06 April 2018 by Gary Gray
A decade after the role stopped being a legal necessity, the case for the company secretary remains strong
April 6 2008 is unlikely to be a significant date to many people. But for company secretaries, this date will be a vivid reminder of the ever-changing nature of company law.
Exactly a decade ago, the requirement for a private limited company to have a company secretary was removed from statute, making the appointment optional. As a consequence, many company secretaries would have been forgiven for thinking this was the beginning of the end of their profession.
I admit that this was my reaction when the Companies Act 2006 was being introduced. I believed the removal of the requirement to have a company secretary would have wide-ranging implications for business across all sectors and industries.
I recall wondering whether the move would lead to more legal breaches, with less focus on ensuring adherence to statute governing company activities.
Certainly, it was seen as a bad idea to leave companies without a dedicated officer to guide the chairman and advise the board on their statutory obligations, as well as ensure governance and compliance matters continued to be dealt with professionally.
Without a company secretary, someone still has to be responsible for these obligations, irrespective the company’s size and function.
In 2018, you might see the lack of requirement for a company secretary at odds with the legal requirements placed on companies and LLPs in the Companies Act 2006, the Small Business, Enterprise and Employment Act 2015, and the EU’s anti-money laundering directives, among others.
Many of these new requirements and obligations naturally fall to the company secretary or their team.
“If the position is optional, the view of many is that the responsibilities attached to that role cannot be that important”
Through discussions with many company secretaries, it is clear organisations that retained a company secretary to support their boards are focused on governance and ensuring they meet the high standards of codes such as the UK Corporate Governance Code and the Stewardship Code.
That is not to say those organisations who have chosen not to appoint a company secretary are not also aware of their responsibilities.
But the main concern facing company secretaries is the potential dilution of their role in effectively governing their companies and boards. If the position is optional, the view of many is that the responsibilities attached to that role cannot be that important. This is false.
The duties formerly held by the company secretary in organisations which have since chosen not to have one become the responsibility of the board. It is here where many compliance issues begin to appear, as directors take responsibility for company secretarial matters alongside their own statutory and fiduciary duties.
The relaxing of many filing obligations with Companies House – such as the replacement of the annual return with the confirmation statement – may also result in the company secretary role being seen to be of less strategic importance to companies and their boards than is the case.
However, the focus on good governance and compliance is not likely to dissipate in the coming years. Rather, it is likely to intensify as businesses battle to meet the increasing volume of regulation set out by government.
Without a dedicated governance professional taking the helm and managing the governance affairs of companies, there is a real danger that companies will fail to meet their obligations and their directors will face personal sanctions.
With the volume of statutory changes we have seen in the last decade, and the pace at which new legislation is brought into force, it is unlikely that we will see any long period where obligations remain consistent.
Regardless of any changes that do occur, it is clear that the responsibilities of the company secretary, named or not, continue to develop and increase. The practical case for having an effective company secretary guiding boards will not disappear any time soon.