Corporate Administration

Company Secretary

Introduction

Every public company must have a qualified company Secretary. Private companies may chose to
appoint a Secretary, but are not obliged to do so.

The Secretary is usually appointed and removed by the directors.

Qualifications

The Secretary of a public company must be qualified under one of the following conditions:

 They must have held the office of company Secretary in a public limited company for at least
three of the preceding five years.
 They must be a solicitor, barrister or member of ICAEW, ACCA, CIMA, ICSA, CIPFA.
 They must appear to be capable of discharging the functions by virtue of another position or
qualification.

Duties

There are no statutory duties, therefore the duties will be whatever the board decides. The company
Secretary will typically undertake the following:

 Check that documentation is in order

 Make returns to the Registrar
 Keep register
 Give notice and keep minutes of meetings
 Countersign documents to which the company seal is affixed.

Powers

The company Secretary has the authority to bind the company in a contract. There are two types of
authority:

 Express authority – this is the authority delegated by the board.

 Implied authority regarding contracts of an administrative nature.

Panorama Developments (Guildford) v Fidelis Furnishing Fabrics (1971)

Auditors

Qualifications

The auditor must be either:

 A member of a recognised supervisory body (ICAEW, ICAS OR ACCA) and eligible under their
rules, or
 Qualified by a similar overseas body and authorised by the Department for Business, Energy
and Industrial Strategy.
 The auditor must not be:

 An officer or employee of the company

 The partner of an officer or employee of the company.

Appointment

The auditors should generally be appointed by the shareholders by ordinary resolution. However,
the directors can appoint the company’s first auditors and fill casual vacancies.

A company must inform the Secretary of State if it has failed to appoint an auditor within 28 days of
circulating its accounts. The Secretary of State has power to appoint an auditor in those
circumstances.

Audit exemption

For financial years starting on or after 1 January 2016, to qualify for a total audit exemption a
company must meet two out of the following three criteria:

 Turner <£10.2m; and

 Net assets <£5.1m; and
 <50 employees.

However, these exemptions do not apply to public companies, banking or insurance companies or
those subject to statute-based regulatory regime.

Resignation

An auditor can resign at any time by giving written notice to the company: s516 CA06.

The resignation is effective from the date it is delivered to the company’s registered office, or from a
specified later date. To be effective it must be accompanied by the statement required by s519.

A company whose auditor resigns is required to inform the Registrar: s517 CA06. Failure to do so is
an offence.

Under s518 CA06, an auditor who resigned can require the directors to convene a general meeting
to consider their explanation of the circumstances that led to their resignation. The directors have
21 days to send out notice convening a meeting and it must be held within 28 days of the notice.

Removal

An auditor can be removed by ordinary resolution: s510 CA06. The resolution must be passed at a
general meeting; a written resolution cannot be used to remove an auditor.

Special notice of the resolution is needed (I.e. 28 days). The company must send a copy of the
resolution to the auditor and they have a right to make a statement in their case. The company then
has to circulate the statement to the shareholders. However, if time does not allow for circulation,
the statement can be read out at the meeting.

Notice of the resolution removing the auditors must be sent to the Registrar within 14 days.
Statement by departing auditors

Under s519 CA06, a departing auditor is required to make a statement and to deposit it with the
company:

 For quoted companies, this statement must explain the circumstances surrounding the
departure.
 For other public companies and all private companies, it should explain the circumstances
surrounding the departure, unless the auditor thinks that there is no need for them to be
brought to the attention of the shareholders or creditors. In that case, the statement should
state that there are no such circumstances.

Unless there are no circumstances to be brought to the attention of shareholders and creditors, the
company is obliged to circulate the statement to everyone whom it needs to send the annual
accounts. It must do this within 14 days of receiving it.

If the company does not want to circulate the statement, it can apply to the court for an order that it
need not circulate the statement.

Duties

The auditor has a statutory duty to report to the members on whether the accounts:

 Give a true and fair view and

 Have been properly prepared in accordance with the Companies Act and the relevant
financial reporting framework.

The auditor must investigate and form an opinion as to whether:

 Proper books of accounting records have been kept

 Proper returns adequate for their audit have been received from branches not visited by
them
 The accounts are in agreement with the books of account and returns
 The information given in the directors’ report is consistent with the accounts.

If the auditor is dissatisfied with the findings of their investigation they must qualify the audit report.

The report (whether qualified or unqualified) must state the name of the audit firm, or if an
individual has been appointed as auditor, their name. Where the auditor is a firm, the senior
statutory auditor must sign the report in their own name on behalf of the firm.

Under s507 CA06, it is a criminal offence to knowingly or recklessly cause an audit report to include
anything that is misleading, false or deceptive, or to omit a required statement of a problem with
the accounts or audit. The offence carries an unlimited fine.

There could also be liability under the tort of negligence for including misleading accounts.

