Module 1: The Company - Chapter 1: The Company Secretary

Question 1

The role and duties of the company secretary

Answer 1

Board meetings
General meetings
Memorandum & Articles of Association
UK Listing Authority requirements
Statutory registers
Registered office
Statutory returns
Directors’ duties and transactions
Corporate Governance
Report and accounts
Share registration
Shareholder communications
Shareholder monitoring
Share and capital issues and restructuring
Maintenance of the share capital and distributions
Acquisitions, disposals and mergers
Company identity
Subsidiary companies
General compliance

Question 2

Board meetings

Answer 2

Facilitating the smooth operation of the company’s formal decision-making and reporting machinery.

This involves organising board and board committee meetings, ensuring that they are properly constituted, formulating meeting agendas in consultation with the chairman, advising management on content and presentations for the meeting and collating and distributing high-quality information, papers or other documents required for the meeting.

At the meeting, the company secretary is responsible for ensuring that they are conducted in accordance with the Articles of Association (including voting and quorum requirements) and that the minute books are maintained.

Question 3

General meetings

Answer 3

Ensuring that the Annual General Meeting (AGM) and other general meetings are held in accordance with the requirements of the Companies Act, the company’s Articles of Association and other rules, obtaining internal and external agreement to all documentation for circulation to shareholders, preparing and issuing notices of meetings, distributing proxy forms, assisting directors to prepare for any shareholder questions including the creation of briefing materials and overseeing security arrangements.

Prior to, and at meetings, ensuring that proxy forms are correctly processed and that the voting is carried out accurately.

Following the meeting, the company secretary will prepare the minutes and any necessary actions to follow up.

Question 4

Memorandum & Articles of Association

Answer 4

Ensuring that the company complies with its Articles of Association and be responsible for drafting and incorporating amendments to the Articles, in accordance with the Companies Act, and any other relevant regulations

Question 5

UK Listing Authority requirements

Answer 5

Monitoring and ensuring compliance with the Listing Rules, Prospectus Rules and Disclosure and Transparency Rules (LPDT), as well as the Takeover Code when relevant, including supervising dealing in the company’s shares by Persons Discharging Managerial Responsibilities (PDMRs) and their connected persons.

Question 6

Statutory registers

Answer 6

Maintaining the following statutory registers:
• Members
• Directors and secretary
• Persons with Significant Control
• Substantial interest in voting shares
• Debenture holders

Question 7

Registered office

Answer 7

Establishing and administering the registered office, attending to the receipt, co-ordination and distribution of official correspondence received by the company and ensuring the procedures for the public inspection of company documents.

Question 8

Statutory returns

Answer 8

Filing information with the Registrar of Companies to report certain changes regarding the company. These include:
• Annual Confirmation Statement
• Annual report & accounts
• Amended Articles of Association
• Share capital returns
• Returns of allotment
• Notices of appointment, removal and resignation of directors and the secretary
• Notices of removal or resignation of the auditors
• Change of registered office
• Resolutions of the company

Question 9

Directors’ duties and transactions

Answer 9

Ensuring directors are aware of their statutory duties, including those relating to any conflicts of interest in accordance with the company’s Articles of Association and the Companies Act.

Question 10

Corporate Governance

Answer 10

Continually reviewing developments in corporate governance, and assisting the chairman and directors to fulfil the requirements of the UK Corporate Governance Code.

This is a significant core duty for the company secretary and includes supporting the board in the areas of director induction and development as well as the delivery of high-quality information to the board and its committees.

Question 11

Report and accounts

Answer 11

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

As part of this, the company secretary assists the directors in writing the narrative reporting sections of the report covering corporate governance, the work of the board and the board committees, the directors’ report and the corporate social responsibility reports.

Question 12

Share registration

Answer 12

Maintaining the company’s register of members, dealing with queries, transfers, share certificates and other matters affecting share-holdings, including co-ordination of all requirements relating to dividend and interest payments.

Some, or all of these duties, may be delegated to the company’s share registrar acting as agents of the company but the company secretary will need to manage the activities of the share registrar to ensure compliance with the relevant law and regulations.

Question 13

Shareholder communications

Answer 13

Communicating with the shareholders about corporate actions, dividends and general meetings, issuing documentation regarding rights issues and capitalisation issues and generally maintaining good shareholder relations.

Again, some, or all of these activities, may be undertaken in conjunction with the company’s share registrar and other external agents.

