Role of the Company Secretary in a Ghanaian Listed Company
“THE ROLE OF A COMPANY SECRETARY
IN A PUBLIC LISTED GHANAIAN COMPANY”
INTRODUCTION:
According to the late Lord Esher M.R., “a Secretary is a mere servant; his position is to do what he is told and no person can assume that he has any authority to represent any thing at all”. In this article, I shall endeavour to look at the role of the Company Secretary in the administration of a public listed company. I shall particularly focus on whether the statement quoted above represents what the modern Company Secretary is or should be. Is the Company Secretary an ‘amanuensis’?
In today’s corporate world, normal business activities of both private and more so public companies are subject to a web of various laws and regulations. This is more so for a publicly listed company whose continued listing on an Exchange is subject to on-going compliance with the listing regulations of the relevant Exchange. Information is required on a continuous basis for compliance purposes. Disclosure requirements for listed companies are therefore greater in many respects than for unlisted or private companies. Where a company has multiple listings, that company would in all respects be reporting to the Registrar of Companies or its equivalent in its country of origin as well as the Stock Exchanges on which its securities have been listed.
In this aspect, the role of the Company Secretary is very important. A Company Secretary is a facilitator and guide as to the best possible means of how to perform a certain act, with minimal complications and with avoidance of not anticipated and costly pitfalls. Section 190 of the Companies Code, 1963, Act 179, provides that every company must have a Secretary. A company under the Code cannot operate for more than 6 months without a Secretary and is duly fined for each other day it continues to operate without a Company Secretary. The Company Secretary is an agent and in most cases in Ghana, an employee of the company. This gives rise to a number of common law, statutory and regulatory obligations. The Company Secretary plays a pivotal role in the smooth administration of the company and in the fulfilment of its responsibilities towards all the afore-mentioned regulatory institutions and to the company’s shareholders and other stakeholders.
DUTIES:
It has been mentioned previously that the Company Secretary is an agent and in most cases an employee of the company. The Company Secretary of a public listed company usually undertakes the following duties:
1. Maintaining Statutory Registers:
(a) Register of Members (section 32 of Code):
The provisions of the Code stipulates that every company must keep a register of its members (i.e. shareholders) which must include the underlisted particulars:
i. the name and address of each member of the company
ii. a statement of the shares held by each member with distinguishing numbers, if any
iii. the amount paid on each share
iv. the date of entry on the Register
v. the date of cessation of membership.
Members may inspect the Register free of charge. Non-members may inspect the Register on payment of a small fee. It is instructive to note that any person may require a copy of the Register upon payment of a small fee and the copy must be supplied within ten days.
The Register of Members is important, as it is the public representation of who the members are. A Company has no power to create a right of pledge or lien over the Register, since that would deprive the public of their statutory right of access and inspection.
It must be noted that corporate practice in Ghana is that the Register of Members is invariably kept at the office of the Registrar of the company. Registrar services are usually handed out to an entity which is external to the company offering the specialised service. However, it is prudent for every company secretary to have at least a copy of the most recent Register of Members once very quarter and also request from the Registrars a list of the top twenty shareholders of the company at the end of every month. A company secretary will then be able to alert the Board and Management of a listed company to movements in the shareholding worthy of note.
(b) Register of Directors and Secretary (section 196):
Every company is obliged to keep a register of its directors and its secretary at its registered office. Such a Register must contain the name (and former name where applicable) the usual residential address, business occupation and particulars of any other directorships. The company must notify the Registrar within twenty-eight (28) days of any change in the particulars on the Register. When a person becomes a director, the notification must be accompanied by his signed consent to act as such. Unless expressly exempted by the Registrar, the names of all the directors must be put on the company’s business stationery. This requirement is not adhered to in corporate practice in Ghana by some firms and the SE, GSE and the Registrar of Companies should be mindful of it.
