What is a Company Secretary? [Everything You Need to Know]
A company secretary is one of the most important roles in a business. This importance has increased significantly over the past twenty years, especially in light of high-profile company collapses in the 1990s and 2000s (recall the collapse of HIH Insurance and the Bell Group). These collapses resulted in quite intense focus being placed on corporate governance, including the positions of directors, boards, executives and – of course – company secretaries.
As company boards become swamped in more and more work, the company secretary is often looked to as the primary governance specialist. They are relied upon to deliver timely and high-quality good governance advice. The role has become much more proactive than it used to be.
Company secretaries also now have strict legal responsibilities contained in the Corporations Act 2001 which is Australia’s primary company law, and also the Australian Stock Exchange (ASX) listing rules. Below, we’ll outline what the role of a company secretary is, their tasks, duties and qualifications.
What is the role of a company secretary?
A company secretary has a critical role in governing a company and monitoring how a company operates. They are essentially the company’s ‘chief governance advisor’ and support the board of directors to ensure the company is compliant with the relevant corporate legislation.
Some of this includes lodging ASIC financial reports, maintaining a registered office, and reporting to ASIC changes to the company’s members, share issuing, share structure and company office address.
The important role of a company secretary has been recognised in the ASX’s Corporate Governance Council’s Corporate Governance Principles and Recommendations. The commentary to Recommendation 2.5 says:
The company secretary plays an important role in supporting the effectiveness of the board by monitoring that board policy and procedures are followed, and coordinating the timely completion and dispatch of board agenda and briefing material. It is important that all directors have access to the company secretary. The appointment and removal of the company secretary should be a matter for decision by the board as a whole. The company secretary should be accountable to the board, through the chair, on all governance matters.
Company secretaries are considered to “officers” under the Corporations Act. This means they have legal duties to act with care and diligence, in good faith and for a proper purpose. They also have the duty not to improperly use their position or to gain an advantage for themselves or someone else. Company secretaries may not cause detriment to the company and not to improperly use information that they obtain due to their position
Tasks of a company secretary
While company secretaries have a great deal of legal obligations, they also expected to perform various tasks due to their role. This includes:
- Ensuring the discussions that occur at meetings are accurately recorded in company minutes
- Confirming that meetings are called appropriately
- Ensure that policy and procedure are followed by correctly by the board
- Prepare reports and send them to the board
- Ensure the business’ financial reports are maintained properly
- Advise the board on matters of governance
- Help with the procedure of inducting new directors
- Facilitate professional development of the board
- Maintain compliance policies and procedures for the company
Their role can be very broad and will vary depending on the structure of the board and the size of the company. In large companies, secretaries will often take on more responsibilities than just the tasks listed above. If a company has many shareholders or a board of directors, they’ll typically ask the secretary to do a lot more.
Other tasks that a company secretary may be expected to do include:
- Promoting the company’s compliance framework to safeguard the company’s integrity
- Organising the performance reviews for members of the board
- Managing the induction of directors
- Maintain the director manual
- Becoming involved in managing risk and maintaining matters of corporate responsibility
- Ensure the board makes informed decisions by providing them with the information the y need to exercise sound business judgment
Appointing and removing a company secretary
There are highly prescriptive rules in the Corporations Act for a secretary to be appointed, depart and be removed.
Public companies in Australia are obliged to appoint at least one company secretary. At least one of them must ordinarily reside in Australia (in other words, they must regularly live here in Australia). Private companies do not need a secretary, but if they choose to appoint one, they must ordinarily reside in Australia. They also need to be a natural personal and at least the age of 18.
When a company director appoints a secretary, they determine the terms of their role, which includes for example nominating their salary. The company needs to notify ASIC within 28 days of appointing a company secretary. That secretary needs to give them signed consent before the appointment is made official. That consent will then need to be kept by the company – and a failure to keep that consent is an offence under the Corporations Act.
Once a secretary is appointed, they will usually report to the company’s chief executive officer (CEO) or chief financial officer (CFO). They’ll also report to the board’s chair in larger companies.
Secretaries can resign from their company by giving written notice. They will also need to notify ASIC of the resignation.
If a company secretary doesn’t inform ASIC of the resignation, then the company needs to notify ASIC of the secretary’s resignation.
A company secretary can be removed by other company directors typically in accordance with a company’s constitution. If there is no procedure, however, then the directors can pass a resolution to remove the secretary and notify ASIC within 28 days of the removal.
Qualifications of a company secretary
A company secretary doesn’t need to have any particular qualifications or experience to carry out their role and perform their duties.
However, legal qualifications do help. This is because companies and their directors will rely on the company secretary to advise them on their compliance with corporate law. This includes everything from ASIC notifications and calling meetings properly to proper company procedures.
Are a company secretary and general counsel the same thing?
No. The positions of company secretary and general counsel are technically different, but their duties may overlap significantly.
Company general counsel is the chief legal officer of a company. Their primary duties are to give legal advice to corporate executives – this can be on commercial and corporate law to employment and intellectual property law.
In a modern company, however, they are more like a business partner. Their contribution to a company involves high-level strategic planning, business processes, financial affairs and corporate project management.
Company secretaries, however, many not necessarily be legal professionals. Their duties are more like the dot points we’ve listed above in this article. They hold statutory offices and have duties under the Corporations Act, whereas general counsels do not.
No general counsel or company secretary role is the same. Many companies have different expectations from each position, and again this will depend on the size and structure of the company.
There is debate within the corporate world as to whether a company secretary and general counsel should occupy the same role. Ultimately, this is a matter for each company to decide. It may be that these roles are too large to be occupied by one individual. It may also cause confusion as to what role they are performing.
The importance of ASX Listing Rules for company secretaries
Public companies listed on the ASX have strict financial compliance requirements. Company secretaries are expected by boards and executives to know these rules back to front, to ensure the company complies with them to the letter. Failure to comply with certain ASX listing rules can lead to penalties and even imprisonment, so the stakes are high.
At 2account, we help companies and boards comply with strict financial reporting requirements on the ASX. We help company directors, secretaries and chief financial officers achieve visibility over their solvency and establish an accurate view of their financial position. Get in touch with our expert ASX team today and we’ll more be more than happy to assist.