In our previous cosec series, we talked about the role of the board of directors (“the Board“), and how it is often regarded as the management arm of a company. For the purposes of this article, we will focus on the role of a company secretary, which is often overlooked but equally as important to ensure accountability and good corporate governance in the context of South African company law.
THE ROLE OF A COMPANY SECRETARY
A company secretary is responsible for the legal administration of a company, often playing an advisory role to the Board on what its responsibilities are and to ensure that the Board carries out its duties effectively. The King Report on Corporate Governance for South Africa (“King III“), which is often regarded as the go-to authority for corporate governance guidance outside of the Companies Act 71 of 2008 (“the Companies Act“), states that the Board should always “be assisted by a competent, suitably qualified and experienced company secretary”. As the most senior administrative “officer of the company”, a company secretary must oversee the efficient administration and compliance of a company and is the primary source of advice on the conduct of the business (CIPC Guidance Note 1 of 2017: The Role of the Company Secretary in a Modern Company).
IS IT COMPULSORY FOR MY COMPANY TO HAVE A COMPANY SECRETARY?
Section 86(1) of the Companies Act makes it compulsory for a public company or a state-owned company to appoint a company secretary. It is not mandatory for a private company to appoint a company secretary, but the absence of this requirement does not mean that a private company is automatically exempt from observing the relevant requirements of the Companies Act from a governance perspective.
WHO CAN BE COMPANY SECRETARY?
Section 86(2) of the Companies Act states that every company secretary, irrespective of whether such appointment is a requirement in terms of the Companies Act or a company’s memorandum of incorporation (“the MOI“), must:
- have the requisite knowledge of, or experience in, relevant laws; and
- be a permanent resident of the Republic of South Africa and remain so while serving in that capacity.
If a public company or a state owned company (or, in the case of a private company, it elects in terms of its MOI to abide by the extended accountability provisions), appoints a company secretary, then such appointment may be made by the incorporators of the company or within 40 business days after the incorporation of the company by either the directors of the company or an ordinary resolution of the holders of the company’s securities (i.e., its shareholders).
Section 87(1) of the Companies Act further states that a juristic person or partnership may be appointed to hold the office of company secretary, provided that:
- every employee of that juristic person who provides company secretarial services, or partner and employee of that partnership, as the case may be, satisfies the requirements contemplated in section 84(5) (i.e., that person has not been disqualified as director); and
- at least one employee of that juristic person, or one partner or employee of that partnership, as the case may be, satisfies the requirements contemplated in section 86 (i.e., requirements to be appointed company secretary).
DUTIES OF COMPANY SECRETARY
A company’s secretary is accountable to the Board and section 88(2) of the Companies Act states that a company secretary’s duties include, but are not restricted to, the following:
- providing the directors of the company collectively and individually with guidance as to their duties, responsibilities and powers;
- making directors aware of any law relevant to or affecting the company;
- reporting to the Board any failure on the part of the company or a director to comply with the MOI or rules of the company or the Companies Act;
- 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 the Companies Act;
- certifying in the company’s annual financial statements whether the company has filed required returns and notices in terms of the Companies Act, and whether all such returns and notices appear to be true, correct and up to date;
- ensuring that a copy of the company’s annual financial statements is sent, in accordance with the Companies Act, to every person who is entitled to it; and
- carrying out the functions of a person designated in terms of section 33(3) (i.e., filing of annual returns).
As can be seen, the role of a company secretary is an extensive and important one, often to facilitate the Board in carrying out its duties. Even if it is not mandatory for your company to appoint a company secretary, it is advisable that such company delegates or outsources this responsibility to an appropriate person or organisation. Our firm has a dedicated Company Secretarial Department and even though we will not accept an appointment as company secretary, we do offer such services on an ad hoc basis. Please do get in touch if you require more information or how we can assist with your company secretarial needs.