A Company Secretary

A Company Secretary

A company secretary is a senior position in a private company or public organization, normally in the form of a managerial position or above.

Despite the name, the role is not a clerical or secretarial one in the usual sense. The company secretary ensures that an organisation complies with relevant legislation and regulation, and keeps board members informed of their legal responsibilities.

Company secretaries are the company’s named representative on legal documents, and it is their responsibility to ensure that the company and its directors operate within the law.  

A company secretary is essentially responsible for all the company administration, which is also known as company compliance.

This means they are accountable for the submission of confirmation statements and other important documents to Companies House, and they often take up a number of other administrative matters such as arranging board meetings.

The company secretary cannot be the same person as the limited company director, however, in the absence of a company secretary, the company director will need to absorb the required duties.

Origins

The role of company secretary has changed significantly in recent years. Since the financial crisis of the US in 2008 there has been a tighter focus on corporate governance in all sectors, not just financial services.

Boards and chairmen in all industries now rely on the company secretary to advise not only on statutory duties, but also on matters concerning corporate governance and effective board processes.

The company secretary has gained greater visibility and greater influence in the boardroom.

In most organisations today, the company secretary has become the primary link between the executive management and the board and other key stakeholders, and they will act as the key point of liaison for regulators and major shareholders.

Although their impartiality remains crucial, today’s company secretaries frequently identify themselves as the third member of the triumvirate at the head of the company, along with the CEO and chair.

And in this role, they must bring a strategic outlook and a level of commercial understanding that was rarely seen in company secretaries of 10 or 20 years ago.

The Company Secretary normally plays an important role in ensuring compliance with the Companies Act and the Capital Markets licensing requirements and general 4 regulations for the listed companies.

The Company Secretary comes to “act as the ‘grout’ to fill knowledge cracks that might otherwise appear during a board meeting. The Company Secretary’s duties are an essential ingredient in the implementation of sound corporate governance procedures.

In the eyes of many directors the position represents a shield against non-compliance and breaches of the Company law.

The Company Secretary is thus required to be fully conversant with the law and procedure of meetings, which at times is least appreciated, but can be crucial in the good management of a company’s affairs.

Appointment of a Company Secretary

According to company law, when appointing a company secretary, the directors must ensure the person has “the requisite knowledge and experience to discharge the functions of secretary of the company”.

Yet today’s company secretaries must possess a broad range of attributes. They must be talented leaders, with the confidence and ability to influence their chairman and senior board members.

They must possess strong commercial acumen together with well-developed technical knowledge relevant to their industry. They must also be skilled communicators, able to effortlessly engage with their executive board, NEDs and regulatory bodies.

And they must be able to combine sharp intelligence with broad experience to make sound, well-informed decisions.

A private company is required to have a company secretary only if it has a paid up capital of Kenya shilling five million or more, but every public company must have at least one secretary. Anyone who becomes a secretary must give their written consent to act.

In making the appointment, directors of a public company must take reasonable steps to ensure that the secretary or each joint secretary of the company is:

  • Person who appears to them to have the requisite knowledge and experience to discharge the functions of a secretary of the company;
  • Is a holder of a practicing certificate issued under the certified public secretaries of Kenya act

The Companies Act introduces additional responsibility for the directors of a public company to ensure that the company secretary appointed has the requisite knowledge and experience to discharge his duties.

The appointment of the company secretary can be terminated by the directors of the company without shareholder approval.

The Company Secretary and Corporate Governance

In practice, the role of the company secretary has developed into much more than the basic statutory requirements outlined above. Most notably, the responsibility for developing and implementing processes to promote and sustain good corporate governance has fallen largely within the remit of the company secretary. This is seen as best practice and the standards of corporate governance should be adopted by other companies in so far as they are considered appropriate to the nature and scale of the organisation. 

The dynamics of the boardroom are changing and chairmen and directors are realising that they need specialist skills and technical knowledge in this area and they are looking to company secretaries to provide this expertise. There are a number of responsibilities, some of which have been explicitly referenced to in the above guidance, where the company secretary can assist and add value:

Organisational Governance

It is important that robust governance arrangements are in place, are clearly documented and communicated to the organisation. The position of the company secretary enables them to have a holistic view of the governance framework and as a result they are generally tasked with the responsibility of ensuring that this framework and any supporting policies and procedures are clearly documented. This should include ensuring that the formal documentation required under the Code of Corporate Governance.

