The changing role of the company secretary
Focus on governance
As the importance of effective corporate governance continues to be critical in today’s environment, not least due to the global financial crisis, there has been increased focus on the role of the company secretary in Ireland.
- Statutory responsibilities
- Corporate governance
- Increased burden of regulation
Most notably, the Companies Act 2014 retained the need for a company secretary in both private and public companies. The responsibilities of the modern day company secretary have evolved from that of a “note taker” at board meetings or “administrative servant of the Board” to one which encompasses a much broader role of acting as “Board advisor” and having responsibility for the organisation’s corporate governance.
The Board, particularly the chairman, relies on the company secretary to advise them not only on directors’ statutory duties under the law, disclosure obligations and listing rule requirements but also in respect of corporate governance requirements and practices and effective board processes. This specialised role of the modern company secretary has emerged to position them as one of the key governance professionals within the organisation.
The Companies Act 2014, which was signed on 23 December 2014 and is expected to be commenced on 1 June 2015, retains the requirement for a company secretary unlike the UK legislation which eliminated this requirement for private companies in 2006. The retention of this requirement demonstrates the importance of the role of the company secretary in the eyes of the legislature and in fact the proposals go a step further by placing the responsibility on the Board of directors to ensure that the secretary has the requisite knowledge and experience to discharge the functions of secretary of the company and to maintain the records as required by the Bill. Furthermore, the company secretary will be required to sign a declaration acknowledging the existence of the secretary’s duties on appointment.
If one were to examine the role and duties of the company secretary as currently outlined in Irish legislation it would appear to be quite restrictive and mainly administrative in nature. Principally, the company secretary ensures the company complies with company law, maintains certain statutory registers and makes the necessary filings with the Registrar of Companies such as annual returns, financial statements and certain forms with respect to changes to share capital etc.
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 recognised in both the UK Code of Corporate Governance (which has been adopted by the Irish Stock Exchange through the Irish Annex) and the FRC Guidance on Board Effectiveness. Both have served to focus companies on Board effectiveness and in turn how they can be assisted by the company secretary. Although this guidance applies to listed companies, it is seen as best practice and these 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:
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 UK Code of Corporate Governance, such as schedule of matters reserved for the Board, is in place.
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.
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.
Increased burden of regulation
In the light of economic developments in recent years stakeholders of companies, particularly in the financial services sector, are increasingly concerned with the conduct of the affairs of the company and therefore it is essential that best practice is adhered to at all times and evidence is available to demonstrate same. The requirement for higher standards in this sector can be further evidenced by the introduction by the Central Bank of a series of corporate governance codes including fitness and probity standards for certain pre-approval controlled functions or persons who perform controlled functions. Controlled functions include “ensuring, controlling or monitoring compliance by a regulated financial service provider with its relevant obligations”.
While the monitoring of compliance in the financial services sector has traditionally been outsourced with the introduction of these new standards there is more caution in the provision of such services which are more likely in the future to be laid at the feet of the company secretary. It is true to say that the role of the company secretary also includes keeping the Board informed of new legislation and how it applies to them. With this increased focus on corporate governance, the role of the company secretary has been extended such that the secretary is now seen as the guardian of the company’s compliance with legislative requirements and best practice.