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Experience isn’t Expensive…it’s Priceless.
The Potential Liability of the
Company Secretary
Presented by
Annamarie van der Merwe
27 October 2015
Experience isn’t Expensive…it’s Priceless.
The good……………
Experience isn’t Expensive…it’s Priceless.
Where does the company secretary come
from?
“A secretary is a mere servant to do what he is told to do.”
Newlands v National Employment Accident Association, 1885
Experience isn’t Expensive…it’s Priceless.
And then…………
“A company secretary is a much more important person nowadays than he
was... He is an officer of the company with extensive duties and
responsibilities. This appears not only in the modern Companies Acts, but
also by the role which he plays in the day-to-day business of companies. He is
no longer a mere clerk. He regularly... enters into contracts on [the company's]
behalf which come within the day-to-day running of the company's business. So
much so that he may be regarded as held out as having authority to do such
things on behalf of the company. He is certainly entitled to sign contracts
connected with the administrative side of a company's affairs, such as
employing staff, and ordering cars, and so forth. All such matters now come
within the ostensible authority of a company's secretary.”
Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd, 1971
Experience isn’t Expensive…it’s Priceless.
And now……….
“The breadth and importance of the role of the Company Secretary has
increased markedly over the past five years. It is a unique role as the
Company Secretary is often neither part of “line management” nor a member of
the Board itself. There are endeavours to move the profession beyond that of
being the “administrative servant of the board” to one which encompasses the
broader role of “board advisor”.
Rt Hon Alun Michael MP, UK, May 2012
“Corporate Affairs Minister Sachin Pilot today said he would support Company
Secretaries in their efforts to gain a bigger say in corporate governance. He
said the Government would move amendments in Parliament for a new
nomenclature for company secretaries – governance professionals – should
the Institute of Company Secretaries of India push for an amendment. He was
speaking at the 41st annual convention of the institute here today.”
Chennai, Nov. 7, 2013
Experience isn’t Expensive…it’s Priceless.
Evolving role – also a local trend
1994: King I Report – Recommended the mandatory appointment of acompany secretary for public companies with share capital.
1999: The Companies Amendment Act No 37 of 1999 – Gives effect to the
King I recommendation and includes various provisions regarding the
appointment, removal and duties of the company secretary. The company
secretary is required to be appointed by the board as a whole, which should
satisfy itself that the appointee has the requisite attributes, experience and
qualification to properly discharge his/her duties.
2002: King II Report - The company secretary should provide a central
source of guidance and advice to the board, and within the company, on
matters of ethics and good governance.
Experience isn’t Expensive…it’s Priceless.
Evolving role – a local trend (continue)
2010: King III Report – The company secretary has a pivotal role to play in
the corporate governance of a company………
2011: The Companies Act No 71 of 2008 – The mandatory appointment of a
company secretary by a public company and state owned company is
confirmed in section 86. Must be a person with the requisite knowledge of,
or experience in, relevant laws. Section 88(1) confirms that the company
secretary is accountable to the company’s board.
2012: The JSE Listings Requirements – The board to annually consider and
satisfy itself of the competence, qualifications and experience of the
company secretary and to include a statement in the integrated report on
the process followed to determine, as well as information that demonstrates
actual competence, qualifications and experience.
Experience isn’t Expensive…it’s Priceless.
Thus, today we have important statutory
duties…..
Duties of company secretary – Companies Act, s88:
(a) providing the directors of the company collectively and
individually with guidance as to their duties, responsibilities and
powers;
(b) making the directors aware of any law relevant to or affecting
the company;
(c) reporting to the company’s board any failure on the part of the
company or a director to comply with the Memorandum of
Incorporation or rules of the company or this Act;
(d) ensuring that minutes of all shareholders meetings, board
meetings and the meetings of any committees of the directors,
or of the company’s audit committee, are properly recorded in
accordance with this Act;
(e) certifying in the company’s annual financial statements whether
Experience isn’t Expensive…it’s Priceless.
Specific statutory duties (continue)
Duties of company secretary – s88:
(e) certifying in the company’s annual financial statements whether
the company has filed required returns and notices in terms of
this Act, and whether all such returns and notices appear to be
true, correct and up to date;
(f) ensuring that a copy of the company’s annual financial
statements is sent, in accordance with this Act, to every person
who is entitled to it; and
(g) carrying out the functions of a person designated in terms of
section 33 (3).
Experience isn’t Expensive…it’s Priceless.