(c) Register of Directors Interests (s215):
Every company must keep a register of directors interests in shares and debentures. The Company Secretary must enter the information within twenty-eight (28) days of such acquisition. When a publicly listed company receives notification from a director, it must before the end of the following day, notify the stock exchange which may publish the information. This Register must be produced at the commencement of any general meeting and remain open and accessible during the continuance of the meeting to any person attending the meeting. At every other period, the Register of Directors Interests is accessible at the company’s office for its members (and even former members) and the company’s auditors without cost.
(d) Register of Charges (s107):
All public companies are also obligated under the Code to register with the Registrar every charge created by the company within twenty-eight (28) days of its creation. The implications of non-registration of the company charge are severe. Unless registered, the charge is deemed void as a security on the company’s property. This however does not mean that the company goes scot-free and is not liable for the repayment of any money that was to have been secured by the unregistered charge. The Code points out that when a charge becomes void, the money secured thereby immediately becomes payable despite whatever contrary intentions may have been stated in any contract.
These provisions however do not apply to pledges of or possessory lien on goods. They also do not apply to any charge by way of pledge, deposit, letter of hypothecation or trust, receipt of bills of lading, dock warrants or other documents of title to goods or of bills of exchange, promissory notes or other negotiable securities or money.
2. Completion of Statutory Forms:
Ordinarily, companies cannot simply forward a letter to notify the Registrar of Companies that the firm wishes to change the situation of the company’s registered office or that changes have occurred among the directors or secretaries or their particulars. The appropriate forms must be secured from the Registrar of Companies and duly completed for submission within the stipulated time frame. The necessary forms have been set out in the Companies Prescribed Forms Instrument, 1963 (LI 289).
3. Providing Members and Auditors with Notice of Meetings:
The company is expected to give members and auditors, at least twenty-one days written notice of an Annual General Meeting (AGM) and fourteen days written notice of a meeting which is neither an AGM or a meeting to pass special resolution. The company has an obligation to supply a copy of the accounts to every member of the company, every debenture holder and every person who is entitled to receive notice of general meetings at least twenty-one days before the meeting. A company may provide in its Regulations for a period longer but not shorter than the twenty-one days stipulated by law. It is instructive to note that members may call any meeting described as a general meeting if they so decided and it will be a meeting properly so-called despite a shorter notice. Furthermore, members holding 95% of the shares may also call a meeting at shorter notice where the holders of the 95% constitute a majority in number of the shareholders. It is the Company Secretary who would administer adherence to all these provisions of the Code.
4. Copies of Resolutions and Agreements:
Under section 176 of the Code, copies of certain resolutions have to be filed within twenty-eight days of their passage by the company with the Registrar of Companies. All special resolutions are required to be filed. Furthermore, resolutions to which the requisite proportion of a class of shareholders have given their written consent but which would otherwise have required a special resolution of the class must also be filed with the Registrar of Companies. It is unclear as to the degree of compliance by listed companies of this provision.
5. Minutes of Directors’ Meetings and General Meetings:
The Company Secretary is required to be fully conversant with the law and procedure relating to the calling and holding of meetings. The administrative tasks related to such meetings could be categorised as preparation for the meeting, holding the meeting, voting, minutes and procedural irregularities. The Company Secretary must also have a sound knowledge of the procedural requirements of holding a meeting, which would include the rules of debates, motions and amendments, polls, elections and ballots. The skill of secretarial administration is possibly one of the least appreciated but can be of tremendous importance where crucial matters affecting a company are the subject of resolutions in a meetings. The Code and the regulations of the company govern the procedure relating to periods of notice, quorums and majorities needed to pass different types of resolutions.
6. Inspection of Company Records:
The company also has an obligation to ensure that people entitled to do so, can inspect company records. For example, members of the company and members of the public, i.e. non-shareholders, are entitled to a copy of the company’s Register of Members. Members of the company are also entitled to inspect the minutes of its general meetings and to have copies of these minutes for a minimal fee.
7. Custody and Use of the Company Seal:
Though in many jurisdictions, companies no longer need to have a company seal, the Code makes provision for it and the Company Secretary is usually responsible for its custody and use, a function adequately catered for under company regulations in Ghana.
