COMPANY SECRETARY SURVIVAL GUIDE
FOR PUBLIC UNLISTED COMPANIES
DUTIES AND RESPONSIBILITIES OF A COMPANY SECRETARY
With your appointment as a company secretary of a public company, it is important that you are aware of the significant duties and responsibilities that attach to or are generally associated with that office. Set out below is an overview of secretarial duties and functions for your assistance. This guide does not cover the additional obligations imposed upon financial services licensees. If you require further specific advice in relation to any aspects of your duties or obligations please contact us further.
1.Role of the company secretary
1.1The company secretary is now regarded as the chief administrative officer of a company. They do not participate in decision making about operational matters, as a company secretary, but may well do so in another capacity, such as financial controller, as the two positions are often linked.
1.2Understanding this distinction and the particular role you have in your organisation is important as it goes to the authority of a company secretary to contract on behalf of the company. A company secretary may only contract (without obtaining express approval from the board or some authorised person) with respect to administrative matters, for example, to purchase a photocopying machine. Prudence suggest that board approval be first obtained for any significant contractual commitments to avoid any doubts as to your contractual capacity as company secretary.
2.Duties and responsibilities
2.1A company secretary’s general duties are extensive. Generally, as chief administrative officer, the company secretary is required to:
(a)carry out the functions of the chief administrative officer of the company which often includes some or all of the roles of office manager, public officer, accountant, financial adviser, controller and public relations officer;
(b)comply with section 188 of the Corporations Act 2001 which provides that the company secretary is personally in breach of the Corporations Act 2001 if the company breaches the following requirements of the Act:
•requirement to have a registered office (section 142);
•requirement for registered office of public company to be open to public (section 145);
•requirement to respond to extract of particulars (section 346C);
•requirement to respond to return of particulars (section 348D);
•requirement to lodge notices with ASIC on change of officeholder details (section 205B);
•requirement to give notice of change of principal place of business (section 146);
•requirement to give notice of the issue of shares (section 254X); and
•requirement to lodge financial reports (section 319);
(these provisions are discussed further below);
(c)have a clear understanding of the company’s constitution, the provisions of the Corporations Act 2001 that affect the company and reforms to the Corporations Act 2001 (as they affect the company);
(d)ensure that the necessary registers required to be kept under the Corporations Act 2001 (see the list in section 168(1)) are established and properly maintained, including the following:
•members;
•option holders;
•debentures;
(e)ensure that all returns required to be filed with ASIC, are properly prepared and filed within time. Section 188 has the effect that any secretary who fails to lodge a notice of change of personal details of directors or secretaries is in breach of the Act;
(f)facilitate the conduct of board meetings by finalising the agenda with the chairman, collating board papers and sending these to directors in a timely fashion before each meeting, taking accurate minutes at the meeting and assisting the chairman with procedural matters when requested;
(g)organise and attend any meetings of the shareholders - this includes sending out requests for nomination of directors and notices of meeting, assisting in sorting proxies, arranging for attendance of the auditor to supervise shareholder registration on the day and conduct polls, assisting chairman to prepare meeting notes and taking minutes;
(h)be aware of the laws and procedures governing meetings - particularly the relevant company constitution provisions on quorum requirements, voting procedures and proxies - so that the secretary can advise the chairman if need be;
(i)supervise the company’s share capital generally, including the issue of shares by the board, preparation of allotment letters, issue of share certificates, handling of transfers of shares, forfeiture of shares, dividends, etc;
(j)deal with all correspondence with members concerning their shares and debentures (eg calls, dividends, interest payments, etc);
(k)ensure that the company’s financial records are kept in accordance with the Corporations Act 2001 and that the annual financial reports are prepared in the form and at the time required by the Corporations Act 2001;
(l)supervise the preparation of tax returns and ensure compliance with the various taxation provisions (eg payroll, income, GST, withholding and land taxes);
(m)attend to the company’s insurance requirements, ensuring that the company is adequately protected;
(n)be conversant with relevant statutory requirements, ensure compliance with them and keep abreast of new legislative developments - these requirements may range broadly, embracing areas such as occupational health and safety, industrial awards, trade practices, consumer protection, anti-pollution, hire purchase and taxation;
(o)carry out the instructions of the directors and convey those instructions to other persons concerned, such as other company officers; and
(p)ensure that the company displays its name prominently at every place in which it carries on business (section 144);
(q)be responsible for the custody of the company’s common seal, if the company has adopted a seal (and completing the seal register);
(r)be responsible for notifying ASIC of the company’s registered office and any changes to it; and
(s)ensure that the registered office is open (section 145) each business day from at least 10.00am to 12noon and 2.00pm to 4.00pm, or at least 3 hours chosen by the company between 9.00am and 5.00pm each business day. It is also possible for the company to choose its own opening hours.
