Chapter 3 - Company Secretary Flashcards
What does CA2006 say about the Company Secretary?
- s.270 (1) - private companies no longer require one unless stated in its Articles
- s.270(3)(b) - directors must take on CS’ responsibilities where decision not to employ one is taken
- s.271 - all public companies must have a company secretary
What does UKCGC 2018 say about the Company Secretary?
Provision 16 - all directors should have access to advice of the CS, who is responsible for adivsing the Board on all governance maters. Both appointment/removal of the CS should be a matter for the whole board
<br></br>Recognises central role of CS in providing good CG & helping chair/directors uphold good governance standards.
What are the 4 key roles of the Company Secretary
- Statutory and regulatory compliance
- Governance
- Board’s communicator
- Advising the Board & senior management
Key points on Governance role of the CoSec.
- Board composition and assist chair with policies and proceedures (schedule of matters / meeting support) - including the fact they are complied with/conducted compliantly
- Accountability (support/advise board on responsibility - inc. RM & ICs, audit & auditors)
- Ensure good information flows
- Board information, development and relationships (support professional development and director induction - arrange for company to provide resources)
- Ensure execs/NEDs have access to independent professional advice at the company’s expense where appropriate
- Remuneration (support the RemCo, ensure compliance with rule/legislation re director/senior exec remuneration)
- Shareholder relations
- Disclosure & Reporting
Key points on Statutory/Regulatory Compliance role of the CoSec.
Usually full responsibly for (overseeing) compliance with
- CA2006
- UK Corporate Governance Code
- If listed - LPDTR
- Market abuse provisions of FSMA 2000
Topics to include
- Directors’ duties
- Share Dealing
- Inside Information / release of market information
- Vertification of published information
Key points on Advisory role of CoSec.
- Governance best practice (inc. board evaluation, training/induction, board and committee constitution and procedures.)
- Transparency & disclosure
- Effective Control Environment(s)
- Committment to Corporate Responsibility/Corporate Governance
Key points on Communicator role of CoSec.
- Communicate board decisions
- Managing disclosures of baord decisions to regulators & other stakeholders
- Ensure board keeps in touch with shareholder opinion
- Ensure good information flows
- Primary point of contact with NEDs
- Supporting preparation of Annual Report
- Liaison re all board events
What are some examples of adhoc/other responsibilities of the Company Secretary?
- Insurance/facilities/administrative matters
- Advice adhoc
- Ultimately will differ from company to company
What is the liability of a Company Secretary?
- CoSec is an officer, along with the directors - so can be liable to default fines/penalties for officers per CA2006
- s.1157 CA2006 - can apply to court for relief of any liability and will not usually be held WITH directors for** their breach** of trust/malfeasance
- May be liable under IA 1986 for damages awarded by court in course of winding up if there has been a misfeasance or breach of trust in relation the company
- Unusual they would be held personally liable
- CASE STUDY - Hillsborough - CS found negligent re H&S measures
Why is the Company Secretary often referred to as a bridge for information, communications, advice and arbitration?
Company Secretary has important role as the company’s communicator
- Communicates decisions to management
- Manage disclosures / maintain the importance of timley and balanced disclosure
- Liaise between board, shareholders and management on board logistics
- Facilitate good information flows / foster effective working relationships
- Primary contact for NEDs
- Source of advice/information for the companys - maintain consistency of msgs via collation/being central source
- Ensures board is in touch with shareholder opinion and shareholders briefed on reasons for CG practices/board decisions
- Ensure disclosures on CG and Directors Remuneration are also available on website (and any other requisite governance information as required)
What is meant by the CoSec as ‘conscience of the company’
In fulfilling their governance role, the Company Secretary should be advising the board on the right thing to do in the long-term interests of the company.
<br></br>Often goes beyond laws/regulations and into the realm of business ethics.
<br></br>CoSec should speak out against bad governance and unethical/illegal business practices.
<br></br>They should be indepedent-minded and not under the influence of senior management, the Chair or an individual director.<br></br>
Based on:
- Independence
- In depth knowledge of company
- Strong governance and ethical understanding
- Good relationship with the board
What were the key findings of “The Company Secretary: Building Trust Through Governance”? (ICSA with Henley Business School)
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- Role more than admin – STRATEGIC LEADERSHIP
- Ideally placed
- Skills/attributes closest to those of chair
- Vital CoSecs have director/informal access to all board members
- For max effectiveness – should report directly to the Chair
- Role is increasingly OUTWARD FOCUSED
- ICSA qualified – more ROUNDED GOVERNANCE/board member service.
- Conflict of interest in combined ‘head of legal (gen counsel) & CoSec’ role – should separate roles.
- Board members LACK OF AWARENESS how Cosec can support re decision-making & miss out on full use of skills/knowledge/experience.
- Often longest-serving member present–repository of history/culture/ guarantor of continuity.
- CoSecs = embedded in process of making boards more effective – contribute by OBSERVING and advising on any gaps that need filling (skills)
- Breadth of role – additional responsibilities – OFFICER OF COMPANY – chief of staff to Chair
Why is it vital for company secretary to have good interpersonal / soft skills? (key challenges faced by the Company Secretary)
Many company secretaries face the following key challenges:
- being considered traitors by the executive team;
- supporting chairs exhibiting poor performance;
- acting as the third person in a CEO-chair relationship;
- becoming a pivotal contact for insurmountable problems; and
- maintaining independence from other executives and board members.
To overcome these challenges company secretaries, in addition to their technical skills, need commercial and business acumen and interpersonal skills, which many considerethe most important.
Provide 5 examples of interpersonal skills the CoSec should have and why each is important to them fulfilling their responsibilities. (***)
- Empathy and relationship management
- Respectful, diplomatic and effective communication
- Active listening
- Can bring issues to surface - summarise concerns and interests
- Generates solutions/appreciates views of all parties
- Respects confidences and has an indepedent mindset
- Personal and social awareness
- Integrity and strength of character – as the conscience of the company it is important that the company secretary has the highest levels of integrity.
- Effective team-working
Why should a Company Secretary be commercially aware/have a degree of business acumen?
Many CoSecs face the following challenges
- Being seen as a traitor by CEO’s executive team
- Acting as third person in CEO-Chair relationship
- Supporting poorly performing chairs
- Being pivotal contact for insurmountable problems
- Maintaining their indepedence<br></br>
To overcome these challenges it is vital that company secretarials, in addition to their technical skills, have business and commercial acumen and interpersonal skills.
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A study by All Parliamentary Corporate Governance Group in 2012 criticised many CoSecs for not being commercially minded or aware, something they saw as a key/important feature of the job, especially due to their role in advising the board on governance<br></br>
To be commercially aware an individual must understand business/make good practical decisions as a result.
- Understand how the company makes money and creates value
- Understand what it needs now/in future to continue to do so
- Have a thorough understanding of the company’s competitive advantage; and
- Keep up to date with the company’s industry
The CoSec should then be able to advise the board on this basis so they can make decisions.
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In ICSA/Henley’s ‘Building Trust Through Governance’ many company secretaries acknowledged ‘commercial awareness and abilities are critical to ensure their understanding of what is right for the company, what information means and to whom relevant questions need to be passed’
