional misconduct in relation to members of the Institute generally

A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he –

“(1) not being a Fellow of the Institute, acts as a Fellow of the Institute;”

This clause prohibits a member to act as a Fellow of the Institute while in fact he is not a Fellow member. A person is entitled to have his name entered in the Register as a Fellow as per regulation 4 (2) of the Company Secretaries Regulations, 1982 which requires standing of five years as an Associate and a certain level of experience.

“(2) does not supply the information called for, or does not comply with the requirements asked for, by the Institute, Council or any of its Committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority;”

It is a duty of a member to supply information called for or to supply the requirements as asked for by the Council or any of its Committee and other authorities such as Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority. Non-compliance with this clause would tantamount to breach of code of conduct.

“(3) while inviting professional work from another Company Secretary or while responding to tenders or enquiries or while advertising through a write up, or anything as provided for in items (6) and (7) of Part I of this Schedule, gives information knowing it to be false.”

A member of the Institute, whether in practice or not, shall be guilty of professional misconduct if he gives any information which he knows it to be false, while inviting professional work from another Company Secretary or while responding to tenders or enquiries or while advertising through a write up, or anything as provided for in items (6) and (7) of Part I of the First Schedule.

B) Part IV of the First Schedule which deals with Other misconduct in relation to members of the Institute in generally

A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct under Part IV of the First Schedule, if: -

“(1) he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term not exceeding six months;”

A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, under Part IV of the First Schedule, if he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term not exceeding six months.

“(2) in the opinion of the Council, he brings disrepute to the profession or the institute as a result of his action whether or not related to his professional work.”

If a member of the Institute in the opinion of the Council brings disrepute to the profession or the institute as a result of his act/ omission whether the same relates to his professional work or not or such act/ omission does not fall under any of the items of the First and Second Schedule of the Act, the member shall be deemed to be guilty of other misconduct. However, such cases are to be decided by the Council keeping in view the facts and circumstances of each case.

C) Part II of the Second Schedule which deals with Professional misconduct in relation to members of the Institute generally

A member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct, if he—

“(1) contravenes any of the provisions of this Act or the regulations made thereunder or any guidelines issued by the Council;”

Every member of the Institute is expected to pay due obedience to the Act, the Regulations made thereunder and any Guidelines issued by the Council of the Institute from time to time. For example: acquiring requisite Programme Credit Hours (PCH).

“(2) being an employee of any company, firm or person, discloses confidential information acquired in the course of his employment, except as and when required by any law for the time being in force or except as permitted by the employer;”

A member in employment is expected to maintain confidentiality of any information which may cause harm to the employer if disclosed to any undesirable person/ outsider. This clause emphasized on building a relationship of trust and confidence amongst a member of the Institute and its employer.

“(3) includes in any information, statement, return or form to be submitted to the Institute, Council or any of its Committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority any particulars knowing them to be false;”

This clause prohibits any member of the Institute, to include any particulars which he knows it to be false, in any information, statement, return or form to be submitted to the Institute, Council or any of its Committees, Director (Discipline), Board of Discipline, Disciplinary Committee, Quality Review Board or the Appellate Authority.

“(4) Defalcates or embezzles moneys received in his professional capacity.”

This clause covers defalcation or embezzlement of moneys received by a member of the Institute in his professional capacity, whether in practice or not. Misappropriation of funds received in his professional capacity by a member of the Institute, would amounts to professional misconduct under this clause.

D) Part III of the Second Schedule which deals with Other misconduct in relation to members of the Institute in generally

“A member of the Institute, whether in practice or not, shall be deemed to be guilty of other misconduct, under Part III of the Second Schedule, if he is held guilty by any civil or criminal court for an offence which is punishable with imprisonment for a term exceeding six months.”

This write-up has been prepared and published for the reference of the members of the Institute. These views may be subject to judicial interpretation.

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