The legal position of a company secretary may be explained as follows:
(a) As a servant of the company:
The secretary of a company is a servant of the company, whose duty is to act in accordance with instructions given to him by the directors. In the performance of his duties, therefore, the secretary can properly act only under the orders of the directors. In the words of Lord Esher M.R., “A secretary is a mere servant; his position is that he is to do what he is told, and no person can assume that he has any authority to represent anything at all” (Barnett vs.South London Tramways Co).
The secretary cannot, for instance, summon a general meeting on his own authority (Re State of Wyoming Syndicate); or register a transfer unless instructed to do so by the directors (Chida Mines Ltd. vs. Anderson) or borrow money for the purposes of the company without the like authority (Re Cleadon Trust Ltd.). Further, he has no implied authority to bind the company by making any representation, except the representation implied by Section 112 upon a certification of transfer made in accordance with that Section.
(b) As an agent of the company :
The secretary of a company, being the chief administrative officer of the company by virtue of his office, is also an agent of the company in a restricted sense. He has ostensible authority to enter into contracts on behalf of the company as regards matters connected with office administration, e.g., employment of office staff, the ordering of office equipment, the hiring of vehicles. (Panorama Developments (Guildford) Ltd. vs. Fidelis Furnishing Fabrics Ltd.”]. As agent, he must conduct the business with reasonable care and diligence and shall be made liable to account for any secret profits made by him in the course of his employment (Mckay’s Case).
A company is liable in respect of all such acts of its secretary as are done by him within the scope of his authority, and it is immaterial whether the secretary was acting in his own interests, or in the interests or supposed interests of the company [Lloyd vs. Grace, Smith & Co. (1912)]. It may be noted that a secretary is not an agent of the company like directors. He is an agent in the capacity of a servant and cannot act for the company without authority, from the directors except as regards matters covered within his administrative function.
(c) As an officer of the company :
The secretary is also an “officer” of the company within the meaning of Section 2(30). As “officer” of the company he may incur liability to statutory penalties by reason of non-compliance with the requirements of the Act, for instance, he may be held liable for default in holding the statutory meeting and filing the statutory report under Section 165, for default in registering certain resolutions and agreements as required under Section 192.
The secretary, like any other officer of the company, will be punishable with imprisonment, if he falsifies the books of the company, or if he willfully and knowingly makes a material false statement in the Balance Sheet or in certain returns, reports, certificates or other documents of a company which is being wound up (Sections 539 to 541). Again, misfeasance proceedings may also be taken against him in a winding up if he has misapplied any money or property of the company or has been guilty of breach of trust (Section 543).
Besides, a secretary is the chief officer under whose supervision all the ministerial and administrative work at the registered office of the company is carried on. He is solely responsible to the managing director or manager and the directors for the smooth running of office work. In fact ‘the secretary is the real principal officer of a company who is the proper person to correspond on behalf of the company in all routine matters. To substantiate, it may be stated that under the Civil Procedure Code, no evidence of competency is required for the secretary to sign pleadings on behalf of the company in connection with civil suits.
Professor Gower has summed up the position of the company secretary admirably as follows:
“It is arguable, therefore, that the secretary has also graduated as an organ of the company. Though appointed by the directors he is not their servant but an officer of the company” with substantial authority in the administrative sphere and with powers and duties derived directly from the articles and the Companies Acts. Andlin the performance of his statutory duties he is clearly entitled to resist interference from the members, board of directors or managing director. Where he differs from them is .that he has no responsibility for corporate policy or for making managerial decisions, as opposed to playing an administrative role in ensuring that the policy and managerial decisions are implemented.”