Role of the company secretary: Does your small business need one?
A company secretary has a vital role in ensuring your company complies with the law. While not compulsory, learn more about the benefits of the role here...
Whilst the word ‘secretary’ might conjure up images of answering phones and managing appointments, a company secretary’s role is quite different. A company secretary is considered an officer of the company, and shares many legal duties with the company directors, as well as some special ones accorded to them personally.
It is no longer compulsory for limited companies to appoint a company secretary (the only ‘company officer ‘ legally required is at least one director – read more in our article on company officers), but most companies continue to do so as they fulfil a vitally important administrative role.
So how can you find the right person for the job, and what do you need to know about how company secretaries work in practice? Read on to find out.
What is a company secretary?
Broadly, a company secretary is the head of the administrative division of a company, given duties and responsibilities along with the business’ directors under the Companies Act. They have a duty to file annual returns and other documents to Companies House, normally on an annual basis, as well as taking responsibility for convening board meetings and other internal administrative matters.
Because of the heavily administrative nature of the role, it goes without saying that the person you pick as a company secretary should be organised, motivated and have a good understanding of the internal workings of your company, as well as its legal duties. A secretary doesn’t need to have formal qualifications, however.
You and the other directors will normally appoint a company secretary when registering as a limited company with Companies House; they are named in the application to register the company. When making your choice, make sure the person you pick understands their obligations as secretary; the Companies Act imposes a wide variety of duties on the company secretary, accompanied by around 150 separate criminal offences.
It is important to note that some people are barred from becoming company secretary; this includes the company’s auditor (giving them the role would constitute a conflict of interest) and undischarged bankrupts, unless given permission by a court.
Although the multi-faceted nature of the role may seem daunting, it is perfectly possible for a company secretary to delegate or outsource tasks – but they retain ultimate responsibility, and must at least check over and sign work they have farmed out.
Some companies offer a chartered secretary service, in which you can outsource almost all the main duties to a consultancy, or you could use an accountant or solicitor. Such services normally cost between £300 and £1,000 a year.
What is the company secretary’s main role in a business?
The main duties of the company secretary relate to Companies House reporting requirements. Normally, the task of filing annual returns and other company documents will fall upon the company secretary. You can take a look at this article to see how this differs from the key responsibilities of a company director.
Documents to be filed by the company secretary include the annual return, now known as the Confirmation Statement. This is a snapshot of certain company information, which must be correct at the ‘made-up date’ – in other words, the date at which the information contained in the form was correct. The company secretary must get this form to Companies House within 28 days of the made-up date, at least once every 12 months.
A company secretary often takes charge of the directors’ report too. This is a document which details the state of the company and the names of the secretary or director approving the accounts and must also be filed annually once a year, and financial statements – including details of the company’s assets and liabilities, including debts must also be included
Filing the auditor’s’ report may also be an important part of the role, but it is only compulsory if your business turns over more than £10.2m annuals or has assets totalling more than £5.1m – lower than this and you qualify for the small companies audit exemption.
Finally, a strategic review (which previously formed part of the directors’ report) is compulsory for companies filing accounts and if your business is publicly listed there are a number of quoted company documents that the company secretary must file, including the number of men and women employed, CO2 emissions, and human rights issues and policies.
It is important to note that the smallest businesses are exempt from the above reporting requirements, and are only required to provide Companies House with a simple balance sheet and profit/loss account each year. A ‘micro-business’ is one with less than 10 employees, turnover of less than £632,000 and/or a balance sheet of less than £316,000.
In addition to the Companies House reporting requirements, the company secretary’s duties normally include:
Maintaining the company’s registered office
This does not have to be the address from which the company actually operates, but the company secretary must ensure that you receive all correspondence sent to that address. The company secretary should ensure that the company’s registered name is shown clearly outside your registered office, and any other place of business.
The secretary is normally responsible for telling Companies House about any change in the company’s registered address.
Maintaining the company’s statutory records
These include; minutes of general and board meetings, a register of directors, a register of shareholders, any charges applying to the company’s assets, and a register of ‘debenture holders’ (this is usually your bank).
Looking after essential legal documents.
These will include: the Certificate of Incorporation, the Memorandum and Articles of Association, share certificates and stock transfers, the company’s seal, any certificates of change of name, and director’s service contracts.
Reporting on changes to the company
What other ways can the company secretary contribute to the business?
In addition to the legal record-keeping and reporting requirements outlined above, the company secretary normally fulfils an important role in the efficient administration of a business.
In particular, their duties normally include arranging board meetings. Secretaries must convene a meeting of the board of directors if any director asks for one. Normally, they must give at least 14 days’ notice to the other directors, and are then responsible for ensuring that accurate minutes of the meeting are taken and signed.
A secretary can also arrange annual general meetings (AGM). These are no longer required for privately-listed companies, although one must be held if your company has traded shares, if a director requests one or if 5% of shareholders do. If an AGM needs to be held, the secretary should give 14 days’ notice (21 days for a public company).
In smaller companies, it is normal for the company secretary to take on a number of additional duties, in line with their general role of chief administrative officer of the business. In particular other administrative duties. Secretaries often take on responsibility for things like PAYE and payroll, pensions, VAT registration and managing the company’s offices and legal matters – a company secretary will often take on responsibility for other legal duties the company has to fulfil, such as health and safety, directors’ responsibilities, and insurance.
A company secretary may also take responsibility for signing off documents on behalf of the board, such as leases or documents relating to accounts.
What are the risks of being a company secretary?
In line with the wide range of duties a company secretary must take on, there are a number of legal risks you should be aware of.
Although there are a huge range of potential offences under the Companies Act, in reality it is only the company secretaries of large, public companies with their duties enshrined in their employment contract who are at serious risk of prosecution.
Secretaries in smaller companies with more informal roles are unlikely to face criminal proceedings, unless they have been complicit in a fraud or other serious criminal activity.
That said, you should be aware of the potential risks, however remote. These include joint liability for Companies Act breaches. All the directors and the company secretary are considered equally liable if there is a breach of the reporting requirements – except filing company accounts, the responsibility for which lies solely with the other directors. Failing to file the annual return could land you with a fine, or in serious cases, a criminal charge.
Also, if the secretary is complicit in a crime committed by the company, such as fraudulent trading, they could be disqualified or prosecuted. If the secretary is also a director, they will be held jointly liable for the company’s debts in the event of wrongful trading.
For more information on company structure, check out our setting up a company channel here.