The changed role of your Company Secretary and how RM2 can help

Posted by admin at 15:51 on 13 Feb 2017


During the life of a share scheme we deal with many different people from a company including owners, the management team, employees, accountants and also the company secretary. The importance of the latter should not be underestimated.

Role of the company secretary

Possibly the job title doesn't create the right impression. Their work - advising on governance and conduct and ensuring that the company and its directors operate within the law - is secretariat rather than secretarial. But while the increasing burden of regulation would suggest a more pressing need for company secretaries on 22nd September 2009, under the Companies Act 2006, the Government ended the legal requirement for private limited companies, of any size, to make the appointment. If one is appointed, they need not have any formal qualifications. The company secretary can however still be found criminally liable for defaults by the company, for example, failure to file any changes in the company's director or secretary details, or filing the company annual return. If directors or the company secretary are unsure on any of these points, it may be time to call in the professionals. (We can usually help with specific issues but if you would like our recommendations for good companies that provide these services on a retained basis then please let us know.)

Historically many smaller companies have regarded the role of company secretary as somewhat insignificant, a merely titular appointment which perhaps justified a very modest remuneration to a founder's spouse. In such circumstances the compliance with Company Law often lapses and this can have ramifications when the company looks to undertake any transactional work involving share capital or desires to amend the company's governing constitution, the Articles of Association.

Company secretarial records and share schemes

When a company approaches us for advice on implementing a share scheme the directors are sometimes concerned about how much it will cost. One of the factors that can influence the cost is the state of the company's company secretarial records. If they are all in good order and up to date then our work incorporating amendments to facilitate the introduction of a plan will be minimal. Where records are incomplete or inconsistent then there is a need for time to be spent reconciling differences and correcting omissions and undertaking remedial work as necessary just to bring matters up to date and ensure that the right foundations are in place before any further share capital changes are made.

As a guide, when we commence our work implementing a share scheme we need to discover the following:

  • the company share capital and share classes including information on the rights and any restrictions attaching to shares;
  • who the shareholders are and how many shares they each hold; what shape the Articles of Association are in and what needs to be updated;
  • whether there are any shareholders' or investment agreements in place; and
  • details of any recent share transactions.

Common errors to avoid

Common misconceptions/errors we have dealt with while implementing share schemes include, but are not limited to the following:

  • Share Certificates. Either the original or a copy should be issued by the company secretary to all shareholders. At RM2, we deal with option certificates rather than share certificates and will inform the Company Secretary of share certificates that may need to be issued, for example post Option exercise.
  • Companies House Forms. When any shares are allotted a Companies House form SH01 is required. Simply reporting the amendment in your annual return is not a viable alternative.
  • AR01. Mistakes on the share capital register and the lack of consistency with the filed accounts.
  • Omitting the filing of shareholder resolutions and amendments to the Articles of Association (sometimes even the location of the current Articles is a struggle!)
  • The directors have not been given authority to allot shares or grant rights over shares but have purported to do so anyway.
  • There has been a reduction in the issued share capital because the Company has repurchased its own shares but the very strict Company Law procedure and reporting requirements relating to this have not been followed.
  • Amendments are now desired that require shareholder consent but the company does not have current contact details for all shareholders and in some cases does not even know if some of their legacy shareholders are still alive!

If you would like to discuss the content of this article in more detail then please call the office on 020 8949 5522 and speak to Becky Mitchell, our Client Services Manager, who specialises in these matters.