Companies Act 2013 Section 328

Companies Act 2013 Section 328 deals with the appointment of a company secretary in Indian companies. This section specifies which companies are required to appoint a company secretary and outlines the qualifications necessary for the role. The company secretary plays a vital role in ensuring compliance with corporate laws and maintaining proper governance within the company.

Understanding Section 328 is essential for directors, shareholders, company secretaries, and professionals involved in company management. It helps ensure that companies appoint qualified personnel to handle secretarial duties, thereby promoting transparency and adherence to legal requirements.

Companies Act Section 328 – Exact Provision

This section mandates that certain companies must appoint a whole-time company secretary who is a qualified member of the Institute of Company Secretaries of India. The company secretary acts as a key managerial personnel responsible for ensuring compliance with the Companies Act and other applicable laws.

• Applies to listed companies and companies with paid-up capital of ₹10 crore or more.

• Requires appointment of a whole-time company secretary.

• Company secretary must be a member of ICSI.

• Ensures compliance with corporate governance norms.

• Supports board and shareholders in legal and procedural matters.

Explanation of Companies Act Section 328

This section sets out the obligation for certain companies to appoint a qualified company secretary.

• States that listed companies and companies with paid-up capital ≥ ₹10 crore must appoint a whole-time company secretary.

• Applies to companies, their boards, and management.

• Mandatory requirement for compliance and governance.

• Triggers appointment based on company’s listing status or capital threshold.

• Permits only qualified members of ICSI to hold the post.

• Prohibits appointment of unqualified persons as company secretaries in applicable companies.

Purpose and Rationale of Companies Act Section 328

The section aims to strengthen corporate governance by ensuring companies appoint qualified company secretaries. This promotes legal compliance and transparency.

• Strengthens corporate governance frameworks.

• Protects shareholders and stakeholders by ensuring proper compliance.

• Ensures transparency and accountability in company operations.

• Prevents misuse of corporate structure through professional oversight.

When Companies Act Section 328 Applies

This section applies when companies meet certain financial or listing criteria, mandating the appointment of a qualified company secretary.

• Applies to listed companies regardless of capital.

• Applies to companies with paid-up capital of ₹10 crore or more.

• Must comply upon reaching thresholds or listing status.

• Exemptions may apply to smaller companies or those below thresholds.

Legal Effect of Companies Act Section 328

Section 328 creates a mandatory duty for applicable companies to appoint a qualified whole-time company secretary. This duty impacts corporate governance and compliance significantly. Non-compliance can lead to penalties and affect company operations. The provision works alongside MCA rules and notifications to enforce compliance.

• Creates a mandatory appointment duty.

• Impacts company secretarial and compliance functions.

• Non-compliance attracts penalties under the Act.

Nature of Compliance or Obligation under Companies Act Section 328

Compliance with Section 328 is mandatory for applicable companies. It is an ongoing obligation requiring the company to maintain a qualified company secretary throughout its operations. Directors and officers are responsible for ensuring this compliance, which directly affects internal governance and regulatory adherence.

• Mandatory and ongoing obligation.

• Responsibility lies with directors and company management.

• Direct impact on internal governance and compliance.

Stage of Corporate Action Where Section Applies

Section 328 applies primarily at the operational stage of the company when it meets thresholds or becomes listed. It influences board decisions and ongoing compliance filings.

• Applies after incorporation when thresholds are met.

• Relevant during board appointments and governance decisions.

• Impacts annual filings and disclosures.

• Ensures continuous compliance throughout company life.

Penalties and Consequences under Companies Act Section 328

Failure to comply with Section 328 can lead to monetary penalties and other enforcement actions. The company and officers responsible may face fines, and repeated defaults can attract higher penalties or prosecution.

• Monetary fines for non-compliance.

• Possible prosecution for repeated violations.

• Disqualification of officers in certain cases.

• Additional fees or remedial directions by regulators.

Example of Companies Act Section 328 in Practical Use

Company X, a listed entity, appointed Mr. Y, a qualified member of ICSI, as its whole-time company secretary to comply with Section 328. This ensured proper handling of board meetings, filings, and compliance with the Companies Act. Conversely, Company Z, with paid-up capital over ₹10 crore, failed to appoint a company secretary and faced penalties from the Registrar of Companies.

• Appointment of qualified company secretary ensures compliance.

• Non-appointment leads to regulatory penalties.

Historical Background of Companies Act Section 328

Under the Companies Act, 1956, company secretary appointments were less regulated. The 2013 Act introduced stricter norms to professionalize secretarial roles and enhance governance standards. Section 328 reflects this shift and has undergone minor amendments to clarify qualifications and applicability.

• Shifted from less stringent 1956 Act provisions.

• Introduced to professionalize secretarial appointments.

• Amended to clarify scope and qualifications.

Modern Relevance of Companies Act Section 328

In 2026, Section 328 remains crucial for digital compliance and governance reforms. Company secretaries use MCA’s e-filing portal to ensure timely disclosures. The role also supports ESG and CSR compliance, reflecting evolving corporate responsibilities.

• Supports digital compliance via MCA portal.

• Integral to governance reforms and transparency.

• Key role in ESG and CSR compliance efforts.

Related Sections

• Companies Act Section 2 – Definitions relevant to corporate entities.

• Companies Act Section 203 – Appointment of Key Managerial Personnel.

• Companies Act Section 205 – Duties of Company Secretary.

• Companies Act Section 118 – Registers and Records.

• IPC Section 420 – Cheating and dishonestly inducing delivery of property.

• SEBI Act Section 11 – Regulatory oversight for listed companies.

Case References under Companies Act Section 328

No landmark case directly interprets this section as of 2026.

Key Facts Summary for Companies Act Section 328

• Section: 328

• Title: Appointment of Company Secretary

• Category: Governance, Compliance, Directors

• Applies To: Listed companies and companies with paid-up capital ≥ ₹10 crore

• Compliance Nature: Mandatory, ongoing

• Penalties: Monetary fines, prosecution, disqualification

• Related Filings: Annual secretarial compliance reports, board meeting filings

Conclusion on Companies Act Section 328

Section 328 of the Companies Act 2013 plays a critical role in ensuring that companies appoint qualified company secretaries. This strengthens corporate governance and compliance with statutory requirements. Directors and management must prioritize this appointment to avoid penalties and maintain regulatory standards.

As companies grow or get listed, adherence to Section 328 becomes mandatory. The company secretary acts as a bridge between the company and regulators, ensuring smooth governance and legal compliance. Understanding and implementing this section is essential for sustainable corporate operations.

FAQs on Companies Act Section 328

Who must appoint a company secretary under Section 328?

Listed companies and companies with paid-up share capital of ₹10 crore or more must appoint a whole-time company secretary as per Section 328.

What qualifications are required for a company secretary?

The company secretary must be a member of the Institute of Company Secretaries of India (ICSI) to qualify for appointment under Section 328.

Is the appointment of a company secretary mandatory for all companies?

No, only listed companies and those with paid-up capital of ₹10 crore or more are required to appoint a company secretary under this section.

What are the penalties for non-compliance with Section 328?

Non-compliance can lead to monetary fines, prosecution, and possible disqualification of officers responsible for the default.

Can a company appoint a part-time company secretary under Section 328?

No, Section 328 requires the appointment of a whole-time company secretary for applicable companies, ensuring full-time compliance oversight.