3.Penalties
3.1ASIC can impose penalties on a secretary for breaches of the sections set out in section 188 even where, for example, the delay in lodging documents lay with the board of directors rather than the secretary specifically.
3.2A secretary who contravenes section 188 commits an offence. However, it is a defence if a secretary took all reasonable steps to ensure the company complied with the section. Nevertheless, there may not be a defence available to a secretary even where they can show they were not knowingly concerned in the breach. Further, even where a secretary has acted in good faith, they may still be found to be in breach of the Corporations Act 2001.
4.Company constitution
4.1The company constitution, formerly known as the memorandum and articles of association, is a contract formed by statute (the Corporations Act 2001) which has binding force. Its provisions can be enforced as between:
(a)the company and each director and the company secretary;
(b)the company and each member;
(c)a member and each other member.
4.2It is therefore vital that you gain adequate familiarity with and understanding of the company’s constitution. Ensure that it is not inconsistent with current legislation and is written in plain English.
5.Systems
You should ensure that systems are in place to assist the company to maintain proper financial records so that financial statements can be prepared in the form required by the Accounting Standards. The directors should be given these statements on a regular basis. Company secretaries should understand these documents, even if this involves seeking professional assistance.
6.Accounts
You should ensure that financial statements, including the directors’ report and auditor’s report, for the company are prepared each financial year.
For a company with a 30 June balance date, the deadline for:
(a)lodgment with ASIC is 30 September, if it is a disclosing entity;
(b)lodgment with ASIC is 31 October, if it is not a disclosing entity; and
(c)dispatch to members is the earlier of:
•21 days before the next AGM after the end of the financial year; or
•31 October.
7.Meetings
7.1You should assist the chairman of the company to ensure that the board meets regularly, is properly informed and has time for consideration before major decisions are taken.
7.2If the directors have to make decisions ‘on the run’ (as commercial realities will sometimes dictate) you need to ensure that the surrounding circumstances are properly recorded. Telephone meetings have their place but must be treated cautiously and be conducted strictly in accordance with the constitution. Similarly, circular written resolutions of directors meetings should only proceed after the directors undertake careful deliberation of the relevant subject matter. Do not forget the ‘business judgment rule’ (subsection 180(2)).
8.Relationship with auditors
You should ensure that the board has free and regular communication with external auditors and is mindful of the relationship between management and auditor.
9.Insurance
9.1Take out appropriate insurance cover on behalf of the directors and officers of the company, with the assistance of a reputable broker. It may be possible to obtain insurance for damages in the event of breach of duty, negligence or breach of trust but only if such conduct does not constitute wilful breach of duty in relation to the company or a contravention of sections 182 or 183 (misuse of position or information).
9.2Insurance can still be obtained by the company in respect of liability for costs and expenses for defending civil or criminal proceedings subject to the limitations in section 199A of the Corporations Act 2001.
9.3Insurance should be maintained for each director and company secretary for at least 7 years after they cease to hold office as a director or company secretary of the company.
9.4Workers’ Compensation and Rehabilitation Act 2003 (Qld) excludes directors in most situations from the company’s workers compensation cover and thus you should ensure that adequate personal coverage is in place for workplace injuries caused to directors.