Supporting the Chairman

The company secretary has a duty to advise the Board, through the chairman, on all governance matters.

Together they should periodically review whether the Board and the company’s other governance processes are fit for purpose, and consider any improvements or initiatives that could strengthen the governance of the company.

The relationship between the company secretary and the chairman is central to creating an efficient Board.   

Board and Committee Processes

The company secretary plays a leading role in good governance by helping the Board and its committees function effectively and in accordance with their terms of reference and best practice.

Providing support goes beyond scheduling meetings to proactively managing the agenda and ensuring the presentation of high-quality up-to-date information in advance of meetings. This should enable directors to contribute fully in board discussions and debate and to enhance the capability of the Board for good decision making.

Following meetings, the company secretary should pursue and manage follow up actions and report on matters arising. 

Board Development

All directors should have access to the advice and services of the company secretary. The company secretary should build effective working relationships with all board members, offering impartial advice and acting in the best interests of the company.

In promoting board development, the company secretary should assist the chairman with all development processes including board evaluation, induction and training. This should involve implementing a rigorous annual Board, committee and individual director assessment and ensuring actions arising from the reviews are completed.

Further, the company secretary should take the lead in developing tailored induction plans for new directors and devising a training plan for individual directors and the Board.  

Although these tasks are ultimately the responsibility of the chairman, the company secretary can add value by fulfilling, or procuring the fulfilment of, these best practice governance requirements on behalf of the chairman.

Communication with Stakeholders

The company secretary is a unique interface between the Board and management and as such they act as an important link between the Board and the business.

Through effective communication they can coach management to understanding the expectations of, and value brought by the Board.

The company secretary also has an important role in communicating with external stakeholders, such as investors, and is often the first point of contact for queries. The company secretary should work closely with the chairman and the Board to ensure that effective shareholder relations are maintained.   

Disclosure and Reporting

In recent years there has been increased emphasis in the quality of corporate governance reporting and calls for increased transparency. The company secretary usually has responsibility for drafting the governance section of the company’s annual report and ensuring that all reports are made available to shareholders according to the relevant regulatory or listing requirements.

Role of a Company Secretary in Governance 

Company secretary plays a largely supportive role, taking care of important tasks such as general administration, shareholder communication, corporate governance, and statutory compliance/filing of accounts. In short, the secretary acts as a bridge between the company, the shareholders and Registrar, ensuring all the relevant information is shared in compliance, on time and efficiently.

The role of company secretary involves lots of different tasks, and so an organized individual with prior experience in an administrative role is often a preferred candidate.

  • Facilitating the smooth operation of the company’s decision making and reporting mechanism.
  • Convening board and committee meetings in accordance with the requirements of the Companies Act and the company’s Articles of Association and taking proper account of such meetings
  • Ensuring that Annual General Meetings are held in accordance with the requirements of the Companies Act and the company’s Articles of Association
  • Ensuring that the company complies with its Memorandum and Articles of Association, monitoring and ensuring compliance with the CMA and NSE requirements.
  • Maintenance of up-to-date statutory registers of Members, Mortgage and charges; Directors and secretary, Directors’ interests in shares and debentures.
  • Notifying the Registrar of Companies on certain changes regarding the company such as timely filing of annual returns, accounts, returns of allotments, notices of changes in directors and/or the Company Secretary.
  • Coordinating the publication and circulation of the company’s annual report and accounts and interim statements to all the stakeholders.
  • Participating as a key member during corporate acquisitions
  • Continually reviewing developments in corporate governance and advising the Board on new legal requirements.
  • Ensuring the safe custody and proper use of company seal and letterheads
  • Ensuring that procedures are in place for the correct administration of subsidiary companies and that correct information is given to the holding company
  • Ensuring that procedures are in place to allow adequate historical archives of key company records.