Question 14

Shareholder monitoring

Answer 14

Monitoring movements on the register of members to identify any apparent ‘stake- building’ in the company’s shares by potential take-over bidders and making appropriate enquiries of members as to the beneficial ownership of their holdings.

Question 15

Share and capital issues and restructuring

Answer 15

Implementing properly authorised changes in the structure of the company’s share and loan capital, in accordance with the Articles of Association, the Companies Act and the LPDT Rules.

Question 16

Maintenance of the share capital and distributions

Answer 16

Ensuring compliance with the Companies Act, in relation to maintenance of share capital.

This covers matters such as the reduction of capital, share buybacks, and the requirement to pay dividends or other distributions out of distributable profits

Question 17

Acquisitions, disposals and mergers

Answer 17

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 and ensuring that due diligence disclosures enable proper commercial evaluation prior to completion of a transaction.

Also, ensuring that the correct authorities are in place to allow timely execution of documentation.

Question 18

Company identity

Answer 18

Ensuring that all letters, order forms and websites show the name of the company and the other information required by the Companies Act, that the company’s name is included on all notices and other correspondence and publications of the company and that the company’s name is displayed at the company’s registered office and any other place it conducts business.

Question 19

Subsidiary companies

Answer 19

Ensuring that procedures are in place for the correct administration of subsidiary companies including all aspects of their corporate procedures, company books, records and filings.

Also, maintaining a record of the group’s corporate structure.

Question 20

General compliance

Answer 20

Monitoring and putting in place procedures to comply with relevant regulatory and legal requirements, particularly under the Companies Act. This includes the legal requirements on retention of documents.

Question 21

The company secretary is at the centre of the company in which they operate

Answer 21

role is pivotal in ensuring the well being of the organisation in terms of its:
Legal operation
administration
compliance

Question 22

Recent years - increasing requirement within companies

Answer 22

openness
transparency
accountability
greater pressure on directors to explain the performance of the company

Question 23

Company secretary has an essential role assisting the board with these requirements by

Answer 23

assist & guide the directors in the pursuit of the company’s aims
act with integrity & independence to protect the interests of the:
company
shareholders
employees
& other stakeholders

Question 24

Company secretary can be described as

Answer 24

conscience of the company

Question 25

Is there a legal requirement for a company secretary

Answer 25

Yes in public companies
for larger private companies the role is highly recommended due to the value the role will bring to the company.

Question 26

Company secretaries are ideally placed to

Answer 26

Align the interests of different parties around the boardroom table
facilitate dialogue
gathering and assimilating relevant information to enable effective board making decisions
Often the only people to know first hand how decisions have been reached

Question 27

Specific responsibilities of the company secretary will vary depending on

Answer 27

size of the company

the sector the company operates in

Question 28

other duties the company secretary may commonly undertake

Answer 28

areas relating to:
Accounting
property
pensions
insurance

Question 29

Many company secretaries will be involved in one or more of the following activities

Answer 29

• Anti-bribery and corruption
• Data protection
• Contract drafting
• Contract vetting
• Employment law
• Employee and executive share schemes and incentive plans
• Other employee benefits (e.g., company car, health insurance)
• Pensions administration & trusteeship
• Money laundering regulations
• Customer due diligence
• Insurance administration
• Risk management
• Facilities management
• Premises administration
• Office administration
• Information and computer systems
• Charitable and political donations
• Document management and retention

Question 30

Other duties a co sec may undertake if they have qualified as a lawyer

Answer 30

May undertake litigation work

Question 31

other duties a co sec may undertake if they have qualified as an accountant

Answer 31

May manage treasury function

Question 32

other duties a co sec may undertake if they are a chartered secretary

Answer 32

May take on additional responsibilities such as
property management
pensions
insurance

Question 33

Essential skills of a the role of a company secretary

Answer 33

The ability to liaise effectively on a variety of subjects and to communicate with a range of people from the chairman and directors to shareholders, staff, other stakeholders and regulators. In liaising with different people, an important attribute of the company secretary is that of discretion. The company secretary will often be privy to private and sensitive information. They will be a confidante to those they work with, who may privately share thoughts on certain matters. It is essential that the company secretary can always be trusted.

• Knowledge of the legal, regulatory and administrative framework that the organisation operates in. This can vary from a premium listed public limited company with thousands of shareholders, to a private limited company, a charity or a service provider in the public sector.

• The ability to be an effective manager and organiser of the operational and administrative affairs of the company.

