Chapter 1: The Role of the CoSec Flashcards
Which type of company must appoint a Company Secretary.
Public or Listed Companies. Private companies do not need to (CA2006 S. 270 and 271 - came into effect on 6 April 2008.
What is Compliance?
Compliance refers to the systems put in place that companies have to adhere to based on legislation. These systems include the following:
1. Record and maintain records relating to the company structure;
2. Document reporting and decision making processes and the exercises of those processes;
3. Detect and prevent breaches of legislation by agents, employees, officers and directors of the company.
Legislation will vary widely by company type and structure.
What is Governance?
Governance refers to the processes and procedures by which a company is controlled, specifically;
1. the way in which the Board and senior management is structured;
2. the authority that board and management can exercise;
3. the transparency and accountability processes for the board and management;
4. the interaction processes within investors and stakeholders.
Will the CoSec be responsible for compliance within all companies?
No. The legislation falling within the remit of the CoSec’s role will vary depending on the company type and structure. Larger companies will have specialist departments or roles responsible for different compliance matters, e.g. H&S, Insurance, Intellectual Property, etc.
How does good governance help boards achieve their goals?
Helps by providing a framework and mechanisms for boards and organisations to be transparent in their dealings with members, investors, employees and other stakeholders.
How does the CoSec role differ to that of General Counsel?
CoSecs are rarely driven by the commercial drivers and personal targets that might distort decision-making, unlike executives who have to consider profit and expenditure, therefore they are able to view issues from an impartial neutral position. CoSecs, when advising boards, have to consider whether an action should be undertaken, an ethical decision.
General Counsel considers the legality of proposed action.
These roles are sometimes combined though.
When was a CoSec role first acknowledged.
Joint Stock Act 1856 - the role was recognised as merely an administrative function with no responsibilities or duties in the legislation.
The CoSec had no authority to represent the company and was a ‘mere servant’.
Where does the UK Governance Code derive from.
The Cadbury Report - “Financial Aspects of Corporate Governance”-Adrian Cadbury
Provide a timeline of the CoSec role evolving and being acknowledged.
- CA1948: recognised a CoSec as an officer of the company and required all companies to appoint a CoSect (s.177). No specific duties were prescribed but CoSec was authorised to sign prescribed forms on behalf of the company and make statutory declarations as to matters of fact regarding the company, thereby implying personal responsibility for not complying with the Act.
- Further recognition as a responsible Officer: Trade Descriptions Act 1968; Taxes Management Act 1970 and Unsolicited Goods Act 1971.
- Court of Appeal 1971 - Salmon LJ judgement: CoSec role was formally noted as being the Chief Administration Officer. Master of the Rolls, Lord Denning: CoSec is an officer with extensive duties and responsibilities; has authority to make representations and enter into contracts on behalf of the company;
- CA1980: introduced requirement for CoSecs of Public companies to be registered with a professional body or be qualified by relevant experience. Still in force (CA2006 s.273).
- Cadbury Report (Financial Aspects of Corporate Governance - Adrian Cadbury); recognised key role of CoSecs in good corporate governance. This report is regularly updated and is now the UK Governance Code.
- 2008: Requirement for private companies to have a CoSec became optional in CA2006. Took effect on 6 April 2008.
Where does a CoSec’s authority derive from?
Their employment contract states their management responsibility and authority.
CoSec’s authority does not derive from any legislation, unlike Directors.
Who may be a CoSec?
A corporate body (corporate service provider) - common in groups of companies or where the role is outsourced. Facilitates the use of multiple signatories and can appoint any number of authorised signatories to sign documents on its behalf.
A partnership can be appointed in the name of the firm. England and Wales - same effect as appointing all partners as joint secretaries as partnerships do not have corporate status. Scotland - partnerships have corporate status and therefore firm may be appointed as company secretary within its own right.
LLP (Limited Liability Company) as a corporate body can be appointed a CoSec.
Deputy or assistant CoSecs can be appointed.
Are CoSec duties specified in legislation?
Although CA2006 does not specify duties in detail, it does name the CoSec as having authority to sign prescribed forms, make statutory declarations and sign the confirmation statement.
The CoSec is also recognised as the responsible officer in certain legislation, e.g. Taxes Management Act 1970, the Trade Descriptions Act 1968 and the Unsolicited Goods and Services Act 1971.
Other than the employment contract, where else are a CoSec’s authorities and duties set out?
The Company’s Articles. These can be amended to suit the requirements of the company.
What does a Company’s Articles contain?