8. Chief Administrative Officer:
The Company Secretary therefore invariably acts as the chief administrative officer of the company. Such a position would require supervision of the administrative functions of the company and implementing board policy in relation to this. In the performance of his functions, the Company Secretary is expected to keep abreast with the provisions of the Code and maintain a watching brief over the company’s regulations and its obligations under the Code and to other regulatory institutions.
As chief administrative officer, the Secretary will often deal with employment of staff, contracts relating to the company’s premises and office equipment, the company’s printing and stationery requirements, the company pension arrangements and employee share option schemes and company cars. It must be pointed out that large firms have specialised departments, which handle these ancillary functions thereby freeing the Company Secretary to concentrate on the core functions. In companies that are not very big however, the Company Secretary may perform all the functions of a chief administrative officer.
COMMON LAW DUTIES:
The Company Secretary’s position also gives rise to certain common law obligations. The Secretary is expected to act in good faith, by acting in the best interests of the company and not use his or her position to make gains for him or herself. The Secretary must also exercise care, diligence and skill. These cover the proper performance of the duties required to be undertaken by the Secretary. The Secretary will be liable for any losses or damages caused through a lack of care, diligence or skill in performing those duties. The Company Secretary as an employee of the company is bound to follow instructions, whether they are written or verbal. He or she is also not at liberty to make use of the company’s records, such as trade secrets or lists of customers which are classified as confidential, for his or her own purposes.
OTHER DUTIES:
It must be stressed that the duties already enumerated and the roles played thereunder by a Company Secretary are primarily “traditional”. The fact of listing on an Exchange introduces a whole new plethora of obligations the ‘chief administrative officer’ ought to be conversant with.
1. Continuing Listing Obligations:
Stock Exchanges around the world have a statutory duty to protect investors. To help fulfil this responsibility and maintain the prestige and quality of the market, Exchanges require listed companies to provide timely information so that investors can make well-informed decisions. In order to maintain an orderly market in all listed securities, Exchanges set out in their Listing Rules a number of continuing obligations which a company must fulfil on an on-going basis once it is listed. The main aim of these continuing obligations is to ensure that all potentially price sensitive information is released to the market without delay. Price sensitive information is that which has ability to impact the prices of securities when the information gets into the public domain. Timely disclosure of information is vital if investors are to have confidence in the operation of the stock market. This is also critical if the risk of insider dealing is to be minimised. A listed company is therefore expected to disclose all major new developments that may cause substantial price movements in its listed securities. For example, Part VII of the Listing Regulations of the Ghana Stock Exchange has clearly listed matters which must be the subject of public disclosure within specified deadlines, some to be immediately announced by the listed company and others by a stated deadline.
Under Part VII of the GSE’s Listing Regulations, public announcements are required in these situations:
- major developments in the company’s business activities, such as new products, contracts or customers
- significant acquisitions or disposals
- a change in directors or a change in the functions or executive responsibilities of a director
- decisions to pay dividends
- half-yearly results, preliminary financial statements of annual results, fully audited annual results
- changes in the interests of major shareholders and directors
- further issues of securities and changes in the company’s capital structure.
In respect of companies that have listings on more than one Exchange, special procedures are invariably applied to ensure that announcements are made simultaneously to all the Exchanges on which they are listed. Conventionally, such a company would be required to make the announcement in accordance with the requirements of the primary Exchange, for example the Ghana Stock Exchange and simultaneously deliver a copy of the announcement to the other Exchanges for distribution. For example, in respect of the London market, the information is notified to the Regulatory News Service (RNS) of the London Stock Exchange.
Although the Listing Rules impose an obligation on the directors to enforce the provisions with regard to their company, it is the Secretary to whom the responsibility is delegated to ensure that the administrative
procedures are in place to comply with the Exchange’s requirement. The issue of compliance therefore is a critical matter for every listed company and more so for a company with listings on different Exchanges.