If we are regarded as prescribed officers, then
these statutory duties also need to be noted…
s76: Standard of directors’ conduct (includes alternate, prescribed officer and board committee member) –
- Must not use position or information to gain advantage (also for others) or knowingly cause harm to the company
- Must communicate to board any information unless immaterial to the company or generally available to public or bound not to disclose by legal or ethical obligation of confidentiality
- Must exercise powers and perform functions –
• in good faith and for proper purpose
• in best interest of the company
• with degree of care, skill and diligence that may reasonably be expected from individual carrying out same functions and having general knowledge, skill and experience of that director
Experience isn’t Expensive…it’s Priceless.
And the business judgement rule may then
also apply to us as prescribed officers…..
s76: Standard of directors’ conduct (continue)
- ss(4): Director will have satisfied these obligations if:
• he has taken reasonably diligent steps to become informed about
the subject matter of the judgement; AND
• does not have a personal financial interest in the subject matter of
the decision and no reasonable basis to know of related person’s
interest; OR
• disclosed the interest in terms of s75; AND
• had a rational basis for believing, and did believe, that the decision
was in the best interest of the company.
Experience isn’t Expensive…it’s Priceless.
The bad………..
Experience isn’t Expensive…it’s Priceless.
This could result in potential liability…….
s77: Liability of directors and officers
- Similar definition of director as in s76
- Liable in accordance with principles of common law
relating to breach of fiduciary duty for any loss,
damages or costs sustained by the company as result of
breach of duties contemplated in s75 and s76 (3)(a) or
(b) (“good faith and in best interest of company”); or
- in accordance with principles of common law relating to
delict for any loss, damages or costs sustained by the
company as result of breach of duty contemplated in
s76(3)(c) (“care, skill and diligence”), any provision of
the Act or the provisions of the MoI.
Experience isn’t Expensive…it’s Priceless.
Not to forget the potential for civil liability…..
s218(2), Companies Act of 2008:
“Any person who contravenes any provision of this
Act is liable to any other person for any loss
suffered by that person as a result of that
contravention.”
Experience isn’t Expensive…it’s Priceless.
With real exposure and risk, what do we
do…….??
Know “your stuff” and remain an eternal student
Understand your role and your limitations
Watch your back and don’t expect loyalty
Be meticulous in recording your advices
Build and continuously work on relationships
When in doubt obtain legal advice
Do NOT compromise on your integrity – your
reputation is your biggest asset
Above all, remain professional and humble!!!!
Experience isn’t Expensive…it’s Priceless.
Core competencies for making best use of this
opportunity are….
Professional integrity – earns trust and respect through demonstration of
professional standards
Governance – promotes best practice and enables efficient working of the
organisation
Personal effectiveness – applies knowledge, skill and experience to
maximise performance
Business acumen – improves results by focusing on the organisation’s
objectives, customers and marketplace
Performance management – delivers objectives through effective
development and use of all available resources
Innovation and change – encourages innovation to increase capability,
deliver efficiencies and add value
ICSA, Chartered Secretaries
Experience isn’t Expensive…it’s Priceless.
Conclusion
There can be no doubt that the role of the company secretary has greatly
evolved over the centuries.
From being seen as a mere servant, the company secretary of today faces
nearly the same extent of duties and responsibilities as directors.
While acting as the company’s chief administrative officer, the company
secretary also plays a pivotal role in the proper governance of the company
and has a broad range of corporate governance and compliance duties.
To do all of this, today’s company secretary must have excellent
communication skills, a thorough knowledge of the company’s business and
applicable regulations, strength of character, integrity and above all, a
professional approach.
Experience isn’t Expensive…it’s Priceless.
No argument here…………!
Andrew Kakabadse, Professor of Governance and
Leadership at Henley, supports this view: "While the NED
has been the focus of much attention in the post-financial
crisis period, it is now time for the company secretary role
to come to the fore. Company secretaries are the only ones
with access to all relevant information, know the culture of
an organisation inside out, and are attuned to the reality of
what is happening on the board and in the organisation.
They have only one agenda – what is best for the company
and the board."
Experience isn’t Expensive…it’s Priceless.
And the ugly……..
Experience isn’t Expensive…it’s Priceless.
Experience isn’t Expensive…it’s Priceless.
Thank you!
Annamarie van der Merwe
Managing Director
iThemba Governance & Statutory Solutions
avdm@ithembaonline.co.za
086 111 1010
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