Provisions regarding appointment and removal of a CoSec. The model articles for companies incorporated prior to 1 October 2009 do not contain such provisions.
What is the role of the CoSec?
Board: ensure proper board procedures are in place and adhered to; all relevant papers are circulated in advance of meetings; provide practical suport and guidance to NEDs; monitor and guide corporate governance policies.
Company: Ensure compliance with relevant legislation and codes of conduct specific to the business’s activities; provide a central source of information to the Board and senior execs.
Shareholders: Primary point of contact for shareholders and institutions in matters related to corporate and environmental governance.
What qualifications must a CoSec hold in a private company?
No professional or other qualifications, nor any previous experience.
What qualifications must a CoSec have for Public companies?
CA 2006 s.273 provides that directors should take all reasonable steps to ensure a CoSec has the knoweldge and experience to discharge the functions of a CoSec, and who meets the certain qualifications. The following are deemed automatically having relevant qualifications:
1. A barrister, advocate, solictor called or admitted in the UK;
2. A member of The Chartered Governance Institute; Institute of Chartered Accountants in England and Wales; Institute of Chartered Accountants of Scotland; Association of Chartered Certified Accountants; Institute of Chartered Accountants in Ireland; Chartered Institute of Management Accountants; Chartered Institute of Public Finance and Accountancy;
3. A member of any other body or having held any position which appears to directors as being able to discharge the functions of a CoSec;
4. A person who held the office of a CoSec for a Public company for three of the five years preceding their appointment.
Who is prohibited from being appointed as a CoSec?
The auditor of a company or an employee of the auditor (CA2006 s.1214).
Why should a sole director of a company consider appointing a CoSec?
The same person cannot sign documents in both capacities, so where two signatories are required, they would need to appoint an authorised signatory or have an independent party witness their signature.
What are the other considerations for formally appointing a CoSec that private company directors should consider?
Private company Directors should consider formally appointing a CoSec bearing in mind the additional signing capacity they will bring for official documents and contracts.
What should be considered when appointing a CoSec (for public and private companies)?
Consideration should be given to:
a. The role required;
b. whether it will be focused on compliance and governance, or whether it will be a wider role encompassing other areas, e.g. insurance, risk management and health & safety.
How is a CoSec appointed?
There are two forms and both are valid for private and public companies:
1. Cosec is appointed with effect from the date of incorporation as they are named as the CoSec in Form IN01 during the incorporation process (not obligatory for a private company); and is deemed as appointed as the first CoSec of the company (CA2006 ss.12 and 16).
2. CoSec is appointed by directors in accordance with the provisions of the Articles and CA2006 ss.275-8.
Provide the checklist for appointing a CoSec (private and public).
- Ensure that the proposed appointee meets the qualification criteria set out in CA2006 s.273 (for public companies).
- Appointment by a meeting of the Directors or written resolution where directors resolve to appoint a new CoSec. Where it is a replacement, the resolution will include the replacement of the previous CoSec by way of resignation, retirement, removal or another cause.
- The appointee formally consents to their being appointed and this is confirmed on Form AP03 or AP04 indicating the appointee has consented.
- The new CoSec’s particulars are entered into the company’s register of secretaries and notified to the Registrar using Form AP03 (person) or AP04 (corporate service provider) within 14 days of the appointment (CA2006 s276). This form is filed either in paper form or electronically. Where the register of secretaries is held on a central register, the obligation to give notice under CA2006 s276 is replaced with the matching obligation under CA2006 s279D.
- If the CoSec shall be an authorised bank signatory, notification of the change of CoSec and a signature specimen is sent to the bank, with additional identity verification documents as required.
- If appropriate, an announcement of the new CoSec is made to the staff, customers and suppliers. Normally only appropriate with CoSecs in a senior executive role.
- A formal service contract is drawn up between the company and the CoSec. This usually states the details of the CoSec’s executive responsibilities and remuneration, and does not necessarily state that they are an employee - which allows their removal as CoSec to not affect their employment with the company. The UK Corporate Governance Code recommends that the remuneration committee have delegated responsibility for setting remuneration for senior management, including CoSecs.
- The insurance company is notified at renewal or appointment of a CoSec - only in cases where the company has liability insurance covering officers of the company.
- If a company has publicly traded shares, the CoSec is given teh company’s rules governing transactions in its securities, which should ocmply with the Market Abuse Regulations (MAR), Disclosure & Transparency Rules (DTR), Listing Rules (LR), and the rules of the relevant exchange.