2. Servicing a Plethora of Specialist Committees:
The tightening up of the regulatory framework of companies by Stock Exchanges around the world has given rise to the creation of various specialist committees at the board level in companies. In the wake of Enron and WorldCom, corporate governance has assumed fundamentally critical roles in all listed entities around the world. Board sub-committees may include audit committees, due diligence committees, continuous disclosure committees, remuneration committees etc. Corporate governance principles enable companies to balance the need for managerial risk taking and entrepreneurial abilities with mechanisms and procedures for monitoring purposes to safeguard shareholder interests and other interests in the wider community. The responsibility for ensuring the efficient implementation of such procedures would fall upon the Company Secretary’s shoulders.
CONCLUSION:
A company secretary should not see himself as merely being responsible for ensuring compliance with the statutory requirement such as keeping proper statutory books and following correct procedures for convening relevant company meetings. Following scenarios such as the Enron and WorldCom failures, a very important and critical role for the company secretary arises. The modern company secretary should be the “ keeper of the company’s conscience”.
In playing this role, there is the need to for the company secretary to have a wider perception of the company’s obligations to all shareholders and be steadfast in proffering advice and guidance to the board of directors. But the performance of this function as the compliance officer of the company comes with risks. In Malaysia, for example, attempts have been made to provide legislative safeguards to the effect that any decision to dismiss the Company Secretary should only be carried out with the sanction of a resolution of the company in general meeting which is approved by not less than three- fourth majority of members present and voting at the meeting or by proxy. Ultimately, a Code of Ethics for Company Secretaries could be adopted to guide actions of company secretaries in the performance of their duties.
It is clear from the foregoing that the Company Secretary plays a major role in maintaining a watching brief over the Code, Exchange regulations if applicable and other relevant obligations of the company. The Secretary draws attention to them when they do arise and assists in the fulfilment of due obligations.
It is clear from the foregoing that the Company Secretary plays a major role in maintaining a watching brief over the Code, Exchange regulations if applicable and other relevant obligations of the company. The Secretary draws attention to them when they do arise and assists in the fulfilment of due obligations.
As has been pointed out, the Company Secretary is the chief administrative officer of the company and on matters of administration, he has ostensible authority to make contracts on behalf of the company. In the English case of PANORAMA DEVELOPMENTS – V – FIDELIS FURNISHING FABRICS (1971), the Secretary of the Defendant Company entered into a number of contracts for the hire of cars. The cars were ostensibly to be used to collect important customers from Heathrow Airport, but in fact, the Secretary used them for his own private purposes. Counsel for the Defendants cited a passage of Lord Esher MR in the 1887 case of BARNETT HOARES –V- SOUTH LONDON TRAMWAYS. The Learned Judge had said that “ a secretary is a mere servant; his position is to do what he is told and no person can assume that he has any authority to represent anything at all”. However, on appeal to the Court of Appeal it was held that the Defendant Company was liable. The famous English jurist, Lord Denning, sitting in the Court of Appeal said, “…times have changed. A Company secretary is a much more important person nowadays than he was in 1887. He is an officer of the company with extensive duties and responsibilities…. He is no longer a mere clerk…. He is entitled to sign contracts connected with the administrative side of a company’s affairs, such as employing staff and ordering cars and so forth”.
But Company Secretaries, a note of caution. This does not mean that a Company Secretary can begin acting as a Managing Director. A Secretary may not bind the company on a trading contract, borrow money on behalf of the company, issue a writ or lodge a defence in the company’s name without due authorisation. The Secretary also does not have authority to register a transfer of shares, strike a name off the Register of Members, suo motu or summon a general meeting on his own authority.
A word to the wise…
JOE ABOAGYE DEBRAH Esq.
Partner, 1stLaw
Accra JD210905
Reference:
1. Abbott, K. R. , Company Law, 5th Edition, DP Publishing (1995)
2. Armour Douglas, Company Secretarial Checklists, ICSA Publishing (1992)
3. The Companies Code, 1963 (ACT 179)
4. The Ghana Stock Exchange Listing Regulations of 1990 (as amended)
5. Geoffrey Morse, Charlesworth’s Company Law, 13th Edition, English Language Book Society/Stevens, 1987
6. The Listing Rules, London Stock Exchange (Yellow Book)
IN A PUBLIC LISTED GHANAIAN COMPANY”
INTRODUCTION:
According to the late Lord Esher M.R., “a Secretary is a mere servant; his position is to do what he is told and no person can assume that he has any authority to represent any thing at all”. In this article, I shall endeavour to look at the role of the Company Secretary in the administration of a public listed company. I shall particularly focus on whether the statement quoted above represents what the modern Company Secretary is or should be. Is the Company Secretary an ‘amanuensis’?
