Non-Compliance & The Expanded Role of Company Secretaries under the Companies Act
The new Companies Act, 2019 (Act 992) (the “Act”) expanded the traditional role of the company secretary (“Secretary”) from the recording of minutes, issuing notices and filing of statutory documents to include an advisory and guidance role to the shareholders and directors of the company.
The Act requires them to assist the Board of Directors (“Board”) to comply with the constitution of the company and to further guide them in their duties and responsibilities. Among other duties, the Secretary is to advise the Board on any changes and development in the laws affecting the operations of the company.
This article looks at the expanded roles of the company Secretary, their obligations and the effect of non-compliance under the Act.
Who qualifies as a Company Secretary
The Act places some restrictions on who can become a company Secretary. The Secretary can be an individual or a corporate entity who has a reasonable in-depth knowledge of company law and legislation to assist the company in making its decisions.
The Act requires any person appointed as a Secretary to have obtained a professional qualification or tertiary level qualification that enables that person to have the requisite knowledge and experience to perform the functions of the company Secretary.
Where the person has not obtained the above qualification, he/she must have been trained under the supervision of a qualified company Secretary for a period of at least three years.
However, where a person is a member in good standing of the Institute of Chartered Secretaries and Administrators, Institute of Chartered Accountant or a lawyer that person qualifies to serve as a Secretary of a company.
Appointment and Removal of Secretaries
Secretaries are usually appointed at the formation stage of the company by the first directors. The directors can appoint subsequent secretaries through a board resolution. Practically, the letter of appointment must indicate the remuneration and conditions of the appointment which must be accepted by the Secretary. The written consent to serve as Secretary must be lodged with the Registrar Generals Department (“RGD”).
The Secretary can be removed by the directors through a board resolution or by voluntary resignation by the Secretary. The Secretary also has the right, to claim any unpaid remuneration and for damages if the said removal was in breach of contract. It is worthy to note that where the company operates for more than six months without a Secretary, it is liable for a fine of twenty-five penalty units (GHS 300.00) each day after the six months.
Duties of the Company Secretary
Maintaining the Statutory Register of the Company:
The Company Secretary is to ensure that at all material times, the company keeps its register of members (shareholders), directors and Secretary and notify the RGD where there are changes in them.
- Register of Directors (“ROD”): The content of the ROD includes the present and former names of the directors, residential address, business occupation as well as the nationality of each director. The ROD also indicates the date of appointment of the directors as well as dates of removal or resignation if any.
- In recent times, most investors in conducting due diligence on the director’s request for notarized identity cards (preferably bio-data pages of valid passports) as well as their resume. The ROD folder must also include the letters of appointment of each of the directors as well as the consent by each of them.
- Register of Members (“ROM”): The ROM must indicate the full names, date, and place of birth of the member, nationality, proof of identity, residential and postal address of the shareholder, the class of the various shareholders, the number of shares currently held by each member, date of acquisition of the shares, the person who transferred the shares and any supporting documents that justifies the sale of shares.
Register of Secretary (“ROS”): The content of the ROS also requires the present and former names of any Secretary the company has ever worked with, it's business or residential address, its date of appointment as well as the removal.
Keeping Books and Records of the Company
The Secretary is required to properly keep all the corporate books and records of the company. Among the records of the company includes but not limited to the corporate register, the registration documents which is the certificate of incorporation and certificate to commence a business, business operating permit among other things.
The Secretary is also to ensure that all minutes of meetings held within the calendar year are properly recorded and kept in the records of the company. In modern times, secretaries are advised to scan all minutes of meetings as well as corporate documents and store them digitally to avoid it being lost permanently.
Filing of Annual Returns and Financial Statement
The Act requires the company to file its annual and financial statements at the RGD. This is required to be done once every year. The annual returns must include particulars of members of the company, each beneficial owner of the company.
The annual returns must include the companies audited financial statement, signed by a director and the Secretary. It must be filed within thirty-six days after completion of the financial statement and it has been duly signed by the directors.