How may a CoSec resign?
Subject to any service contract in place, a CoSec may resign by notice in writing to the Board.
How may a Board remove/replace a CoSec?
By a simple majority vote, taking into consideration any terms of the service contract in place.
Does the removal of a CoSec result in termination of employment?
Not necessarily as the service contract may not be the person’s employment contract. The service contract will only state the duties and remuneration.
What procedures should be followed when removing/replacing a CoSec?
- Directors approve a resolution to remove the CoSec either by written resolution or in a meeting, in the case of removal.
- The removal/replacement is entered into the company’s register of directors and secretaries and notified to the Registrar using form TM02 within 14 days of resignation or removal (CA2006 ss 276 & 277). This form is filed either in paper form or electronically. Where the company has elected to hold its register of secretaries on a central register, there is no obligation to update the company’s own register and the notification to the Registrar per CA 2006 s. 276 is replaced by the matching obligation under CA2006 s.279D.
- If the CoSec is an authorised bank signatory, notification of the change should be given to the bank.
Public companies are required to appoint a new CoSec as soon as is practical per the appointment procedures.
What are the benefits of appointing a corporate company secretary?
- Facilitates the use of multiple signatories for documents required to be signed on behalf of the company secretary;
- Changes of staff within the corporate company secretary company will not require registration of changes in the named company secretary with the registrar.
Usually large companies with subsidiaries appoint corporate company secretaries.
What does the Governance Code, Act and other best practices recommend regarding a CoSec’s obligations and responsibilities in relation to the Board?
- The CoSec should fulfill a leading role in good governance of the company by supporting the chair and assisting the board and its committees to function efficiently.
- The CoSec should report to the Chair on all board governance matters, and report to the CEO in relation to the executive responsibilities.
- The appointment and removal of a CoSec should be a matter for the Board as a whole to consider.
- Remuneration should be considered by the remuneration committee to ensure independence from undue influence.
What are the key responsibilities of a CoSec per the Governance Code and guidance?
- Advising the Board on all governance matters;
- Supporting the Board in establishing the necessary processes, procedures, information, policies and resources to function effectively and efficiently;
- Ensuring that Board procedures are complied with;
- Ensuring good communication and information flow within the Board, and between its committees, senior management and NEDs;
- Facilitating Board induction, training and professional development;
- Ensuring that Directors and NEDs have access to independent professional advice at the company’s expense, when deemed necessary in the performance of their duties;
- Periodically reviewing corporate, board and committee governance (with the Chair), and considering any improvements/initiatives that could strengthen governance processes.
What is an important skill that a CoSec should have to enhance their effectiveness?
The ability to build and maintain relationships of trust and confidence with the Chair, CEO, Directors and NEDs.
How is a CoSec an adviser to the Chair and Directors?
A CoSec must act with integrity and independence from the competing interests of the company, its employees and stakeholders, thereby enabling the CoSec to take a proactive and central role in governance. This allows the CoSec to guide and advise the Board on a company’s values and governance framework through assisting and guiding directors in pursuing the company’s aims.
Explain the CoSec’s role in advising the Chair and Directors.
A CoSec takes a proactive and central role in governance. This includes strategic thinking around why/how the company is doing business, and the necessary governance procedures to ensure an appropriate corporate culture so that the company operates according to its values.
What other duties does a CoSec have in relation to the Board and Company?
A CoSec’s duties will also include maintaining statutory registers, ensuring prompt filings are made on time with Companies House, taking and drafting of minutes, co-ordinating/drafting non-financial aspects of the annual report and accounts (e.g. strategic and directors reports), and convening and managing meetings of its members.
Why is a CoSec role in a unique position in a company?
A CoSec has access to all decision-making processes, highly confidential information, and is privy to opposing views which may/may not be discussed at Board level. They also oversee the evaluation process for their own line manager (Chair).
The Governance Code recommends a CoSec report to two people. Who are they and for which aspects of the role would each have oversight?
Chair: Governance issues.
CEO: Executive matters.
Who has the authority to convene Board meetings?
Directors. However this can be delegated to the CoSec per the company’s articles.
Does the CoSec play a role in convening Board meetings?
A CoSec plays a central role in the preparation of, convening and management of a Board Meeting and is responsible for all administrative tasks post meeting.
How can Board Packs be distributed?
- By hard copy delivered to each director at their registered address;
- Electronically via email or specific applications allowing the board packs to be delivered directly to the director’s laptop.
What are the benefits of distributing Board packs electronically?