Companies Act liability for auditors report and audited accounts

S507 CA06 makes it an offence for an auditor to recklessly cause an auditors report to contain any
matter that is misleading or false to a material extent. The offence is punishable by a fine.
S532 CA06 makes any provision exempting auditors from or indemnifying them against liability for
negligence void in relation to providing audited accounts.

S534 CA06 provided that a company may enter into a liability limitation agreement with an auditors,
limiting their liability for negligence (amount other things) in the course of auditing accounts.

Powers

The auditor has the right to:

 Receive notice of, attend and speak at general meetings.

 Access the books at all times
 Require such information and explanations from the company’s officers and employees as
the auditor thinks fit for the performance of their duties (it is a criminal offence to fail to
provide the information requested, unless it was not reasonably practicable to do so).

Meetings

Annual general meeting (AGM)

Timing Public companies must hold an AGM within six months following their
financial year end: s336

Failure to hold The company and every officer in default can be fined if an AGM is not held.

Any member can apply to the Department for Business, Energy and Industrial
Strategy to convene the meeting.

Private Private companies are not required to hold an AGM.

companies

Notice 21 days notice is required unless every member entitled to attend and vote
agrees to a shorter period.

The notice must state that the meeting is an AGM.

Business Usual business includes:

 Consider accounts
 Appoint auditors
 Elect directors
 Declare dividends.

Resolutions  Members holding at least 5% of the voting rights (or at least 100
members holding on average £100 paid up capital) have the right to
propose a resolution for the AGM agenda and to require the company
to circulate details of resolution to all members.
 If the members request is received before the financial year end, the
members are not required to cover the costs of circulation. Otherwise,
the members requesting the resolution must deposit a sum to cover
the company’s costs.
General meetings (GM)

Timing Held whenever required.

Must be held by a plc if a serious loss of capital has occurred, I.e. net assets
fallen to less than half of the called up share capital.

Notice At least 14 days.

Business The person who requisitions the meeting sets the agenda.

Class meetings

Purpose Meeting of a class of shareholders, usually to consider a variation of their

class rights.

Procedure Notice, etc, as for general meetings

Quorum Two persons holding of representing by proxy at least 1/3 in nominal value of
the issued shares of the class in question.

Calling a meetings

Who can call a meeting?

Directors The articles usually delegate the power to the directors,

Members Members may require the directors to call a GM if they hold at least 5%
of the paid up voting capital.

The directors must call a meeting within 21 days of receiving a

requisition.

The meeting must take place within 28 days of the notice convening the
meeting.

If the directors do not call a meeting, the members who requested the
meeting (or any members holding over 50% of the total voting rights)
may themselves call a meeting to take place within three months of the
initial request and recover their expenses from the company.

Resigning auditor A resigning auditor may require the directors to convene a meeting so
they can explain the reasons for their resignation.

Court A court can call a meeting on the application of a director or member

where it would otherwise be impracticable e.g. to break a deadlock.
Notice

Who must receive notice? Every member and every director: s310

Failure to give notice Accidental failure to give notice to one or more persons does not
invalidate the meeting: s313

Contents of notice Date, time and place of meeting.

The general nature of the business to be transacted.

The text of any special resolutions.

Length of notice period AGM – 21 days

Less if every member entitled to attend and vote agrees.

GM – 14 days

Less if members holding at least 95% of shares agree. (Where

company is private, can be reduced to 90%).

Special notice Requires 28 days notice.

Required for the removal of a director or auditor.

Resolutions

Resolutions are the way in which companies take decisions. They are voted on by the members in
person or by proxy. There are three types of resolution:

Type % required to pass To registrar? Purpose of resolution

Special >= 75% Yes – within 15  Alter name.

days  Wind up company
 Alter articles
 Reduce share capital.

Ordinary >50% Only if required Used whenever the law or the articles do not
by statute require a special resolution.

Written Same majority as required Yes if a 75% The purpose can be anything apart from
(private in GM majority is resolutions requiring special notice.
only) required Members cannot revoke their agreement.

The date of the resolution is the date when

the necessary majority has been reached.

The resolution must generally be passed

within 28 days from its circulation.
Procedure at meetings

A quorum is the minimum number of members that needs to be present at a meeting in order to
validate business. It is generally 2 persons who can be members or proxies: S318 CA06.

Voting is by a show of hands initially, unless a poll is demanded. A show of hands means one
member one vote, irrespective of the number of shares held.

A poll may be demanded by members holding at least 10% of the total voting rights (or by not fewer
than five members having the right to vote on the resolution). A poll means one vote per share. The
result of a poll replaces the result of the previous show of hands. Quoted companies must publish
the results of the polls on their website: s341 CA06.

Members have a statutory right under S324 CA06 to appoint one or more persons as their proxy. A
proxy can attend meetings, vote and speak on behalf of the member for whom they are acting for.