A climate of uncertainty
Currently, every company, no matter what size, must have a secretary. The secretary plays an important role in ensuring that both the company and its directors comply with applicable legislation.

However, under new government proposals in the form of the Companies Bill, the role of the company secretary for small companies will become optional.

As with most legislation of this nature its progress has been delayed. Giles Peel, Director of Development at the Institute of Chartered Secretaries and Administrators (ICSA) has expressed concern:

"We are concerned that the new Companies Act looks as though it will not even be put before parliament until at least 2006, 8 years after the Company Law Review was set in motion and 5 years after its Final Report was published. The delay is unwelcome and creates a climate of uncertainty for business in the UK."

What is certain is that until the legislation is enacted, and when and if it is in place the functions of a secretary will still have to be undertaken in some form.

The role of a company secretary

The extent and nature of a secretary's role is not defined in law, however they are required to undertake a wide range of duties. Key duties that they are required to undertake include:

Maintaining the statutory registers:

-register of members
-register of directors and secretaries
-register of directors' interests
-register of charges (public companies only) register of interests in shares

Ensuring that statutory forms are filed promptly;
Providing members and auditors with notice of meetings.
Sending the Registrar copies of resolutions and agreements.
Keeping or arranging for the keeping of minutes of directors' meetings and general meetings.
Ensuring that people entitled to do so, can inspect company records.
A secretary may also have to make out a statement of the company's affairs if an administrative receiver or a provisional liquidator is appointed, or if a winding up order is made (pursuant to Sections 47 and 131 Insolvency Act 1986).

Potential liabilities

It is important to note that as the secretary is an officer of the company, they could be held criminally liable for any defaults of the company. For example, a failure to file a change in the details of the company's directors and secretaries or the filing of the Annual Return in the time allowed.

In a similar way the duties owed to a company by a director also extend to the secretary. The secretary must act in good faith, in the interest of the company and must not act for any collateral persons. They must be aware of potential conflicts of interest and must not make profits themselves from dealings for and on behalf of the company.

Consequently, some companies take out and maintain insurance for its officers against any liability arising from negligence, default or breach of duty, subject to the appropriate provisions being contained in the company's Articles of Association.

An important role

The company secretary of a private limited company is not required to have any formal qualifications. However, the secretary of a public limited company must either be a member of certain bodies (the ICSA for example), must be a solicitor, a barrister or have previous experience of being a company secretary of a public limited company.

The directors of the company have the responsibility to ensure that, as far as reasonably possible, the secretary is a person who appears to them to have the proper knowledge and experience to carry out the functions of a secretary.

The role of a secretary therefore continues and will continue to be an important role in a company of any size. They have considerable responsibility and can incur fines and criminal charges for the company if they do not properly fulfil their role. The directors can also be held responsible if the company secretary does not fulfill their role.

Although the current proposals would allow small companies to abolish the role, the functions that a secretary currently carries out will still need to be performed by that company.

When the Bill finally works its way through the mechanics of the UK legislative process there may be further changes, however, for all companies, unless they are dormant or carry out a minimum of activity, it will still be sensible to have a company secretary.

If you would like further information please contact Amanda O'Brien, Company Secretarial Executive on 0117 917 7829.

This publication is intended for gneral guidance and represents our understanding of the relevant law and practice as at July 2003. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

By Amanda O'Brien
The source: TLT Solicitors