In today’s corporate world, normal business activities of both private and more so public companies are subject to a web of various laws and regulations. This is more so for a publicly listed company whose continued listing on an Exchange is subject to on-going compliance with the listing regulations of the relevant Exchange. Information is required on a continuous basis for compliance purposes. Disclosure requirements for listed companies are therefore greater in many respects than for unlisted or private companies. Where a company has multiple listings, that company would in all respects be reporting to the Registrar of Companies or its equivalent in its country of origin as well as the Stock Exchanges on which its securities have been listed.
In this aspect, the role of the Company Secretary is very important. A Company Secretary is a facilitator and guide as to the best possible means of how to perform a certain act, with minimal complications and with avoidance of not anticipated and costly pitfalls. Section 190 of the Companies Code, 1963, Act 179, provides that every company must have a Secretary. A company under the Code cannot operate for more than 6 months without a Secretary and is duly fined for each other day it continues to operate without a Company Secretary. The Company Secretary is an agent and in most cases in Ghana, an employee of the company. This gives rise to a number of common law, statutory and regulatory obligations. The Company Secretary plays a pivotal role in the smooth administration of the company and in the fulfilment of its responsibilities towards all the afore-mentioned regulatory institutions and to the company’s shareholders and other stakeholders.
DUTIES:
It has been mentioned previously that the Company Secretary is an agent and in most cases an employee of the company. The Company Secretary of a public listed company usually undertakes the following duties:
1. Maintaining Statutory Registers:
(a) Register of Members (section 32 of Code):
The provisions of the Code stipulates that every company must keep a register of its members (i.e. shareholders) which must include the underlisted particulars:
i. the name and address of each member of the company
ii. a statement of the shares held by each member with distinguishing numbers, if any
iii. the amount paid on each share
iv. the date of entry on the Register
v. the date of cessation of membership.
Members may inspect the Register free of charge. Non-members may inspect the Register on payment of a small fee. It is instructive to note that any person may require a copy of the Register upon payment of a small fee and the copy must be supplied within ten days.
The Register of Members is important, as it is the public representation of who the members are. A Company has no power to create a right of pledge or lien over the Register, since that would deprive the public of their statutory right of access and inspection.
It must be noted that corporate practice in Ghana is that the Register of Members is invariably kept at the office of the Registrar of the company. Registrar services are usually handed out to an entity which is external to the company offering the specialised service. However, it is prudent for every company secretary to have at least a copy of the most recent Register of Members once very quarter and also request from the Registrars a list of the top twenty shareholders of the company at the end of every month. A company secretary will then be able to alert the Board and Management of a listed company to movements in the shareholding worthy of note.
(b) Register of Directors and Secretary (section 196):
Every company is obliged to keep a register of its directors and its secretary at its registered office. Such a Register must contain the name (and former name where applicable) the usual residential address, business occupation and particulars of any other directorships. The company must notify the Registrar within twenty-eight (28) days of any change in the particulars on the Register. When a person becomes a director, the notification must be accompanied by his signed consent to act as such. Unless expressly exempted by the Registrar, the names of all the directors must be put on the company’s business stationery. This requirement is not adhered to in corporate practice in Ghana by some firms and the SE, GSE and the Registrar of Companies should be mindful of it.
(c) Register of Directors Interests (s215):
Every company must keep a register of directors interests in shares and debentures. The Company Secretary must enter the information within twenty-eight (28) days of such acquisition. When a publicly listed company receives notification from a director, it must before the end of the following day, notify the stock exchange which may publish the information. This Register must be produced at the commencement of any general meeting and remain open and accessible during the continuance of the meeting to any person attending the meeting. At every other period, the Register of Directors Interests is accessible at the company’s office for its members (and even former members) and the company’s auditors without cost.