Duties of the Company Secretary

The following list includes both those duties, which are legal obligations as well as those which result from Best Practice. This is not a comprehensive list and the Company Secretary may have to use their initiative to ensure that all core duties are fulfilled. The Company Secretary will also have to refer to all relevant legislation. The Company Secretary will need to fulfill the following duties:

Board Meetings

Facilitating the smooth operation of the company’s formal decision making and reporting machinery; organizing board and board committee meetings [e.g. audit, remuneration, nomination committees et; formulating meeting agendas with the chairman and/or the chief executive and advising management on content and organization of memoranda or presentations for the meetings; collecting, organizing and distributing information, documents or other papers required for the meeting; ensuring that all meetings are minuted and that the minute books are properly maintained and that all Board committees are properly constituted and provided with clear terms of reference.

General Meetings

Ensuring that an Annual General Meeting is held in accordance with the requirements of the Companies Act and the company’s Articles of Association; obtaining internal and external agreement to all documentation for circulation to shareholders; preparing and issuing notices of meetings, and distributing proxy forms; preparing directors for any shareholder questions and helping them create briefing materials; overseeing the preparations for security arrangements.

At meetings, ensuring that proxy forms are correctly processed and that the voting process is carried out correctly; coordinating the administration and minuting of meetings.

Memorandum & Articles of Association

Ensuring that the company complies with its Memorandum and Articles of Association; drafting and incorporating amendments in accordance with correct procedures.

Stock Exchange Requirements

Monitoring and ensuring compliance with the Stock Exchange requirements as well as supervising the implementation of the model code and/or the company code for dealing in the company’s securities, as appropriate; managing relations with the Stock Exchange through the company’s brokers; releasing information to the market; ensuring the security of unreleased price-sensitive information; making applications for listing of additional issues of securities.

Statutory Registers

Maintaining the following statutory registers:

   Members [see also paragraph 8];

            ♦ Mortgage and charges;

            ♦ Directors and secretary;

            ♦ Directors’ interests in shares and debentures;

            ♦ Interests in voting shares;

            ♦ Debenture holders [if applicable].

Statutory Returns

Filing information with the Registrar of Companies to report certain changes regarding the company or to comply with requirements for periodic filing. Of particular importance in this regard are:

            ♦ Annual returns

            ♦ Report & accounts;

            ♦ Amended Memorandum and “Articles of Association;

            ♦ Returns of allotments;

            ♦ Notices of appointment, removal and resignation of directors and/or the Company Secretary;

            ♦ Notices of removal or resignation of the auditors;

            ♦ Change of registered office;

            ♦ Resolutions in accordance with the Companies Act.

Report & Accounts

Co-ordinating the publication and distribution of the company’s annual report and accounts and interim statements, in consultation with the company’s internal and external advisers, in particular, when preparing the directors’ report.

Share Registration

Maintaining the Company’s register of members; dealing with transfers and other matters affecting share- holding; dealing with queries and requests from shareholders.

Shareholder Communications

Communicating with the shareholders [e.g. through circulars]; arranging payment of dividends and interest; issuing documentation regarding rights issues, capitalization issues, and maintaining good shareholder relations; maintaining good relations with institutional shareholders and their investment committees.

Shareholder Monitoring

Monitoring movements on the register of members to identify any apparent ‘stake-building’ in the company’s shares; making appropriate enquiries of members as to the beneficial ownership of holdings.

Share and Capital Issues and Restructuring

Implementing properly authorized changes in the structure of the company’s share and loan capital; devising, implementing and administering directors’ and employees’ share participation schemes.

Acquisitions, Disposals & Mergers

Participating as a key member of the company team established to implement corporate acquisitions, disposals and mergers; protecting the company’s interests by ensuring the effectiveness of all documentation; ensuring that due diligence disclosures enable proper commercial evaluation prior to completion of a transaction; ensuring that the correct authority is in place to allow timely execution of documentation.

Corporate Governance

Continually reviewing developments in corporate governance; facilitating the proper induction of directors into their role; advising and assisting the directors with respect to their duties and responsibilities, in particular compliance with company law and, if applicable, Stock Exchange requirements; counselling them when preparing presentations and memoranda.

Non-Executive Directors

Acting as a channel of communication and information for non-executive directors.