- They deliver the pack directly to the director’s laptop/tablet;
- Savings in time, cost and enhanced levels of security;
- Reduction in the use of printing, couriers and paper resulting in an environmental benefit;
- The ability to issue updates to the Board packs without needing to reprint;
CoSecs should ensure directors have sufficient training in the use of any software applications.
What are the procedures a CoSec should follow prior to a Board meeting?
- Check with directors and senior executives about any matters to be added to the agenda;
- Agree the agenda with the Chair and CEO. Chair agrees agenda for listed companies.
- Request any documentation to be included in the pack is made available in a timely manner prior to the deadline to allow time for the board pack to be compiled. The time required to compile the pack will vary depending on how board packs are distributed. The distribution deadline will depend on the length of the pack, frequency of meetings and chair preference;
- Notify others that are required to attend (finance, etc.) and provide them with the necessary documentation relevant to their part of the meeting;
- Ensure spare copies of agenda and pack are provided in case directors have technological issues;
- Be familiar with the quorum requirements and processes for declaration and handling of any conflicts of interest relating to items of business to be considered;
- If the meeting is virtual, ensure all attendees are trained on how to use the virtual meeting software, e.g. zoom. Generally the CoSec acts as a host.
What are the duties of a CoSec during a Board meeting?
- Keep note of the people in attendance at commencement, apologies and details of anyone joining or leaving the meeting. This will give an accurate reflection of the meeting in the minutes.
- Ensure a quorum is present at the commencement of business, and when decisions are being made.
- Ensure there is a quorum of independent, non-conflicted directors for decision making if there are directors with conflicts of interest.
- Take notes of action decided, decisions reached, and appropriate justification.
- Advise on any point of procedure regarding conduct of the business of the meeting.
- Intervene if the Board is proposing something unlawful, contrary to company Articles or any other regulations the company is subject to.
- Ensure external participants (e.g. managers or external advisers) are ready to be called when their agenda item is reached.
- Collect any documentation or flip chart pages after the meeting.
Explain what minutes should contain.
Minutes should provide the reader with an accurate summary of matters discussed, challenges raised, decisions reached, and actions to be taken.
Although each Board will decide on the format and detail to be provided within minutes, external requirements may also need to be considered, especially with companies with external regulators (auditors who may read minutes as part of the audit) where more detail may be required on on reasoning behind decisions, challenges raised to proposals and actions taken or discussions had to satisfy the challenges.
When would a formal vote usually take place in Board meetings?
Usually votes are informal and decisions reached via unanimous consent as directors have collective responsibility for their decisions/actions, however where a director remains opposed to a course of action, a formal vote may be appropriate, with a note of the views of the dissenting director being recorded in the minutes.
When must an announcement via a Regulatory Information Service (RIS) be made (only for companies with publicly traded securities)?
If the Board has made a decision on notifiable events then an announcement must be made via RIS as soon as possible. Notifiable events include the payment of a dividend on company shares; approval of yearly/half-yearly accounts; the appointment or resignation of a director; an issue of shares or debentures; and the postponement of a preference dividend or interest.
The CoSec would have been made aware in advance of such an announcement and would normally draft the announcement to be made available during the meeting for approval by the Board and released immediately after the meeting.
What are the procedures post Board meeting?
- Make the necessary announcement via RIS (for companies with publicly traded securities only);
- Notify managers of any actions to be taken as advised by the Board;
- Make a note of any items that have been deferred for future consideration;
- Ensure that the manager responsible for a report on a specific subject requested by directors during the meeting is notified;
- Prepare the minutes accordingly, including details of items carried forward. Sometimes Boards also prefer a schedule of action points to be circulated (often in advance of the minutes).
What is the procedure to follow after preparation of minutes?
These vary from company to company however it is usually:
1. Send a copy of the draft minutes to the Chair and/or CEO for comments and approval;
2. Once approved, circulate the final draft to all directors for comment to be returned by a given date;
3. Once the final version is agreed, distribute to all Board members.
What are the accepted alterations to minutes?
Accepted alterations include:
1. Considering alterations suggested by directors on the wording;
2. Alterations confined to what was said and not what was meant or, on reflection, what a director would have preferred not to say.
Why are there two appointment forms for a company secretary (Forms AP03 and AP04)?
AP03 is for the appointment of a natural person.
AP04 is for the appointment of a corporate company secretary.
Why have CoSecs had to review their procedures for the secure distribution of board packs?