(d) Register of Charges (s107):
All public companies are also obligated under the Code to register with the Registrar every charge created by the company within twenty-eight (28) days of its creation. The implications of non-registration of the company charge are severe. Unless registered, the charge is deemed void as a security on the company’s property. This however does not mean that the company goes scot-free and is not liable for the repayment of any money that was to have been secured by the unregistered charge. The Code points out that when a charge becomes void, the money secured thereby immediately becomes payable despite whatever contrary intentions may have been stated in any contract.
These provisions however do not apply to pledges of or possessory lien on goods. They also do not apply to any charge by way of pledge, deposit, letter of hypothecation or trust, receipt of bills of lading, dock warrants or other documents of title to goods or of bills of exchange, promissory notes or other negotiable securities or money.
2. Completion of Statutory Forms:
Ordinarily, companies cannot simply forward a letter to notify the Registrar of Companies that the firm wishes to change the situation of the company’s registered office or that changes have occurred among the directors or secretaries or their particulars. The appropriate forms must be secured from the Registrar of Companies and duly completed for submission within the stipulated time frame. The necessary forms have been set out in the Companies Prescribed Forms Instrument, 1963 (LI 289).
3. Providing Members and Auditors with Notice of Meetings:
The company is expected to give members and auditors, at least twenty-one days written notice of an Annual General Meeting (AGM) and fourteen days written notice of a meeting which is neither an AGM or a meeting to pass special resolution. The company has an obligation to supply a copy of the accounts to every member of the company, every debenture holder and every person who is entitled to receive notice of general meetings at least twenty-one days before the meeting. A company may provide in its Regulations for a period longer but not shorter than the twenty-one days stipulated by law. It is instructive to note that members may call any meeting described as a general meeting if they so decided and it will be a meeting properly so-called despite a shorter notice. Furthermore, members holding 95% of the shares may also call a meeting at shorter notice where the holders of the 95% constitute a majority in number of the shareholders. It is the Company Secretary who would administer adherence to all these provisions of the Code.
4. Copies of Resolutions and Agreements:
Under section 176 of the Code, copies of certain resolutions have to be filed within twenty-eight days of their passage by the company with the Registrar of Companies. All special resolutions are required to be filed. Furthermore, resolutions to which the requisite proportion of a class of shareholders have given their written consent but which would otherwise have required a special resolution of the class must also be filed with the Registrar of Companies. It is unclear as to the degree of compliance by listed companies of this provision.
5. Minutes of Directors’ Meetings and General Meetings:
The Company Secretary is required to be fully conversant with the law and procedure relating to the calling and holding of meetings. The administrative tasks related to such meetings could be categorised as preparation for the meeting, holding the meeting, voting, minutes and procedural irregularities. The Company Secretary must also have a sound knowledge of the procedural requirements of holding a meeting, which would include the rules of debates, motions and amendments, polls, elections and ballots. The skill of secretarial administration is possibly one of the least appreciated but can be of tremendous importance where crucial matters affecting a company are the subject of resolutions in a meetings. The Code and the regulations of the company govern the procedure relating to periods of notice, quorums and majorities needed to pass different types of resolutions.
6. Inspection of Company Records:
The company also has an obligation to ensure that people entitled to do so, can inspect company records. For example, members of the company and members of the public, i.e. non-shareholders, are entitled to a copy of the company’s Register of Members. Members of the company are also entitled to inspect the minutes of its general meetings and to have copies of these minutes for a minimal fee.
7. Custody and Use of the Company Seal:
Though in many jurisdictions, companies no longer need to have a company seal, the Code makes provision for it and the Company Secretary is usually responsible for its custody and use, a function adequately catered for under company regulations in Ghana.