Company Seal

Ensuring the safe custody and proper use of any company seals.

Registered Office

Establishing and administering the registered office; attending to the receipt, co-ordination and distribution of official correspondence received by the company, sent to its registered office; ensuring the provision of facilities for the public inspection of company register and documents.

Company Identity

Ensuring that all business letters, notices and other official publications of the company show the name of the company and any other information as required by the statutes and that the company’s name is displayed conspicuously outside all places of business.

Subsidiary Companies

Ensuring that procedures are in place for the correct administration of subsidiary companies and that correct information is given to the holding company; maintaining a record of the group’s structure.

General Compliance

Monitoring and laying in place procedures that allow for compliance with relevant regulatory and legal requirements, in particular under the Companies Acts, including legal requirements on retention of documents; retaining the minimum set of records required for commercial reasons; ensuring that procedures are in place to allow adequate historical archives to be maintained.

Administrative Tasks of a Company Secretary

Filing confirmation statements

A company secretary will take over this responsibility from the limited company director. This means they are responsible for the completion and timely submission of the company’s annual returns, statements, and full accounts by the statutory deadline.

Keeping Companies Registrar updated of changes

There is a requirement to let the Registrar know if the official details change about your company. These details include who the shareholders are and their share capital, the Directors details and any PSC (Persons of Significant Control), and the registered office address.

The company secretary has to communicate these changes to Companies Registrar in a timely manner. This is also known as event-driven filing as it happens after the event. They should also ensure these changes are on company communications such as your website or stationery.

Updating the Company’s Statutory Books

It’s really important to keep a record of any changes to the structure of the company. These records are also known the company’s statutory registers, e.g. the Register of Directors and the Register of Members. Should you ever decide to sell your company you will need to show these records as part of the transaction.

Communication with shareholders

As previously mentioned, the company secretary acts as the bridge between shareholders and the company. This means that they will be communicating any important announcements. The Secretary will be sending out news and liaising with shareholders to organize shareholder meetings and the company’s Annual General Meeting (AGM).

Maintaining paperwork

A company secretary is responsible for the security and accuracy of important company documents, which include the certificate of incorporation, share certificates and other important ones.

Signing paperwork

The duty of signing legal documents on behalf of the company director may sometimes fall to the company secretary. This can be anything from signing cheques and bank documents to other vital documents.

Compliance

The company secretary should take time to ensure the company remains compliant with legislation outlined in Companies Act 2015 at all times.

They also need to keep up to date with any changes in compliance, such as the regulations.

General Responsibility of a Company Secretary in a Public Company

The responsibilities of a company secretary in a public company include the following:

  • Recording and keeping minutes of all proceedings at meetings of the directors and the shareholders.
  • Maintaining respective registers of the directors, shareholders and the shareholders.
  • Maintaining a register of the directors’ residential addresses.
  • Maintaining registers of charges and debenture holders.
  • Filing of returns with the Registrar of Companies within prescribed time limits. These include certain resolutions, allotments, changes in directors, the annual return, and financial statements and reports.
  • Assisting in the convention of meetings of directors and the shareholders.
  • Assisting in the execution of documents.

If the company secretary fails to undertake his duty as required under the Companies Act, he commits an offence and on conviction is liable to pay a fine.

Duties and Statutory Liabilities of a Company Secretary Under the Company’s Act

A company secretary has legal requirements and responsibilities, such as compliance, paperwork and financial matters.

If you are the business owner and are considering who to appoint as a company secretary, it is important that you select someone trustworthy and capable for the job.

According to the Companies Act, chartered secretaries of large public companies can face prosecution if they are neglectful or willingly act in violation of the law.

Company secretaries in smaller companies are unlikely to face the same severity of consequences, given that these roles are often loosely defined.

If you are considering becoming a company secretary, you should be aware of the pressure that can sometimes accompany the role, along with the risk of joint liability in the event that there are breaches of the Companies Act.

