Those who form and maintain companies in the most popular common law jurisdictions around the world (i.e. U.S. Delaware, England, Wales, Hong Kong, British Virgin Islands, Cayman Islands and Singapore), often in connection with foreign direct investment into China, private equity funds and pre-IPO holding companies, are generally familiar with the role and importance of the company secretary. The most frequently asked questions we hear from those who lack experience with these jurisdictions are; “What is a company secretary?” and “What is the value of appointing a company secretary?”
Evolution of the Role of Company Secretary
The role of a company secretary is deeply rooted in the traditions of English common law and began 127 years ago. In the English common law case of Barnett, Hoares & Co v. South London Tramways Co., Lord Esher, one of the judges presiding over the hearing stated: “a secretary is a mere servant; his position is that he has to do what he is told, and no person can assume that he has any authority to represent anything at all; nor can anyone assume that the statements made by him are necessarily to be accepted as trustworthy without further enquiry.”
Fortunately for us, the present day authority and stature of a company secretary was established in 1971 in the English Court of Appeals Panorama Developments (Guildford) Ltd. v. Fidelis Furnishing Fabrics Ltd. In this case, Lord Denning established precedent for the role of the modern day company secretary as “an officer of the company with extensive duties and responsibilities”, giving rise to the widely recognized executive position of “Chief Administrative Officer.”
Responsibilities of a Company Secretary
In most common law jurisdictions, the company secretary plays an important part in the ongoing corporate governance of companies in both a regulatory and procedural capacity. These responsibilities include maintaining the company’s registers (i.e. Register of Directors, Register of Members, Register of Charges (Liens), etc.), organizing meetings, sending out notices of meetings, keeping minutes of meetings and filing forms and documents with the relevant government authorities. A well-tenured and experienced company secretary can also provide advice to directors regarding board procedures and can help to ensure that the applicable rules related to relevant company ordinances and regulations are being followed at all times. Many jurisdictions, such as Australia, England, Wales, Hong Kong and Singapore even recognize the professional qualification/licensing of a company secretary by way of the Institute of Chartered Secretaries (“ICS”). An ICS qualification is equivalent to the professional stature of being qualified to practice by the bar or as a CPA in the legal and accounting professions respectively.
The Value of a Company Secretary is Often Underappreciated
This brings us to the next FAQ: “What is the value of a company secretary?” The value of a company secretary can be summarized in one word: “paperwork.” In no small order, the company secretary is responsible for preparing paperwork (i.e. minutes of meeting, resolutions, standard forms), filing paperwork (i.e. Annual Reports, government filings, license fees, etc.), organizing paperwork (i.e. company kits) and retaining paperwork (i.e. recordkeeping). Most businesses, from the smallest of start-ups to the largest of multinational corporations, often underappreciate the value of a company secretary since success is measured by revenue while exit-strategies are measured by words in the business plan. In practice, and any corporate lawyer will (reluctantly) confirm this (at the expense of their annual billings), the success of any corporate exit-strategy (i.e. merger and acquisition, public offering, etc.) is directly related to the quality of a company’s paperwork. Proper corporate governance and corporate transparency on paper is often the most cost-effective remedy for staggering legal fees incurred during a company’s exit-strategy proceedings.
So the next time you are ready to establish a new place of business overseas, spend some time to think about whether a company secretary can add value to the pending venture. Chances are, over the long-term, your pocketbook will thank you if you do.
Author Andy Chen is the General Manager of COGENCY GLOBAL INC. COGENCY GLOBAL INC. (Hong Kong) Limited (“COGENCY GLOBAL INC. Hong Kong”), a wholly-owned subsidiary of COGENCY GLOBAL INC. located in Hong Kong. COGENCY GLOBAL INC. Hong Kong provides a full range of company formation, secretarial and related services, as well as corporate service support for the full implementation and ongoing administration of international tax structures related to Hong Kong private limited companies. For more information about COGENCY GLOBAL INC.'s Hong Kong services, click here.
This article is provided for informational purposes only and should not be considered, or relied upon, as legal advice.