“The company secretariate function is critical to managing a company and fulfilling legal, regulatory, risk and compliance obligations,” explains Debbie Farman, Vistra’ s head of legal advisory and global entity governance. “Because of this, company secretaries are often called the guardians of a business.”
This article explains what you need to know about company secretarial services, including how the role of company secretary has changed in recent years and its typical duties.
Company secretary functions explained
The word “secretary” is sometimes misinterpreted in this context to mean a role that engages in mundane or low-risk administrative duties. In fact, a company secretary has many duties critical to protecting a company and helping it achieve its strategic goals.
The company secretary — or “cosec” — function includes services that can be time consuming and carry considerable risk for a global group. Depending on the size of the organisation, the “function” may refer to an individual, who is usually a member of the senior team and often legally qualified, such as a general counsel. Or, the company secretary function may be carried out by a general counsel-led legal team or by a separate company secretariate team. For some smaller businesses, the role title may be taken by the CFO, who will delegate or outsource the relevant statutory functions.
Whoever takes on the company secretary role should of course be aware of its many responsibilities. Here are some typical duties a company secretary may perform:
- Maintaining the company’s statutory books and records
- Filing certain statutory returns
- Ensuring that subsidiary entity governance is maintained in good standing in all jurisdictions
- Overseeing board and shareholder proceedings as mandated by each entity’s constitution and local bylaws
- Filing relevant paperwork in a timely manner to effect changes in board and shareholder structures
- Drafting and coordinating relevant statutory reports
- Coordinating annual general meetings
- Managing certain other duties, such as those related to
- pension plans
- stock options
- indirect tax (VAT/GST)
- health and safety
- data protection and cybersecurity
Company secretary requirements
Not every organisation in every jurisdiction is required to appoint a company secretary. Rules vary by country, and even within a single jurisdiction there may be different rules based on company type. Hong Kong for example requires a company secretary, while the United Kingdom and Australia require public companies to appoint a company secretary, but the role is optional for private companies. It is important to note that in the majority of cases, the company secretary is held to be an officer of the company. Notably, this is the case for companies listed on global stock exchanges.
Even without appointing a company secretary, the duties must still be carried out, observes Gonzalo Garcia, a senior director based in the US. “There is a misconception that countries which don’t recognise the role of a company secretary, or require someone to be appointed to the role, don’t have the same obligations, but companies still have to conduct cosec duties, such as making legal and financial filings.”
Outsourcing company secretarial services
In many cases — including during periods of cross-border expansion and rapid growth — company secretarial duties can become administratively burdensome for a company, even overwhelming. A company may decide to hire an outside expert to take on the role of company secretary in one or more jurisdictions.
For example, a US company expanding into Hong Kong may hire a third-party provider of company secretarial services. At the beginning of the engagement, the client will receive a calendar of deadlines and timetables for the entire year. Edmund Chiu, head of corporate services in Hong Kong, explains. “We keep our clients on schedule by liaising with local agents to ensure they have the correct documents submitted on time so the company is always in good standing.”
For businesses with subsidiary entities in multiple countries, keeping abreast of legal and regulatory obligations has become remarkably challenging. A good company secretarial services provider introduces sound governance procedures and risk controls within the global business. The provider should also keep abreast of regulatory change in each jurisdiction and maintain a regular reporting convention. These services add immediate value to a business by reducing its risk and protecting its reputation.
“Working with a global provider of company secretarial services gives companies, their general counsel or their company secretariate access to specialised compliance expertise from professionals who have gathered and honed best practices over many years and are constantly monitoring legislative and regulatory change,” says Farman.
Garcia expands on the importance of understanding local rules and related challenges. “When companies expand operations outside their home country, they rarely adequately understand the local regulations, culture, language and customs. They need to find a local expert who can help them understand the criteria for remaining in compliance.”
Keri Wong, associate director for corporate services in Hong Kong, says clients are often bewildered by the types of documents they need to operate in multiple countries. “We have to be one step ahead of them and anticipate regional differences they might not expect.”
For example, Chinese names can be confusing for Westerners, so an experienced provider will know to look for common mistakes, such as clients inadvertently confusing first and last names. They may also not understand which countries require a wet signature on certain documents or when documents need to be notarised and apostilled.
Chiu stresses the importance of finding a single provider over managing multiple vendors. “Vetting, maintaining and communicating with multiple local company secretary relationships can cause major pain points and require an undue amount of time,” he says. “There is increasing demand from clients seeking to streamline operations with a single point of contact who can communicate with the client in their same language and time zone.”
Current company secretary trends
Keeping abreast of regulatory trends, along with customer and investor demands, is critical for the role of company secretary, in part so they can help their organisation proactively manage strategy. Environmental, social and governance (ESG) is an increasingly prominent strategic and regulatory concern for multinationals.
“If an organisation hasn’t begun addressing ESG, they should have it on their agenda,” Farman says. She notes that while ESG priorities and emerging reporting standards vary by industry, all companies will be judged on their efforts and results in this arena.
One important regulatory trend involves increased demands for disclosure of ultimate beneficial owner (UBO) information, which clearly identifies who ultimately benefits from a company’s dealings financially. “Adequate documentation ensures a UBO isn’t hidden by corporate infrastructure,” Garcia says. “We are seeing greater focus on the need to explain if and how a company’s ownership has changed, along with other details local authorities should know about a client’s operation in their country.”
Garcia adds that this is part of an overall trend toward increased regulation. “When you look at the European Union, Asia and other parts of the world, you can see that jurisdictions continue to prioritise getting more information. In particular, they’re scrutinising how organisations are approaching data protection and cybersecurity.” The ability to demonstrate and report on adequate safeguards in these areas can significantly affect a company’s value.
Some trends are more subtle. For example, Farman has noticed that many companies are being more forward-thinking about what information to include in the strategic report section of their annual reports. Striking an appropriate balance in this area can be tricky, she says. A company must provide sufficient detail to reassure shareholders and the public at large without divulging too much information to competitors.
“This is an excellent example of how the role of company secretary is evolving and becoming more important to virtually all organisations,” Farman says. “Fulfilling day-to-day obligations such as board meeting minutes is still essential, but today’s company secretary understands local and global regulatory and economic trends, and how to incorporate those trends when developing and implementing corporate strategies.”
How can we help?
The contents of this article are intended for informational purposes only. The article should not be relied on as legal or other professional advice. Neither Vistra Group Holding S.A. nor any of its group companies, subsidiaries or affiliates accept responsibility for any loss occasioned by actions taken or refrained from as a result of reading or otherwise consuming this article. For details, read our Legal and Regulatory notice at: http://www.vistra.com/notices . Copyright © 2023 by Vistra Group Holdings SA. All Rights Reserved.
I no longer need my BVI company: Strike off or liquidation?
27 Sep 2023
BVI companies may be used for many reasons, including as special purpose, operational or transactional vehicles, and there may come a time when the company is no longer needed. There are several…
The SEC’s new private fund adviser rules: Who’s affected and how to prepare
21 Sep 2023
Process agents: What they do and when you need one
20 Sep 2023
New ISSB standards could bring clarity to sustainability disclosures
13 Sep 2023
Switching from an EOR to a legal entity? Here’s what actually happens
06 Sep 2023
Top five challenges — and solutions — when setting up a cross-border private equity fund
30 Aug 2023