Question 34

Demonstration of essential skills required

Answer 34

Practice in
Professional
balanced
accurate
& clear manner
Each board is unique and the Co sec role is highly discretionary

Question 35

Qualification of the company secretary - Public company

Answer 35

Directors of a public company must take all reasonable steps to ensure that the secretary is suitably qualified for the role and fulfils one of a number of criteria:-

• For at least three out of the five years preceding the appointment, they held the office of secretary of a public company.

• They are a barrister, advocate or solicitor, called or admitted in any part of the United Kingdom.

• They are a member of any of the following bodies:
– Institute of Chartered Secretaries and Administrators
– Institute of Chartered Accountants in England and Wales
– Institute of Chartered Accountants of Scotland
– Institute of Chartered Accountants in Ireland
– Chartered Institute of Management Accountants
– Association of Chartered Certified Accountants
– Chartered Institute of Public Finance and Accountancy

• They are a person who, by virtue of having held another position or being a member of another body, appear to the directors to be capable of discharging the functions required of the secretary.

Question 36

Qualification of the company secretary - private company

Answer 36

There are no equivalent requirements for private companies.

Larger or more complex private companies should recruit secretaries with similar qualification and experience to those of public companies.

Question 37

The office of the company secretary - how did the role begin

Answer 37

The role of the company secretary began with the Joint Stock Act 1856 which established the process for the formation of a company.

The act contained provisions for the secretary of the company but

the position was an administrative position without any level of authority.

1887 - the master of the rolls - Lord Esher stated that

” A secretary is a mere servant; his position is that he is to do what he is tole, and no person can assume that he has any authority to represent anything at all.”

Question 38

1887 - the master of the rolls - Lord Esher - said

Answer 38

” A secretary is a mere servant; his position is that he is to do what he is tole, and no person can assume that he has any authority to represent anything at all.”

Question 39

How has the role of the company secretary changed over the years

Answer 39

Gained recognition through a succession of Companies Acts.

1971 - Salmon LJ, in his judgement at the Court of Appeal in the case Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd 1971 - stated

that the position of the company secretary was as the “Chief administrative officer”

Question 40

1971 - Salmon LJ, in his judgement at the Court of Appeal in the case Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd 1971 - stated

Answer 40

that the position of the company secretary was as the “Chief administrative officer”

Question 41

Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd 1971 - the facts

Answer 41

The facts:
Mr Bayne was the company secretary of Fidelis Furnishing Fabrics Ltd.

Whilst his managing director was away, he hired cars from Panorama Development’s business.

Bayne used Fidelis letter headed paper to represent himself on behalf of the company. He hired a number of Rolls-Royce and Jaguar cars that he used for his own purposes.

On discovering his deception, Bayne was prosecuted and later imprisoned.

There were outstanding debts of £570 12 shillings and 6 pence for the hired cars which Fidelis claimed was not payable by them as they could not be bound by Baynes actions.

They argued that he never had the authority to enter into agreements on the company’s behalf.

Question 42

Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd 1971 - the decision

Answer 42

Decision: The court found Fidelis liable for Baynes actions as he had apparent authority to make contracts for areas concerned with the administrative side of the business.

In summing up, the Master of the Rolls, Lord Denning stated “A company secretary is a more important person nowadays than he was in 1887. He is an officer of the company with extensive duties and responsibilities.

This appears not only in the modern Companies Acts, but also by the role which he plays in the day-to-day business of companies.

He is no longer a mere clerk.

He regularly makes representations on behalf of the company and enters into contracts on its behalf which come within the day to day running of the company’s business.

So much so that he may be regarded as having authority to do such things on behalf of the company.

He is certainly entitled to sign contracts connected with the administrative side of a company’s affairs, such as employing staff, and ordering cars, and so forth.

All such matters now come within the ostensible authority of a company’s secretary.”

Question 43

Role of the company secretary - 1992

Answer 43

starts to gain recognition within corporate governance

report - Financial Aspects of Corporate Governance - AKA the Cadbury Report

This followed the corporate governance failures of some high profile companies.

Succession of further reports has continued to recognise the importance of the company secretary in corporate governance.

Question 44

report - Financial Aspects of Corporate Governance - AKA the Cadbury Report - corporate governance failures

Answer 44

Maxwell Communications
BCCI
Polly Peck

Question 45

The UK Corporate Governance Code - issued by the Financial Reporting Council

Answer 45

Issued by the Financial Reporting Council

give explicit recognition to the central role of the company secretary for the promotion of good corporate governance in listed companies

assistance to the chairman and directors to uphold the best corporate governance standards.

