Company Secretary – headed for extinction?

Traditionally, both public and private companies were required to have a company secretary whose role was to primarily act as the chief administrative officer of the company, leaving the directors free to concentrate on running the business.  With effect from 6th April 2008, the Companies Act 2006 removes the requirement for a private company to have a company secretary, although this requirement in relation to public companies remains.

So why remove this requirement in relation to private companies?

The removal of this requirement is part of a package of company law reforms that are aimed at simplifying the regime applicable to private companies and providing private companies with a greater degree of flexibility in relation to their internal administrative arrangements.  This relaxation of the old rules means that the smaller owner-managed or non-trading companies can have a simplified structure, with only one director as an officer of the company.  Despite the removal of this requirement, a private company may still choose to continue to have a company secretary and the role is important enough to merit a considered decision.

What impact will the changes have?

Although increased flexibility for private companies is a positive change under the new regime, it is important to note that the administrative burden will be the same for a private company without a secretary as it will for a private company with a secretary and therefore the many roles previously carried out by the company secretary will have to be carried out by someone else.  These roles are numerous and include; maintaining statutory registers, ensuring the company files statutory information promptly, providing members with notice of meetings, supplying a copy of the accounts to every member of the company, ensuring that company records can be inspected by those entitled to do so and sending copies of resolutions and agreements to Companies Registry.

In many cases directors who concentrate their efforts on developing the business may not have time to manage these day to day compliance matters and if such compliance and governance matters are not complied with there is a much higher probability that the business will encounter administrative difficulties and may incur fines.

For some companies, particularly smaller privately owned companies, the need for flexibility will outweigh the benefits that flow from having a company secretary and they may chose not to have a company secretary. If a company decides that it no longer needs a company secretary then:

• the secretary must resign, or its directors must resolve to remove the secretary;
• the company should inform Companies Registry by filing a Form 296, within 14 days and amend its register of secretaries; and
• if the company’s articles of association contain a specific reference to the company having a secretary, the articles will need to be amended; however, if the articles only refer to the secretary’s duties, no change is necessary.

For the success of the company it is imperative that the functions and duties of the old company secretary are re-assigned and it is important to note that in the absence of a company secretary, the directors remain legally responsible for ensuring compliance with the requirements of company law.

If you would like to discuss any of the issues raised in the article, please contact Laura McIldowney, Associate Director, Corporate Department on 028 9055 3300 or by email, laura.mcildowney@tughans.com

The content of this article is provided for information purposes only and does not constitute legal or other advice.