8. Chief Administrative Officer:
The Company Secretary therefore invariably acts as the chief administrative officer of the company. Such a position would require supervision of the administrative functions of the company and implementing board policy in relation to this. In the performance of his functions, the Company Secretary is expected to keep abreast with the provisions of the Code and maintain a watching brief over the company’s regulations and its obligations under the Code and to other regulatory institutions.
As chief administrative officer, the Secretary will often deal with employment of staff, contracts relating to the company’s premises and office equipment, the company’s printing and stationery requirements, the company pension arrangements and employee share option schemes and company cars. It must be pointed out that large firms have specialised departments, which handle these ancillary functions thereby freeing the Company Secretary to concentrate on the core functions. In companies that are not very big however, the Company Secretary may perform all the functions of a chief administrative officer.
COMMON LAW DUTIES:
The Company Secretary’s position also gives rise to certain common law obligations. The Secretary is expected to act in good faith, by acting in the best interests of the company and not use his or her position to make gains for him or herself. The Secretary must also exercise care, diligence and skill. These cover the proper performance of the duties required to be undertaken by the Secretary. The Secretary will be liable for any losses or damages caused through a lack of care, diligence or skill in performing those duties. The Company Secretary as an employee of the company is bound to follow instructions, whether they are written or verbal. He or she is also not at liberty to make use of the company’s records, such as trade secrets or lists of customers which are classified as confidential, for his or her own purposes.
OTHER DUTIES:
It must be stressed that the duties already enumerated and the roles played thereunder by a Company Secretary are primarily “traditional”. The fact of listing on an Exchange introduces a whole new plethora of obligations the ‘chief administrative officer’ ought to be conversant with.
1. Continuing Listing Obligations:
Stock Exchanges around the world have a statutory duty to protect investors. To help fulfil this responsibility and maintain the prestige and quality of the market, Exchanges require listed companies to provide timely information so that investors can make well-informed decisions. In order to maintain an orderly market in all listed securities, Exchanges set out in their Listing Rules a number of continuing obligations which a company must fulfil on an on-going basis once it is listed. The main aim of these continuing obligations is to ensure that all potentially price sensitive information is released to the market without delay. Price sensitive information is that which has ability to impact the prices of securities when the information gets into the public domain. Timely disclosure of information is vital if investors are to have confidence in the operation of the stock market. This is also critical if the risk of insider dealing is to be minimised. A listed company is therefore expected to disclose all major new developments that may cause substantial price movements in its listed securities. For example, Part VII of the Listing Regulations of the Ghana Stock Exchange has clearly listed matters which must be the subject of public disclosure within specified deadlines, some to be immediately announced by the listed company and others by a stated deadline.
Under Part VII of the GSE’s Listing Regulations, public announcements are required in these situations:
- major developments in the company’s business activities, such as new products, contracts or customers
- significant acquisitions or disposals
- a change in directors or a change in the functions or executive responsibilities of a director
- decisions to pay dividends
- half-yearly results, preliminary financial statements of annual results, fully audited annual results
- changes in the interests of major shareholders and directors
- further issues of securities and changes in the company’s capital structure.
In respect of companies that have listings on more than one Exchange, special procedures are invariably applied to ensure that announcements are made simultaneously to all the Exchanges on which they are listed. Conventionally, such a company would be required to make the announcement in accordance with the requirements of the primary Exchange, for example the Ghana Stock Exchange and simultaneously deliver a copy of the announcement to the other Exchanges for distribution. For example, in respect of the London market, the information is notified to the Regulatory News Service (RNS) of the London Stock Exchange.
Although the Listing Rules impose an obligation on the directors to enforce the provisions with regard to their company, it is the Secretary to whom the responsibility is delegated to ensure that the administrative
procedures are in place to comply with the Exchange’s requirement. The issue of compliance therefore is a critical matter for every listed company and more so for a company with listings on different Exchanges.