Due to the General Data Protection Regulations coming into force in May 2018, and considering board packs may contain confidential personal information, CoSecs have had to review their procedures to ensure that the regulations are adhered to.
Who is authorised to convene meetings of the directors?
The directors are authorised however they can delegate this to the CoSec.
How might minutes of directors’ meetings differ between regulated and unregulated companies?
Minutes of a regulated company will often be more detailed and contain details of challenges, reviews and reports in the decision-making process.
Is it good practice to allow directors to amend minutes to reflect what they meant to say?
No.
Regarding communication with shareholders and other stakeholders, do CA2006 provisions take precedence?
The provisions regarding communication in the Act take precedence over any contrary provision in the company’s articles, EXCEPT where the Act specifically allows for contrary provisions to be made.
According to CA2006 ss.1143-8 and Sch 4 & 5 and CA2006 ss. 146-51 - what does the Act say?
The Act sets out the communication provisions to be used by companies when communicating with their members and vice versa. ss 146-51 sets out that members of a traded company may nominate a third party to receive copies of company communications.
What legislation with Traded companies be subject to?
CA2006, Disclosure and Transparency Rules, Listing Rules and any additional stipulations set by trading venues.
Is communication with members allowed via electronic means?
Only if the member has opted in or has been deemed to have opted in following a specific request from the company to ascertain preferred methods of communication. This also applies to members being able to send communications electronically. A company must have agreed to accepting communications in this manner.
Where in the CA2006 are the provisions for communications means for companies?
Schedule 5, and applies to all communications a company has with members, suppliers, etc.
What is the default method of communication for general members and for third party members?
The default for members is hard copy and the default for third parties is via a website. A member viewing via electronic means has the right to request a hard copy at no extra cost.
What are the default authentication requirements for communications issued to the company?
Subject to any alternative provisions in the Articles, hard copies should be signed by or on behalf of the sender, electronic copies must identify the sender in a manner specified by the company, and in the absence of any specification in such as way as to identify the sender.
When are electronic documents or information deemed as received according go CA2006 s1147?
48 hours after they were sent, provided the company can prove they were properly addressed.
When is information or documents deemed as received when sent by post, according to CA2006 s1147?
48 hours after posting, provided proof is provided that the envelope was correctly addressed, postage paid and it was actually posted. This can be proven by obtaining a certificate of posting provided by the company that mailed it.
When are documents or information deemed as received when published on a website, according to CA2006 s1147?
When published on the site or, if later, when recipient is deemed to have received notification that the documents are available for view online.
Are non-working days taken into account when deeming the period of delivery?
No.
When is a document deemed readable?
When it can be read with the naked eye, i.e. no fine print.
What must a document sent in electronic form enable the recipient to do?
Read it and retain a copy of it.
What provisions does CA2006 Sch.4. provide for sending of documents and other information TO a company?
Hard copy documents must be sent by hand or post to an address specified by the company for that purpose; its registered office; or an alternative address authorised by any provision in the Act.
Electronic documents can be sent to a company if the company has agreed to permit delivery of that document in electronic form; or in circumstances where the company can be deemed to have agreed by virtue of a provision in the Act.
An electronic document is deemed as delivered when sent to the specified address provided by the company. Where the document is contained on a physical device (DVD, Memory Stick) delivery to the company is only permitted to an address complying with the requirements for delivery of hard copy documents.
A document or information that is sent or supplied to a company otherwise than in hard copy form or electronic form is validly sent or supplied if it is sent or supplied in a form or manner that has been agreed by the company.
What provisions are set out in CA2006 Sch. 5 for delivery of documents/information FROM a company?
Hard copies must be addressed as specified by the recipient, at a company’s registered address, at the address in the register of directors or members, an alternative address authorised by any provision in the Act.
Electronic form communication may only be sent if the recipient has agreed generally or specifically to such means of communication and has supplied an address for that purpose, or if the recipient is a company, agreement has been given the address provided.
Information must be delivered to the address specified for that purpose by the company. Where the information is in physical form (DVD, USB), the company must deliver it specifically to the recipient or an address complying with the requirements of the Act.
Communications via website are only permitted where the recipient has agreed to such means of communication, and where the company has a reasonable expectation that the recipient is able to read it with the naked eye and retain a copy.
Explain “deemed consent”.
Deemed consent refers to when a company has consulted with members and the members failed to respond to the consultation conducted in accordance with CA2006 Sch.5.
In order for a company to take advantage of “deemed consent”, members must agree to the provisions. Any consultation can only be conducted once in a 12 month period.
