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Important Information For Company Secretaries

» Posted on: 21 May 2008
» Posted by: Elaine Hurn
» Service area: General

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Since 6 April 2008 private companies are no longer required to have a Company Secretary.

So what will happen to Company Secretaries?
Providing a Company’s Articles for Association do no expressly require a Company Secretary the existing secretary can simply resign their office and notification given to Companies House and the Company Book be written up accordingly.

What if the Companies Articles of Association provide that we need a Company Secretary in our Company?
If the expressed provisions of the Companies Articles of Association stipulate that a Company Secretary is needed as many of them do then the Company keeps their Company Secretary as before. If however, a company wants to benefit from the change in the Companies Act 2006 then the Shareholders needs to pass a resolution to amend the Articles of Association by deleting the references to the need to have a Company Secretary.

What other items are consequential upon this change?
A Company had currently either to enter into agreement by signing documents or in the case of documents which need to be executed as a Deed to fix a common seal of the Company or have the signatures of two directors or one director and the Company Secretary for the Deeds to be validly executed. A Company is now able to execute documents as Deeds by the signature of a single director providing he or she signs in the presence of a witness.

So is my Company Secretary redundant?
If you can take advantage of the change in the law you do not need an officer of the Company who has the responsibilities of Company Secretary. It is very likely however, that a private company will employ a full time Company Secretary whose responsibilities extend beyond those that had previously been required pursuant to the Articles or pursuant to the earlier Companies Acts. Those duties are probably are of a financial or administrative nature, many financial directors of Companies are also Company Secretary. It is only the “office” that has disappeared not the job. It may however, be worth re-considering the title of an appointee who has previously held the title of Company Secretary, so as to avoid any conclusion with the Statutory role.

So if my Company’s Articles require a Company Secretary would it be sensible for me to change them and so do away with the need to have a Company Secretary?
That depends. Whilst the ability for documents to be signed by only one single director creates more flexibility and less formality it is not always a good thing. The old rule about signing documents requiring either two Directors or a Director and a Secretary at least meant that the Company Secretary (who as I say is often the Financial Director as well) having some means of restraining maverick Directors from signing contracts without the other board members having sight of them. Whilst a number of public companies and large private companies have well documented internal procedures setting out levels of delegated authority, ie, a level of contract spend a Director can enter into without board approval, this is less common with private companies.

Please note that Public Limited Companies are still required to have a Company Secretary but Private Companies who do away with the officer of Company Secretary may have to think about implementing stricter internal procedures over signing, perhaps making sure that any contacts for over a certain level of spend need prior board approval.

We can certainly advise you on implementation of relevant procedures should you wish to consider them.

What other changes are there?
The main ones concern AGM’s and accounts. The procedure most previously honoured in the breach was that of private companies failing to hold Annual General Meetings. You will all be pleased to know that they are no longer required. Private companies also no longer have a need to lay their accounts and reports before the Company in a general meeting. [But note that the period for filing the annual accounts is reduced from 10 months to 9 months calculated from the end of the relevant account reference period].

I have read that Companies have now to publicly publish their Annual Reports and Accounts on their website. Does that apply to me?
It only applies to quoted companies and not private companies.

By way of postscript watch out for the engagement letters you are receiving from your Auditors for accounting period post 6 April 2008. Auditors will be seeking to agree liability limitation agreements with you so as to limit the Auditors liability to your Company for their negligence, default or breach of duty of trust in relation to the audit of your Company’s Accounts. The agreements can only be entered into for one financial year at a time. Any such agreement needs to be disclosed in the accounts to which the limitation relates. Please be vigilant for these letters as in our experience the levels of liability that Auditors have been seeking to agree with Companies are very low and often linked to a multiplier of the fees that you pay.

If you are a small private company, the Auditors mistakes could easily exceed a multiplier of say 4 times the audit fee agreed for that year. Our advice is to shop around or negotiate a higher limitation figure or consult Taylors to ask us to consider whether the limit is reasonable. While auditors are permitted by the Companies Act 2006 to limit their liability and enter into limited liability agreements these agreements are still subject to the law about enforceability of limitation, which is governed by the existing law.

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