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The art of law - the company secretary is an important corporate officer

The role of the company secretary in a modern company

The role of the company secretary in the affairs of the company has grown in importance since the early days of company law, when he or she was merely a lowly clerk.

Thus, in Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd [1971] 2 QB 711 (CA) Denning MR said -

'A company secretary is a much more important person nowadays than he was... He is an officer of the company with extensive duties and responsibilities. This appears not only in the modern Companies Acts, but also by the role which he plays in the day-to-day business of companies. He is no longer a mere clerk. He regularly... enters into contracts on [the company's] behalf which come within the day-to-day running of the company's business. So much so that he may be regarded as held out as having authority to do such things on behalf of the company. He is certainly entitled to sign contracts connected with the administrative side of a company's affairs, such as employing staff, and ordering cars, and so forth. All such matters now come within the ostensible authority of a company's secretary.'

In the modern era it is recognized that the company secretary is the most senior administrative officer of the company. The Companies Act of 2008 now makes it mandatory for every public company to have a company secretary.

In contrast to the directors and managers of the company, the company secretary is an administrator, not a manager, unless he simultaneously holds a managerial position in the company and is consequently a manager in the latter capacity. It follows, therefore, (see Re Maidstone Buildings Provisions Ltd [1971] 1 WLR 1085 (Ch)) that if a company engages in reckless or fraudulent trading, a company secretary who has not gone beyond his administrative duties cannot be declared personally liable for the company's debts on the basis that he was "party to" the carrying on of the company's business in that improper manner.

In matters relating to administration, the company secretary ordinarily has authority to enter into contracts that bind the company in relation to administrative matters, and if he does not have actual authority to do so, then he would usually have ostensible authority. It needs to be borne in mind in this regard that merely instructing a person that he has no authority to do certain things does not, of itself, deprive that person of ostensible authority.

A person has ostensible authority (as distinct from actual authority) to represent and bind another person if the latter, by words or conduct, has represented to the outside world that the person in question has authority to represent him.

A striking illustration of the ostensible authority of a company secretary in the modern era is provided by the decision in Panorama Developments, referred to above.

In that case, a company secretary had hired cars, professing to do so on behalf of the company, but in fact for his private purposes. When the car hire firm submitted its invoice, the company refused to pay, claiming that the company secretary had no authority to hire the cars in question.

The court held that, even if the company secretary in question had no actual authority to hire the cars, he had ostensible authority to do so. By appointing him to the position of company secretary, the company had held him out as having all the usual authority of a company secretary, and such usual authority encompassed the hiring of cars on behalf of the company. Consequently, the company was legally obliged to pay the car hire invoices because it was stopped from denying his authority.

Of course, in these circumstances, the company could have demanded repayment from the company secretary, but it seems that he had by then disappeared from the scene.

The duties of a company secretary used to be set out in section 268 of the Companies Act of 1973 and are now set out more expansively in Part B of Chapter 3 of the Companies Act 71 of 2008.

Of particular significance amongst those statutory duties is the duty to give guidance to the directors, collectively and individually, in regard to their duties, powers and responsibilities. Consequently, the company secretary needs to have a high level of knowledge of company law in this regard.

A further, highly sensitive duty is the duty to report to the board of directors any failure on the part of the company or a director to comply with the company's memorandum of incorporation or the rules of the company as envisaged in section 15(3) of the Companies Act of 2008.

The company secretary's other duties include ensuring that the minutes of shareholders' meetings and board meeting and meetings of committees are properly recorded as required by the Act.


Roodt inc. Attorneys
info@roodtinc.com

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