Commissioned by the Institute of Directors
Author: Joanne Matisonn (FCIS and ICSA Director)
Edited by Phil Armstrong (FCIS, ICSA Past President and Director)
Following the recommendations contained in the first King Report on Corporate Governance in 1994, the Companies Act was amended in 1999 providing for the mandatory appointment of company secretaries in public companies. It is good practice for large private companies to also consider appointing a suitably qualified company secretary to ensure that the board and directors fulfill their statutory requirements and to meet the demanding standards of corporate governance now required of companies.
The person appointed to this position must, in the opinion of the directors, have the requisite knowledge and experience to carry out the duties of a company secretary of a public company. The duties are both extremely broad in scope and onerous. In particular, Section 268G(b) requires that the company secretary must make the directors aware of all relevant laws and regulations and to report any failure to comply. Compliance with this is extremely difficult due to the scope of this requirement and the evolving nature of our legal system and the many accompanying regulations. The company secretary should endeavor to devise a system to meet this onerous obligation, such as taking responsibility for certain areas of the law which relate to his/her expertise and relying on the legal department and/or outside lawyers for other specialised expertise and support.
The duties of a company secretary may vary from one company to another but are broadly divided into responsibilities to the board, the company and share owners and relevant stakeholders.
• The appointment of the company secretary should be a matter for the board as a whole and his/her removal should be a decision of the board. If the board decides to remove the company secretary, the company secretary is entitled to include a replying statement in the company’s annual report.
• The company secretary should be subject to a fit and proper test in line with that required of directors. It is incumbent on the board to empower the company secretary with the necessary authority and support to enable him/her to carry out their duties effectively.
• The company secretary must provide directors with guidance in their duties, responsibilities and powers and make directors aware of all laws and regulations relevant to the company. This should include advice on business ethics and good governance. The company secretary should remain abreast of developments in corporate governance and is pivotal to ensuring that the directors adhere to the highest governance standards as detailed in the second King Report (“King II”). The company secretary should also monitor international developments on corporate governance and bring these to the board’s attention where they would add value.
• The company secretary is closely involved in preparing the schedule of board and committee meetings for the year. The company secretary prepares the agendas for these meetings in conjunction with the chairperson and key executives. The company secretary should ensure that information is dispatched timeously to all directors to enable them to prepare adequately for these meetings. The company secretary takes the minutes of these meetings and should ensure that they are distributed as soon as possible thereafter to aid directors in implementing the decisions.
• The company secretary should ensure that the board’s policies and instructions are communicated to the relevant persons in the company and that pertinent issues from management are referred back to the board where appropriate. It is important for the company secretary to develop a confident relationship with the chairperson, and to assist the chairperson in formulating priorities in the board agenda for consideration by the board.
• The company secretary should play a key role in the induction process of new directors, encompassing both directors’ duties and responsibilities in general and specific matters pertaining to the company itself and the industry in which it operates. The company secretary should provide new directors with an information pack relating to these issues. Visits to major operations and meetings with key executives can be useful for directors to familiarise themselves with the business.
• The company secretary should identify training requirements for inexperienced directors and should also ensure that there is an ongoing programme to keep directors well informed of developments in the company and in respect of matters relevant to their responsibilities generally.
• The company secretary must ensure that the directors and management operate within an authority framework approved by the board and reviewed and updated from time to time.
• The company secretary takes responsibility for preparing all or parts of the annual report and ensuring that statutory deadlines are met and that the statutory and regulatory disclosures are validated, particularly in relation to statements given on corporate governance standards and practices in the company.
• The company secretary is privy to confidential information about the company and needs to act with tact and discretion at all times. The company secretary may not misuse confidential information or disclose it to any third party in line with their fiduciary duties as an officer of the company.
• Equally, the company secretary must act in good faith and avoid any conflicts of interest and to ensure that appropriate guidance is given to the board in these matters.
• A number of these activities and responsibilities can be scheduled in an annual board work plan developed with the chairperson and chief executive, and which can be a useful tool to monitor the performance and effectiveness of the board in discharging its duties and obligations.
