This guide is based on UK law as at 1st February 2010, unless otherwise stated.
There is no easily accessible job description for a company secretary. There are certain duties dotted around the Companies Act that are core to the role of most holders of the office, but there are other responsibilities often added to the post, such as property management, pensions administration, the operation of share and other incentive schemes, and maintaining adequate insurance cover. In this guide we concentrate on some of the core duties and the rules and regulations that a company secretary will commonly need to apply.
These duties have in the past been divided into those owed to the board, to the company and to shareholders. A fourth category can be added today to include those responsibilities imposed by regulators that are commonly discharged by the secretary.
The secretary attends all board meetings and is directly answerable to the board (see also the next section on governance). Meetings of the directors will be convened by the secretary in conjunction with the chairman, and one of the secretary’s prime functions will be to produce minutes of a board meeting. (The same goes for committees of the board.) Indeed, it is a requirement of the Companies Act that minutes of all meetings of directors are produced and kept for at least 10 years – failure to do so is an offence punishable by a fine.
The minutes should, of course, be an accurate record of the meeting. They should state the reasons for a decision either explicitly or by reference to an accompanying board paper – particularly where the resulting benefit for the company may not be obvious. Should any decision of the board be challenged at a later date, the minutes and board papers will be a valuable record of the board’s thinking at the time. (See: Directors' duties: Decision taking and record keeping, an OUT-LAW guide.)
Problems can arise where there is disagreement as to what was said at a meeting or what decision was arrived at. Minutes of one meeting should be circulated before they are tabled for approval at the next. If any disagreements cannot be resolved at that stage, the majority view should prevail. Where the approved minutes do not record the dissenting minority’s views to their satisfaction, the remedy is for them to write to the chairman setting out their position and to circulate copies to all board members. That way, they have a written contemporaneous record of what they said as an alternative to the official minutes.
Another core task for the secretary is the maintenance of the statutory registers. These include those listed below.
- The share register, which is the definitive record of who the company’s shareholders are, who can vote and to whom dividends are paid. Transfers of shares need to be entered in the register and dealt with according to the company’s articles. Most companies with a share register of any size will contract out this work to professional registrars, but see: Access to shareholders’ addresses, an OUT-LAW guide.
- The registers of directors and secretaries that record the personal details of the company’s office holders and reflect the information filed at Companies House. (See: Disclosure of home addresses of directors and secretaries, an OUT-LAW guide.)
- The register of charges in which details of all mortgages and other charges granted by the company to its lenders and other parties must be recorded.
There are many returns that a company needs to make to Companies House to update the information held on the public record – changes to the board, share issues, the passing of certain shareholder resolutions and the annual return, which is a snapshot of the company at a particular date in the year, recording details of the directors, the issued share capital and the current shareholders.
The secretary will also often be the person responsible for ensuring the company’s name and other details appear where they should on business stationery and at any premises where the company carries on business. (See: Company details on stationery and at business premises, an OUT-LAW guide.)
The secretary will also look after communications with shareholders. This will include sending them the Report and Accounts each year, and convening shareholder meetings – the annual general meeting for a public company and for a private company that chooses to continue with an AGM, and other general meetings where shareholder approval is needed. (See: Company meetings, an OUT-LAW guide.) Provided you have the right processes in place, all these communications can now be made electronically. (See: Electronic communication with shareholders, an OUT-LAW guide.)
The share register will only show the names of the holders of the legal title in the company’s shares. They may be nominees or trustees for others who have the beneficial or economic interest in the shares, and so the register will not be a true reflection of who really owns the company.
Where shares in a UK company are traded on the main list of the London Stock Exchange or on AIM, anyone with an interest in three per cent or more of the voting rights must notify the company, and the company in turn must notify the market. That obligation applies when the interest is first acquired and when it increases or decreases. (The rules differ for overseas companies on the main list or AIM.)
A public company can require disclosure of share interests, not just from shareholders as to their underlying beneficial owners, but also from third parties whom it suspects of having an interest at any time in the previous three years. This power is frequently exercised by companies facing a takeover or when they are nervous about possible stakebuilding by a predator, and it will commonly be the secretary’s job to keep on top of these changes in legal and beneficial ownership. Registrars have sophisticated systems that will help in the process.
A listed company must comply with the FSA’s Listing Rules and the Disclosure and Transparency Rules (DTRs). (AIM companies face many of the same obligations.) These comprise a myriad of regulations; the main ones for a company secretary are listed below.
- DTR2, which requires the prompt disclosure of ‘inside information’. (See: Insider dealing, an OUT-LAW guide.) The secretary will usually manage that disclosure process and provide the first advice to the board as to whether an announcement to the market is necessary.
- The Model Code in Chapter 9 of the Listing Rules, which regulates when directors and other ‘persons discharging managerial responsibilities’ (PDMRs) can and cannot deal in the company’s shares. (See: The Model Code, an OUT-LAW guide.) The secretary will often be designated as the person who gives or refuses permission to deal.
- DTR3, which applies once a director or other PDMR has dealt in the company’s shares and requires details of the dealing to be disclosed to the market within four business days.
Authority and execution of documents
The secretary is an officer of the company. What authority does that confer on him or her? In a 1971 case, a company secretary hired cars in the name of the company that were in fact for his own private use. The car hire business sued the company when it refused to pay, and won. It was entitled to rely on the secretary’s ostensible authority, as the company’s chief administrative officer. The Court of Appeal ruled that the secretary:
"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 held out 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."
As an employee of the company, a secretary will in any event often have actual authority delegated by the board to enter into commercial contracts on behalf of the company. Authority for the secretary to commit the company may also be implied by a regular course of dealing over time.
Execution of formal documents, such as property deeds or mortgage documents, used to need the signatures of two directors, or of one director and the secretary. The removal of the requirement for private companies to have a company secretary, however, forced a change in the rules. Since April 2008, any company, public or private, has been able to execute a document in one of four ways:
- by the signature of a single director witnessed by a second person (who need not be a director or connected in any way with the company);
- by applying the company’s common seal to the document (if it has one), witnessed by two directors or by a director and the secretary;
- by the signature of two directors;
- by the signature of a director and the secretary.
A word of warning: allowing one director to sign on behalf of a company may be administratively convenient, but it can leave an individual exposed to making major decisions on their own that will bind the company. Two heads can be better than one, so best practice may be for internal company policy to insist on two signatures.