Telling the truth about SME life today

What Is A Company Secretary and Do You Need One?

Secretary for a Company

A company secretary is an official advisory role in the administrative set up of an incorporated company. They are responsible for the regulatory compliance of a company and provide guidance to board members on the corporate governance best practice. Whilst not a legal requirement for private limited companies, they are required for public limited companies.

What Does a Company Secretary Do?

The main roles of a company secretary are:

Corporate Governance

  • Advising the board of directors on regulatory obligations and corporate governance principles
  • Develop and implement policies and procedures to ensure the board follows best practices
  • Maintain company records and register of members
  • Organise board meetings and annual general meetings (AGM)

The company secretary keeps the board up to date on governance issues and changes to relevant company law. They draft the annual directors’ report, facilitate appointments like auditors and share transfers, as well as educate new directors on their responsibilities. By handling much of the red tape around compliance, they enable the board to focus exclusively on steering organisational strategy and objectives.

Compliance & Filings

  • Ensure company meets reporting requirements
  • File documents with regulatory authorities related to incorporation, changes in directors or share capital
  • Ensure company adherence to relevant company law and regulations

A skilled company secretary intimately understands regulatory timetables and reporting obligations to authorities such as the registrar of companies, tax agencies, and industry regulators. They prepare and submit timely filings to keep the company in good legal standing. Common submissions handled include confirmation statements, annual accounts, annual returns, notices related to changes of directors or constitutional documents.

The secretary maintains comprehensive records of meeting minutes, ensures safe custody of the company seal, issues share certificates, and keeps the member register updated. Diligent documentation and version control assists in demonstrating compliance during inspections or audits by regulators. It also provides continuity in the event of claims disputes further down the line.

Board Support & Communication

  • Organise schedules and distribute paperwork for board meetings
  • Record meeting minutes and follow up on action items
  • Communicate board decisions to stakeholders
  • Liaise with external parties like accountants, auditors and attorneys

The company secretary issues proper notice in advance of company meetings and AGMs, setting out the agenda, venue, time, and shareholder voting rights. They facilitate discussion and advise the chair on procedural issues during meetings. Accurately documenting minutes with key developments, votes, and follow up actions remains essential.

After the meeting concludes, the secretary communicates outcomes and resolutions to the relevant internal teams or external parties. They represent the company on certain legal matters, or connect specialist external counsel as needed on issues like contracts, litigation, mergers and acquisitions. Overall, the corporate secretary function greases the wheels of communication between the board, management, shareholders, advisors, and other parties interacting with the company.

Do You Need a Company Secretary?

Whether you need a company secretary depends on several factors:

Legal Requirements

  • Public limited companies (plc) were previously mandated to appoint company secretaries in many commonwealth countries including the UK, Hong Kong, Australia, South Africa, and Singapore. This requirement has been repealed over the past 15 years, except for in India and Pakistan currently. For example, the UK removed this rule in January 2008 under the Companies Act 2006.
  • Most other company structures like private limited companies do not need to appoint company secretaries by law. However, they must still meet all statutory obligations that a secretary would have handled.

As such, you should review country-specific regulations to determine any ongoing legal requirements before deciding on a company secretary.

Stage of Business

Hiring a company secretary makes the most sense for more complex, growing businesses. Some key milestones which indicate you may benefit from this governance and compliance support role:

  • Seeking external investment – venture capital/private equity firms expect strong processes
  • Going public – heightened reporting and controls before and after IPO
  • Expanding overseas – separate rules in each country of operation
  • Increasing regulatory obligations – staying compliant with complex laws
  • Growing number of shareholders – clear communication imperative

When governance and compliance needs grow rapidly, it allows directors to focus their attention exclusively on core business growth. Company secretaries unlock director time and peace of mind.

Cost-Benefit Analysis

Consider the opportunity cost – does personally handling administrative tasks divert directors’ time from revenue-generating activities? Compare this to the cost of hiring a skilled company secretary.

For an early stage startup, it is likely not feasible or necessary to appoint a secretary given limited complexity of the organisation and its funds. The value that can be seen from this role increases exponentially alongside company scale and risk. The larger the organisation, the more stretched directors become overseeing operations, financing, expansion, etc.

Compliance might fall through the cracks in these cases, but a dedicated corporate secretary can continue to focus on the demands of the role.

The Responsibilities of a Company Secretary

While we’ve covered the primary roles of a secretary, it helps to understand the extensive responsibilities underlying those categories:

Corporate Governance Duties

  • Advise directors on meeting procedures, rules, regulations
  • Prepare documents and resolutions for board approval
  • Educate directors on obligations and changes in legislation
  • Develop corporate governance policies and compliance systems
  • Ensure orderly transfer of shares and appointment of directors/officers
  • Maintain statutory registers – members, charges, directors’ interests

Legal & Regulatory Compliance Responsibilities

  • Keep aware and inform directors of new relevant laws
  • Submit accurate filings and forms to regulatory bodies
  • Follow up to apply licences, permits and certifications
  • Arrange for statutory audits by qualified professionals
  • File annual returns with required attachments
  • Check and store records from creation to dissolution

Administrative Tasks

  • Coordinate company meetings and prepare agenda
  • Record minutes summarising proceedings, document decisions
  • Handle corporate correspondence and announcements
  • Process share allotments, transfers, buybacks appropriately
  • Affix company seal with witnesses when needed for agreements
  • Securely store registers, minutes, contracts and other records

While this may seem extensive, a talented secretary leverages technology like cloud software to smoothly facilitate compliance, governance and administration.

What Qualifications Should a Secretary Have?