• The company secretary must comply with all the statutory provisions of the Companies Act, including the lodgement of all documents with the Companies and Intellectual Property Registration Office and the maintenance and updating of the company’s register of members. This would extend to include any other legislation or regulations critical to the nature of the company, such as a bank or financial institution and/or company listed on a stock exchange.
• The company secretary is usually responsible for ensuring that all contracts and agreements are kept in safe custody and that an executive summary of each document is maintained for ease of reference, which is useful for orientating new operating executives on critical contractual issues relevant to their areas of responsibility. Accompanying this, should be a monthly diary of significant events that would include issues requiring to be monitored in terms of such contracts and agreements. It is good practice to ensure that duplicate copies of critical documents are held offsite as part of a disaster recovery programme.
• The company secretary is responsible for ensuring compliance with the company’s memorandum and articles of association and effecting any changes to meet the needs of the company.
• The company secretary maintains a close relationship with the transfer secretary to oversee movements in shareholdings and the payment of dividends.
• The company secretary is responsible for complying with the listings requirements of any exchange on which the company’s shares are quoted. This should be extended to monitoring compliance with the requirements of the Insider Trading Act and STRATE. Part of the fulfillment of these obligations entails the preparation and submission of all relevant communications to the stock exchange through the company’s sponsor.
• The company secretary may also assume the responsibilities of the public officer of the company under the Income Tax Act and other taxation legislation.
• The company secretary must certify in the annual financial statements of the company in accordance with the Companies Act that the company has lodged all returns required of a public company and that all these returns are true, correct and up to date.
• The company secretary would ensure that all letterheads, notices and other official stationery and publications of the company display the correct name of the company, registration number, registered office and names of the directors and company secretary.
Share-owners and Relevant Stakeholders
• The company secretary prepares the agenda for share owners’ meetings in conjunction with the chairperson and chief executive. This would also require the company secretary to take the minutes of such meetings and to ensure that any special resolutions passed at these meetings are properly registered with the Registrar of Companies. In fact, the company secretary would essentially take charge of the processes and procedures associated with the holding of share owner meetings, including arrangements for the presence of scrutineers, if required, and validating proxies and letters of representation received for these meetings.
• The company secretary would take responsibility or provide input for any circulars and other documentation sent to share owners by the company. This would include obtaining approval from the stock exchange and any other applicable regulatory authorities. It would also require the company secretary to verify the statutory and regulatory information contained in such material and to ensure that the directors clearly understand the implications of any statements of responsibility given on behalf of the board.
• If the meeting is an annual general meeting, the company secretary must arrange for all directors to attend and in particular the chairpersons of the remuneration and audit committees.
• The company secretary is responsible for all forms of communication with share owners and may often be responsible for the relationship with analysts and the media. This may include responsibility for the company’s corporate reputation and investor relations activities.
• The company secretary is required to ensure that a copy of the company’s annual financial statements is sent to share owners within the stipulated period and to all persons entitled to receive it.
• The company secretary may be required to take responsibility for the administration and management of the company’s pension and/or provident fund in the capacity as principal officer, trustee or chairperson.
• The company secretary may be required to administer and manage a group life assurance scheme on behalf of the company’s employees.
• The company secretary may be required to take responsibility for the administration of the medical aid scheme offered to employees and other similar arrangements.
• The company secretary may be required to administer and manage the insurance portfolio and take some role in the company’s risk related activities in this context.
• The company secretary may take responsibility for the corporate social responsibility portfolio. This would entail ensuring that the company adheres to its corporate social investment programme and monitoring various aspects directly and indirectly related to this activity, including the supervision of the company’s adherence to any industry or sector charter and its black economic empowerment credentials.
Consequences of Non-Compliance
In the event of the company not complying with its statutory requirements under the Companies Act and other relevant legislation, or its listings obligations, or the recommendations of King II, the company secretary should raise the matter with the chairperson of the board or the chairperson of the audit committee (as appropriate). As a last resort, if the matter is not addressed, the company secretary may be compelled to notify shareholders under section 268G(b) of the Companies Act and/or approach the relevant regulator for assistance. This requires considerable courage and resolution on the part of a company secretary, which is the hallmark of this role.