In default, the company is liable to pay an administrative fine of Fifty Penalty Units (GHS 600.00) for each day the default continues.
Advisory and Guidance Role by the Secretary
Among the novel duties imposed by the Act on all secretaries, is the duty to provide some level of guidance and assistance to directors and shareholders on their duties and responsibilities. The Secretary must, therefore, be abreast with all the duties and obligations of the directors and members before he/she/it can proffer any advice for the directors and members.
The Secretary must further assist the Board to comply with all the requirements of the constitution and any other applicable law. Again, where there is any change in the law that affects the operations of the company, the Secretary is legally mandated to advise the Board on such changes.
This duty is, therefore, a bit technical and companies are advised to get professionals, preferably lawyers to handle the role effectively.
Penalties imposed by the Companies Act for non-Compliance
The Company Secretary must be aware of the penalties and amount payable by the company should there be the default for non-compliance. This will give the Secretary the required capacity to advise the board on compliance with the constitution of the company.
The summary of some offences and the applicable penalties is tabled below:
|Nature of Breach||Applicable Penalty Units||Nature of Breach||Applicable Penalty Units|
|Guarantee Companies: Where a guarantee company (NGO) carries on the business of profit-making other than nonprofit business.||An administrative fine of 50 Penalty Units (GHS 600.00) for each day the company carries on that business||Registered Office: Failure to have a registered office||25 penalty units (GHS 300.00) for each day that the default continues|
|Error and omissions in registration documents submitted to the RGD.||An administrative fine of 150 Penalty Units ( GHS 1,800.00)||Secretary: Carrying on business for more than six months without a Secretary||25 penalty units (GHS 300.00) for each day that the default continues|
|Failure to Notify RGD on change of Alteration/changes of business.||An administrative fine of 50 Penalty Units (GHS 600.00)||Minutes of Board Meeting: Failure to keep minutes of board meetings of the board of directors.||The Company and each officer is liable to pay 250 penalty units (GHS 3000)|
|Misleading Name: Where a Company fails to change its misleading name after being notified by the Registrar||Administrative fine of 25 penalty units (GHS 300.00) 50 penalty units ( GHS 600.00) for each day the default continues||False Report: Furnishing the RGD with false reports, returns, and accounts||Liable for a fine of not less than 250 penalty units (GHS 3000) and not more than 500 penalty units (GHS 6,000.00)|
|Failure to Allow Inspection: Where a company defaults in keeping a register or prevents the RGD from inspecting its register||it is liable to pay an administrative fine of 50 penalty Units (GHS 600.00). The Court also has the power to cause an inspection into the register of the company.||Stated Capital: where a company raises its share capital but fails to deliver the same to the RGD for registration after 28 days.||An administrative fine of 25 penalty units (GHS 300.00) for each day the default continues|
|Misleading Information: Providing misleading information to the RGD on the Register of Members||Liable to a fine of not less than 150 (GHS 1,800.00) penalty units or not more than 250 penalty units ( GHS 3000.00) to a term of imprisonment not less than one year and not more than two years||Failure to Issue Share Certificate: Where a Company fails to issue share certificate within 2 months||An administrative fine of 50 penalty units (GHS 600.00) for each day the default continues|
|Annual General Meeting (AGM): Failure to have an AGM within a calendar year||The Company and its officers are liable to pay an administrative fine of 150 penalty units (GHS 1,800.00)||Minutes of General Meetings: Where a company fails to keep minutes of its general meetings||The Company is liable to pay an administrative fine of 250 penalty units (GHS 3,000.00)|
In summary, the duties of the company Secretary have been made technical. This is because the Secretary is to advise the board and shareholders on their duties to avoid any breaches in the companies' constitution. Companies must, therefore, ensure that they appoint a Secretary with the requisite skills to carry on the duties of the Secretary as defined by the Act to avoid potential breaches.
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