It states:
• ‘The boar, supported by the company secretary, should ensure that it has the policies, processes, information, time and resources it needs in order to function effectively and efficiently. (2.I)
• ‘All directors should have access to the advice of the company secretary, who is responsible for advising the board on all governance matters. Both the appointment and removal of the company secretary should be a matter for the whole board.’ (2.16)

Question 46

Powers of the Company secretary

Answer 46

The company secretary is a signatory - alongside the directors in the execution of documents

They can authenticate documents or proceedings of the company

Their signature on a written resolution is evidence of proceedings

Question 47

Liabilities of the company secretary

Answer 47

A number of general duties conferred upon the officers of the company clearly fall within the company secretary’s ambit because they are administrative matters.

If not carried out, they will result in them being held liable.

These matters include statutory filings to the registrar of companies.

As an example, failure to deliver accounts and annual returns on time is a criminal offence that upon conviction can incur fines up to £5000.

Liability is generally only imposed on the company secretary, where they are in default, i.e. where they knowingly and wilfully authorise or permit the default.

Generally, the registrar of companies will pursue the directors.

Question 48

Independence of the company secretary

Answer 48

The role of the company secretary should be an independent one, allowing them to provide impartial advice and to act in the best interests of the company.

Question 49

Independence of the company secretary - The CGIUKI guidance note, Appointment of the company secretary’ (2013), states:

Answer 49

‘It is incumbent on boards of directors to ensure that company secretaries are in a position to act with independence.

For example, by ensuring that they are not subject to undue influence of one or more of the board of directors.

If the board fails to protect the integrity of the company secretary’s position, one of the most effective inbuilt internal controls available to the company is likely to be seriously undermined.

The establishment of appropriate reporting lines for the company secretary will normally be a crucial factor in establishing that protection.’

Question 50

Independence of the company secretary - The CGIUKI guidance note, Appointment of the company secretary’ (2013), recommends that

Answer 50

• In matters relating to their duties as an officer of the company, the company secretary should, through the chairman, be accountable to the board as a whole.

• If the company secretary has additional executive responsibilities to their core role, they should report to the CEO or the appropriate executive directors on such matters.

• The company secretary’s remuneration should be set (or at least noted) by the board as a whole, or by the remuneration committee of the board on the recommendation of the chairman or CEO.

Question 51

Appointment & removal of the company secretary - The UK Corporate Governance Code recommends

Answer 51

should be a matter for the board as a whole.

In this way the company secretary can provide an independent voice without fear from any one individual or a small group for their job.

Question 52

Appointment and termination of the company secretary - first appointment & subsequent appointments

Answer 52

the first appointment of a company secretary can be made upon the incorporation of the company and the appointment, notified to the Registrar of Companies.

Subsequent appointments - are made by the board of directors and notified to the Registrar of Companies by filing Form AP03.

Question 53

Termination or removal of the company secretary

Answer 53

As the secretary is appointment by the board - they can also be removed by the board.

A secretary can also resign from their position at any time.

In either case Form TM02 must be filed with Companies House within 14 days.

Question 54

Checklist - appointment of the company secretary

Answer 54

✓ At a meeting of the directors, the appointment of the company secretary is resolved
✓ File form AP03 (Appointment of a Secretary) must be filed with the Registrar of Companies.
✓ For listed companies, the London Stock Exchange must be notified
✓ The necessary entry of the particulars of the secretary must be made in the Register of Secretaries.
✓ If the company secretary is to be a signatory to the bank, then a mandate should be signed.
✓ The new company secretary should be included in the directors’ and officers’ insurance policy.
✓ The company’s auditors should be advised of the appointment.
✓ An induction programme should be provided. This will include meeting key people within the company and the receipt of documents including the Articles of Association, annual reports, terms of reference for the board and committees and minutes of all general, board and committee meetings.

Question 55

Board meeting - cosec duties (3)

Answer 55

1) organising board mtg and brd committee mtgs.

2) ensure these are
* correctly formed
*prepares mtg agendas liaising with the chairman re content
*advises management on content and presentations
*collates and circulates high quality information, papers and any other documents needed

3) responsible for the conduct of the meeting as per the company’s articles of association
* in particular regarding quorum and voting requirements
Maintains the minute book