2. Servicing a Plethora of Specialist Committees:
The tightening up of the regulatory framework of companies by Stock Exchanges around the world has given rise to the creation of various specialist committees at the board level in companies. In the wake of Enron and WorldCom, corporate governance has assumed fundamentally critical roles in all listed entities around the world. Board sub-committees may include audit committees, due diligence committees, continuous disclosure committees, remuneration committees etc. Corporate governance principles enable companies to balance the need for managerial risk taking and entrepreneurial abilities with mechanisms and procedures for monitoring purposes to safeguard shareholder interests and other interests in the wider community. The responsibility for ensuring the efficient implementation of such procedures would fall upon the Company Secretary’s shoulders.
CONCLUSION:
A company secretary should not see himself as merely being responsible for ensuring compliance with the statutory requirement such as keeping proper statutory books and following correct procedures for convening relevant company meetings. Following scenarios such as the Enron and WorldCom failures, a very important and critical role for the company secretary arises. The modern company secretary should be the “ keeper of the company’s conscience”.
In playing this role, there is the need to for the company secretary to have a wider perception of the company’s obligations to all shareholders and be steadfast in proffering advice and guidance to the board of directors. But the performance of this function as the compliance officer of the company comes with risks. In Malaysia, for example, attempts have been made to provide legislative safeguards to the effect that any decision to dismiss the Company Secretary should only be carried out with the sanction of a resolution of the company in general meeting which is approved by not less than three- fourth majority of members present and voting at the meeting or by proxy. Ultimately, a Code of Ethics for Company Secretaries could be adopted to guide actions of company secretaries in the performance of their duties.
It is clear from the foregoing that the Company Secretary plays a major role in maintaining a watching brief over the Code, Exchange regulations if applicable and other relevant obligations of the company. The Secretary draws attention to them when they do arise and assists in the fulfilment of due obligations.
It is clear from the foregoing that the Company Secretary plays a major role in maintaining a watching brief over the Code, Exchange regulations if applicable and other relevant obligations of the company. The Secretary draws attention to them when they do arise and assists in the fulfilment of due obligations.
As has been pointed out, the Company Secretary is the chief administrative officer of the company and on matters of administration, he has ostensible authority to make contracts on behalf of the company. In the English case of PANORAMA DEVELOPMENTS – V – FIDELIS FURNISHING FABRICS (1971), the Secretary of the Defendant Company entered into a number of contracts for the hire of cars. The cars were ostensibly to be used to collect important customers from Heathrow Airport, but in fact, the Secretary used them for his own private purposes. Counsel for the Defendants cited a passage of Lord Esher MR in the 1887 case of BARNETT HOARES –V- SOUTH LONDON TRAMWAYS. The Learned Judge had said that “ a secretary is a mere servant; his position is to do what he is told and no person can assume that he has any authority to represent anything at all”. However, on appeal to the Court of Appeal it was held that the Defendant Company was liable. The famous English jurist, Lord Denning, sitting in the Court of Appeal said, “…times have changed. A Company secretary is a much more important person nowadays than he was in 1887. He is an officer of the company with extensive duties and responsibilities…. He is no longer a mere clerk…. He is entitled to sign contracts connected with the administrative side of a company’s affairs, such as employing staff and ordering cars and so forth”.
But Company Secretaries, a note of caution. This does not mean that a Company Secretary can begin acting as a Managing Director. A Secretary may not bind the company on a trading contract, borrow money on behalf of the company, issue a writ or lodge a defence in the company’s name without due authorisation. The Secretary also does not have authority to register a transfer of shares, strike a name off the Register of Members, suo motu or summon a general meeting on his own authority.
A word to the wise…
JOE ABOAGYE DEBRAH Esq.
Partner, 1stLaw
Accra JD210905
Reference:
1. Abbott, K. R. , Company Law, 5th Edition, DP Publishing (1995)
2. Armour Douglas, Company Secretarial Checklists, ICSA Publishing (1992)
3. The Companies Code, 1963 (ACT 179)
4. The Ghana Stock Exchange Listing Regulations of 1990 (as amended)
5. Geoffrey Morse, Charlesworth’s Company Law, 13th Edition, English Language Book Society/Stevens, 1987
6. The Listing Rules, London Stock Exchange (Yellow Book)
posted by JOEDEE at 9:26 AM
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