The company secretary usually undertakes the following duties:

  1. Maintaining the statutory registers. These are;
  2. The register of members.
  3. The register of directors and secretaries.
  4. The register of director’s interests.
  5. The register of changes.
  6. Ensuring that statutory forms are filed promptly; you cannot simply send a letter to notify the Registrar that you wish to change the situation of the company’s registered office or that changes have occurred among directors or secretaries or their particulars.
  7. Providing members and auditors with notice of meetings.
  8. Sending the Registrar copies of resolutions and agreements.
  9. Supplying a copy of the accounts to every member of the company, every debenture holder and every person who is entitled to receive a notice of general meetings.
  10. Keeping, or arranging for the keeping, of minutes of directors’ meetings and general meetings.
  11. Ensuring that people entitled to do so can inspect company records.
  12. Custody and use of the company seal; the secretary is usually responsible for its custody and use.

Panorama Development (Guildford) V Fe Fideli`s Furnishing Fabrics Ltd (1971)3 WLR 12

The company secretary ordered self drive cars using a different company’s letterhead and when the cars arrived he devoted them to his personal use. The defendant company was sued for the price of the cars.

It raised a defence that it was not bound because the secretary who made the order was an insignificant person in a company (depending on earlier conceptions of the secretary).

The Court of Appeal rejected the defence and pointed out that the secretary is an important company officer with in-exhaustive powers, duties and responsibilities and who can make representations on behalf of the company and can enter into contracts in the day to day running of the company’s business.

Consequently because of his position in the company, the secretary can be held liable not only to his company but also to the shareholders in civil suits.

Relationship between a Company Secretary and the Chairperson of the Board

The chairman and company secretary have distinct yet symbiotic roles to fulfil in monitoring, fostering and ensuring the maintenance of best of breed governance practices within an organisation. The effectiveness of board processes and meetings is directly linked to how well these two role players are able to work together.

As a consequence, their roles and the relationship between them warrants focus. The role of the board chair is one of leadership. The tone from the top and the promotion of the highest standards of integrity and corporate governance are established by the chair.

The chair is responsible and accountable for all aspects of governance and ensuring board effectiveness.

Key to the success of the corporate secretary is the ability to build relationships with shareholders and stakeholders, the board members and most importantly, the Chair.

The relationship with the Chair is a precondition to the corporate secretary’s effectiveness in all other areas of responsibility.

The unfortunate nomenclature of “secretary” together with a historical perspective of the role has, in some jurisdictions, contributed to the positioning of the corporate secretary as an administrative function with low levels of empowerment and more importantly, no direct relationship with the Chair.

The role of the corporate secretary is important for the effectiveness of the boards and its committee operations, but the company secretary “should report to the chairman on all board governance matters.

Despite the growing body of work highlighting the importance of the corporate secretary function, the role remains inadequately positioned in some jurisdictions. There are a couple of prerequisites to ensure effective discharge of secretarial responsibilities and these include:

  • The role being afforded the right stature within the organisation, including being sufficiently empowered to conduct the role in an unfettered manner;
  • Sufficiently independent reporting lines to ensure maintenance of objective oversight in pursuit of implementation of governance objectives; and
  • Fostering a direct and constructive working relationship with the Chair of the board.

The corporate secretary is a critical component of the board team. In some jurisdictions, the company secretary is regarded as an officer of the company and liable for the same fiduciary duties as directors.

Working relationships are personal to the parties involved and to a large degree involve chemistry together with a will to make them work. It is important that the company secretary builds a relationship with the Chair.

It is also necessary for chairmen to recognise the vital governance role played by the corporate secretary and to contribute to the establishment of the relationship.

A solid working relationship built on mutual respect, trust and shared objectives will inevitably enhance the overall performance of the board.

If the Chair is to succeed and create a board that maintains the highest levels of integrity and probity, it is critical that the role of the company secretary and the Chair’s relationship with the corporate secretary be a focus.

This may mean the need to upskill an incumbent corporate secretary to fulfil the new governance tasks being asked of the profession. Or, it may require the Chair to alter his perspective on the role of the corporate secretary.

Either way, the creation of a synergetic relationship is important for improving board performance and effectiveness.

A dynamic, effective board requires the company secretary and chair to work together to create optimal governance outcomes. Their individual governance responsibilities are inextricably intertwined and their relationship needs to reflect this.

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