10.Statutory and common law duties – directors and secretaries
10.1As a company secretary you are an officer under the Corporations Act 2001 and as such, you have a duty to act in good faith, for a proper purpose and in the best interests of the company as a whole. Like directors you are required to act in the interests of all shareholders and to avoid any potential conflicts of interest. Breaches of these common law duties may expose you to potential liability in damages. The Corporations Act 2001 also sets out these duties and provides substantial fines or disqualification from management as a consequence of breaches as follows:
(a)duty to exercise a reasonable degree of care and diligence (section 180);
(b)duty to act in good faith in the best interests of the corporation and for a proper purpose (section 181);
(c)duty not to make improper use of position (section 182); and
(d)duty not to make improper use of information (section 183).
10.2The Corporations Act 2001 requires that a director in the exercise of his or her powers, and in the discharge of his or her duties, exercise the degree of care and diligence that a reasonable person would exercise if:
(a)they were a director of a corporation in the corporation’s circumstance; and
(b)they occupied the office held by and had the same responsibilities within the corporation as the director.
10.3What constitutes the proper performance of duties by a director will be dependent upon:
(a)the actual powers and duties of the individual director;
(b)the corporation’s circumstances; and
(c)the office occupied.
10.4The duty is to be judged by reference to the particular circumstances of the director concerned and does not give rise to criminal penalties. However, in determining whether a director satisfies the criteria in paragraph 10.3, and thus comes within what is called the ‘business judgment rule’, a director must:
(a)exercise their business judgment in good faith for a proper purpose;
(b)not have a material personal interest in the subject matter of the decision;
(c)inform themselves about the subject matter of the decision to the extent they reasonably believe to be appropriate; and
(d)rationally believe that the decision is in the best interests of the corporation.
10.5The term ‘rationally’ indicates that the decision must be one that can be explained in some way. The Corporations Act 2001 indicates that the director’s belief as to what is in the best interests of the corporation must be one that a reasonable person in the director’s position would hold. Therefore, the term ‘rationally’ would seem to have the same meaning as reasonable.
10.6The business judgment rule does not sit easily with the role of the company secretary as an administrative officer as opposed to one who participates in management, such as a director. However, it appears to give comfort to company secretaries who also occupy management roles such as chief financial officer, as it provides a ‘safe harbour’ for those persons who satisfy the above criteria.
10.7The ‘safe harbour’ offered by the business judgment rule only applies to potential breaches of the duty to act with due care and diligence. It does not operate to relieve directors or company secretaries of potential breaches of other common law or statutory duties.
10.8Note also the following provisions:
(a)contravention of any of the above duties constitutes a breach of the civil penalty provisions of the Corporations Act 2001. Company secretaries and directors can be liable for substantial fines; and
(b)breaches of duties to act in good faith and not to misuse their position or information also attract criminal penalties if the company secretary or director intentionally or recklessly breaches their duties.
10.9Company secretaries have a duty to notify the company of their personal details to enable completion of ASIC returns such as change of officers.
11.Disclosing entity
11.1The Corporations Act 2001 imposes additional requirements on disclosing entities, most notably the requirements to:
(a)lodge financial statements and the director’s report within 3 months after the end of the financial year (as opposed to public companies which are non disclosing entities whose lodgment deadline is within 4 months of the end of the financial year);
(b)prepare half year financial statements and directors’ declaration and lodge them with ASIC; and
(c)comply with continuous disclosure provisions in Chapter 6CA of the Corporations Act.
11.2Generally, a company is a disclosing entity if it:
(a)has lodged a disclosure document and has 100 or more shareholders;
(b)has issued securities as consideration under a takeover offer and has 100 or more shareholders; or
(c)has issued security as consideration for the acquisition or cancellation of securities of another body pursuant to a compromise or arrangement under Part 5.1 of the Corporations Act 2001, that other body was a disclosing entity immediately prior to the issue of securities pursuant to the compromise or arrangement and the company has 100 or more shareholders.