The Changing Role of the Company Secretary

As the importance of effective corporate governance continues to be critical in today’s environment, not least due to the global financial crisis, there has been an increased focus on the role of the company secretary in Ireland.

The Companies Act 2014, in particular, retained the requirement for a company secretary in private and public companies. The modern-day company secretary's responsibilities have evolved from that of a "note taker" at board meetings or "administrative servant of the Board" to one that includes acting as a "Board advisor" and having responsibility for the organization's corporate governance.

The Board, particularly the chairman, looks to the company secretary for guidance not only on directors' statutory duties under the law, disclosure obligations, and listing rule requirements but also on corporate governance requirements and practices, as well as effective board processes. The modern company secretary's specialised role has emerged to position them as one of the keys.

Statutory responsibilities

The Companies Act 2014, which went into effect on June 1, 2015, maintains the requirement for a company secretary, in contrast to UK legislation, which eliminated this requirement for private companies in 2006. Retaining this requirement demonstrates the importance of the company secretary's role in the eyes of the legislature. The proposals go even further by putting the responsibility on the Board of Directors to ensure that the secretary has the necessary knowledge and experience to discharge the functions of secretary of the company and to maintain the records required by the Act. Furthermore, upon appointment, the company secretary will be required to sign a declaration acknowledging the existence of the secretary's duties.

If one were to examine the role and duties of the company secretary as currently outlined in Irish legislation, it would appear to be quite restrictive and mainly administrative.?Principally, the company secretary ensures the company complies with company law, maintains certain statutory registers and makes the necessary filings with the Registrar of Companies, such as annual returns, financial statements and certain forms concerning changes to share capital etc.

Corporate governance

In practice, the company secretary's role has evolved far beyond the statutory requirements. Most notably, the company secretary is responsible for developing and implementing processes to promote and sustain good corporate governance. This is acknowledged in the UK Code of Corporate Governance (which the Irish Stock Exchange has adopted through the Irish Annex) and the FRC Guidance on Board Effectiveness. Both have focused on Board effectiveness and how the company secretary can assist them. Although this guidance applies only to publicly traded companies, it is considered best practise. These corporate governance standards should be adopted by other companies insofar as they are deemed appropriate to the nature and scale of the organisation.

The boardroom dynamics are changing, and chairmen and directors realise that they require specialist skills and technical knowledge in this area, which they are looking to company secretaries to provide. There are several responsibilities, some of which are explicitly mentioned in the preceding guidance, where the company secretary can help and add value:

• Organisational governance It is important that robust governance arrangements are documented and communicated to the organisation. The position of the company secretary enables them to have a holistic view of the governance framework. As a result, they are generally tasked with ensuring that this framework and any supporting policies and procedures are documented. This should include ensuring that the formal documentation required under the UK Code of Corporate Governance, such as the schedule of matters reserved for the Board, is in place.
• Supporting the chairman The company secretary has a duty to advise the Board, through the chairman, on all governance matters. Together they should periodically review whether the Board and the company’s other governance processes are fit for purpose and consider any improvements or initiatives that could strengthen the company's governance. The relationship between the company secretary and the chairman is central to creating an efficient Board.??
• Board and committee processes The company secretary plays a leading role in good governance by helping the Board and its committees function effectively and by their terms of reference and best practices. Providing support goes beyond scheduling meetings to proactively manage the agenda and ensure the presentation of high-quality, up-to-date information in advance of meetings. This should enable directors to contribute fully in board discussions and debates and enhance the board's capability for good decision-making. Following meetings, the company secretary should pursue and manage follow-up actions and report on matters arising.?
• Board development All directors should have access to the advice and services of the company secretary. The company secretary should build effective working relationships with all board members, offering impartial advice and acting in the company's best interests. In promoting board development, the company secretary should assist the chairman with all development processes, including board evaluation, induction and training. This should involve implementing a rigorous annual Board, committee and individual director assessment and ensuring actions arising from the reviews are completed. Further, the company secretary should develop tailored induction plans for new directors and develop a training plan for individual directors and the Board.?Although these tasks are ultimately the responsibility of the chairman, the company secretary can add value by fulfilling, or procuring the fulfilment of, these best practice governance requirements on behalf of the chairman.
• Communication with stakeholders The company secretary is a unique interface between the Board and management, and as such, they act as an important link between the Board and the business. Through effective communication, they can coach management to understand the expectations of, and value the Board brings. The company secretary also has an important role in communicating with external stakeholders, such as investors, and is often the first point of contact for queries. The company secretary should work closely with the chairman and the Board to maintain effective shareholder relations.??
• Disclosure and reporting In recent years, there has been increased emphasis in the quality of corporate governance reporting and calls for increased transparency. The company secretary usually has responsibility for drafting the governance section of the company’s annual report and ensuring that all reports are made available to shareholders according to the relevant regulatory or listing requirements.

Increased regulatory burden

Given recent economic developments, stakeholders of companies, particularly in the financial services sector, are increasingly concerned with the conduct of the company's affairs. Therefore, it is critical that best practice is followed and evidence is available to demonstrate the same. The Central Bank's introduction of a series of corporate governance codes, including fitness and probity standards for certain pre-approval controlled functions or persons who perform controlled functions, demonstrates the need for higher standards in this sector. Controlled functions include "ensuring, controlling, or monitoring compliance with relevant obligations by a regulated financial service provider."

While compliance monitoring in the financial services sector has traditionally been outsourced, with the implementation of these new standards, there is more caution in the provision of such services, which are more likely to be laid at the feet of the company secretary in the future. True, the company secretary's role includes informing the Board of Directors about new legislation and how it applies to them. With the increased emphasis on corporate governance, the role of the company secretary has been expanded to include the secretary as the company's guardian of compliance with legislative requirements and best practices.