While specific requirements vary internationally, most countries specify a minimum standard to practise as a company secretary – usually requiring:

  • Bachelor’s degree in a relevant field like business, finance or law
  • Specialised company secretary certification showing mastery of the role
  • Membership in good standing with the national Institute or Council of Chartered Secretaries

In the UK, both the Chartered Governance Institute and Institute of Chartered Secretaries & Administrators offer recognised qualifications and designations like Chartered Secretary or ICSA. Attaining these credentials requires passing intensive exams demonstrating deep understanding of key knowledge areas:

  • Corporate Governance – principles, ethics, board operations, investor relations
  • Finance & Accounting – standards, financial reporting, auditing processes
  • Company Law & Administration – incorporation, company types, filings, liquidations
  • Strategy & Decision Making – supporting directors in their stewardship role

This represents extensive training across finance, law, strategy and governance – making chartered secretaries extremely versatile in handling corporate administration from varied lenses and advising boards holistically.

Practical experience holding the role for reputable companies, law firms or secretary practices provides a distinct advantage too. As does, familiarity of holding the role within the specific industry they work in as it means that they will be able to add further strategic value in navigating sector-specific regulations and advising on common issues or past incidents in the market.

Selecting Your Company Secretary

When choosing a company secretary, it’s important to understand the key qualities that are required to flourish in the role. Hiring managers for company secretaries should:

  • Vet credentials – professional qualification and reputed experience
  • Require sound references from prior dealings
  • Assess communication clarity and transparency
  • Gauge familiarity with your industry
  • Inquire about capacity to handle your workload

While price always matters, superior expertise warrants much higher investments – a strategic long term governance partner can really help to protect the business against exponentially larger risks including penalties and fines.

Can a Director Serve as Company Secretary?

Simply put, the company secretary should never sit on the board of directors itself. This undermines the purpose of the role as an independent check-and-balance and advisor to the board. Objectivity and impartiality remain crucial to oversee governance effectively.

However, for early stage companies with limited means, a director often fills this position. This is legally permissible in most countries after changes removing the explicit requirement for appointing a separate dedicated secretary.

Conflicts of interest can arise from directors acting as both executive decision-makers pushing business growth AND apparatus of governance restraints, so most business owners and savvy investors will require the separation of these responsibilities. If existing directors perform both tasks in a private company, they should aim to gradually delegate governance elements to a designated secretary as the business develops and budgets allow.

Public companies simply cannot merge the two roles given heavy public shareholder and exchange scrutiny requiring accountability. Statutory obligations also continue rising with company size, necessitating specialist attention which directors would not be able to provide whilst working to steer the ship of the business.

As organisations grow, inadequate governance correlates directly with increased risk of penalties, investor flight, and share price declines. These things can be avoided by investing in an experienced company secretary to sustain control over accountability as complexity escalates.

How Much Does Hiring a Secretary Cost?

Many companies utilise somebody within the company itself to hold the company secretary role but it can also be filled by an independent contractor who offers their services.

HR and Finance leaders often hold the dual position of a company secretary due to their in-depth involvement in the running of the business and existing compliance and regulatory due diligence experience from their day-to-day roles. Some companies also recruit full time company secretaries, it simply depends on your business size and budgets available.

If hiring in, SMEs can expect to pay around £200-£500 a month for a part-time outsourced independent secretary. This would usually cover the basic services like filings and official company document maintenance. They may also charge an hourly rate for ad-hoc advice or services that fall outside of this remit.

Cost depends greatly on factors like:

  • In-house employee vs outsourced provider – one secretary or entire team
  • Individual contractor vs professional services firm assistance
  • Generalist vs specialist with industry familiarity
  • One-off tasks vs ongoing workload and emergency advisory

Small businesses may find the costs involved in company secretary hiring prohibitive initially but they should conduct a cost vs benefit analysis to decide if they should take the leap. Savvy and strategic compliance experts can save you money in the long run through effective and timely administration.

Making the Decision

Key Indicators You Need a Company Secretary:

  • Struggling with various filing deadlines and compliance tasks
  • Seeing missed renewal dates or penalties for information lapses
  • Directors constantly forced to become experts across regulations
  • Approaching external funding rounds or going public
  • Expanding overseas into separate jurisdictions
  • Fielding investment inquiries questioning governance processes
  • Avoiding risks distracting from core operations and growth

If several of these indicators apply, then your organisation has likely reached an inflection point that needs this kind of specialist support. Business owners and directors should then consider the true cost of leaving governance gaps versus paying for the expertise required to stay on top of this important task.

Key Takeaways

  • Company secretaries offer tremendous strategic value through bolstering compliance, upholding governance standards, and advising boards on minimising risks.
  • Most companies are not legally required to appoint secretaries – analyse your stage of growth and complexity to determine strategic need beyond box-ticking compliance.
  • Demand for experienced, dedicated company secretaries escalates exponentially as organisations grow – eligibility for funding depends partly on their processes.
  • Independent and professionally accredited secretaries should fill this role rather than current directors to avoid conflicts of interest.
  • Weigh cost of advisory services against risk of directors’ attention spread thinly across responsibilities – opportunity cost of their time diverted.

In summary, while not always a mandatory position by law, outsourcing company secretarial services or hiring for this role in-house provides immense strategic support as your operations and compliance obligations expand. Their specialised corporate governance expertise allows directors to instead fully focus their energy on advancing core business growth.

Trending

Related Stories

Most Read

Trending

If you enjoyed this article,
why not join our newsletter?

We promise only quality content, tailored to suit what our readers like to see!