Business - Secretaries and Auditors (10) Flashcards
What is a company secretary?
A company secretary deals with the company’s legal administration as its ‘officer’ (s1121). They may be natural or corporate with a human proxy. There may be multiple, who will act jointly.
Which companies need a company secretary?
(1) Private Companies: No requirement to appoint (s270).
- Qualifications: No specific qualifications required.
- No Secretary: If there is no secretary, a director or authorised person will perform their role (s270).
(2) Public Companies: Must appoint a qualified company secretary (s271).
(3) Employment Terms: The board is responsible for deciding the secretary’s terms of employment.
What is the role and authority of a company secretary?
Role and Authority: The role of the secretary differs by company.
(1) Large Companies: Usually responsible for running an administrative department.
(2) Small Companies: Usually independent, and may be a director.
(3) Contractual Authority: Authorised to enter administrative contracts, but not trading contracts.
(4) Administration: Often responsible for internal administration, such as recording minutes.
How are company secretaries appointed or removed?
Appointment and Removal: Appointment and removal differs by circumstance.
(1) First Appointment: Typically named on the IN01 on incorporation.
(2) Subsequent Appointments: Made by board resolution (MA 3).
(3) Removal: Resigned or removed by board resolution (MA 3).
- Compensation: May be entitled to compensation if removed in breach of employment contract.
What administrative formalities are associated with a company secretary?
Administrative Formalities: Companies must comply with a number of administrative formalities for secretaries.
(1) Register of Secretaries: Companies must keep a Register of Secretaries (s275).
- Particulars: This must include specified particulars. CH must be informed of any change of particulars on CH03 (natural) or CH04 (corporate).
- Inspection: Register is inspected for free to shareholders and by fee for others at office, or CH central register (s279A).
(2) Resignations and Appointments: CH must be informed of appointments and resignations/dismissals within 14 days.
- Appointments: On Form AP03 (natural) or - Form AP04 (corporate) (s276).
- Removals: On Form TM02 (s76).
Which companies need a company auditor?
Company Auditor: A company auditor prepares the annual accounts report to send to shareholders (s495).
(1) Private Companies: Private companies must appoint auditors (s485).
- Small/Dormant Companies: Small or dormant companies are exempt, and can file abbreviated accounts exempt from audit (ss477-480).
(2) Qualifications: Auditors must be qualified (chartered accountants) and independent from anyone involved in the company (ss1212-1215). Companies usually hire an accountancy firm.
(3) Employment Terms: The board is responsible for deciding the auditor’s terms of employment.
What is the auditors report?
Auditor’s Report: An Auditor’s Report must state whether, in the auditor’s opinion, company accounts have been prepared properly and give a true and fair reflection of the company (s495).
(1) Purpose: Reports ensure shareholders are not being defrauded or misled by directors.
(2) Qualification: If reports are ‘qualified’, it indicates the existence of unethical or fraudulent behaviour.
How are company auditors appointed and removed?
Appointment and Removal: Appointment and removal differs by circumstance.
(1) First Appointment: Directors usually appoint the first auditor by board resolution (s485(3)).
(2) Subsequent Appointments: Shareholders ordinary resolution required subsequently (s485(4)).
(3) Reappointment: Private company auditors are automatically reappointed yearly, unless the auditor was appointed by directors or the articles state otherwise (s487).
(4) Removal: Auditors can resign or be removed.
- Resignation: Resignation in writing sent at any time to company’s RO (s516).
- Removal: Removed by ordinary resolution, provided the company is provided special notice of intent (ss510-511).
- Consequence: Auditor must deliver a statement to company explaining circumstances for ceasing to hold office in either circumstance, which may be useful in instances of unethical behaviour (s519).
What is the liability of a company auditor?
Liability: Auditors may be held liable for their work in a number of instances.
(1) To Shareholders: Auditors do not owe a duty of care to existing or potential shareholders.
(2) To Company: Auditors can be sued in negligence by the company.
(3) Criminal: Auditors may be criminally liable for knowingly or recklessly including misleading, false or deceptive material in their report, or omitting certain statements required by the CA (s507).
