Company secretaries and documents

As readers will undoubtedly be aware by now, the threat to functioning secretaries of private companies has been removed.
It was certainly an 11th hour reprieve.  Until 3 October, when a letter was received by ICSA from Minster of State for Industry and the Regions, Margaret Hodge, which confirmed the change, not only was the appointment of a secretary to be optional in a private company, but where one was wanted, there was to be no formal registration at Companies House and none of the statutory signing power.  Instead, what was proposed was a new ‘authorised signatory’ regime, which was designed to plug the signing gap but which looked more likely to cause confusion and potentially damage the standing of the profession.
Happily, late amendments were made at Report Stage in the Commons in October such that on the Act’s implementation, where a private company appoints a secretary, then his or her particulars much be put on the public record and he or she will have the same status in relation to the company as the secretary of a PLC.  In particular, he or she will be able to be a co-signatory for the execution of documents by the company.  The new authorised signatory regime was deleted from the Bill at the same time.
In the Act as passed, the term ‘authorised signatory’ still appears in the clause on document execution, but the term has limited use, and applies to this clause only.  An authorised signatory is defined, for the purposes of this clause, as being every director of the company and in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company.
The clause itself states that a document is executed by a company (under the law of England and Wales and Northern Ireland) by the affixing of its common seal, or in accordance with certain signing provisions.  These state that a document is validly executed if it is signed on behalf of the company by either two authorised signatories (any combination) or by a sole director, as long as the signature is witnessed.
ICSA is not keen on the new director/witness option (and campaigned against it), as the witness can be anybody and therefore add little from a governance perspective.  It is likely, therefore, that most companies with established procedures already in place – and particularly the larger companies – will continue to use two directors or the director/secretary option.  However, the director/witness option does provide greater flexibility, which may be of particular use for smaller companies where the additional signature from someone else at the heart of the company is not such an important part of their governance structure.
The authentication clause (like S.41 of the 1985 Act), which stated that a document requiring authentication by a company could be authenticated by the signature of a director, secretary or other authorised officer was deleted from the new Act when the amendments went through in October.  ICSA has been assured that this was only because it was felt to be unnecessary – that is, that directors and secretaries simple by virtue of their formal office would continue to be able to authenticate company documents, and there was no need to have this spelt out in legislation.
The norms around who is able to sign contracts on behalf of the company (as opposed to deeds) will be unaffected by the new Act.
ICSA has been asked whether private companies will continue to have secretaries, and it believes that those companies which need or want a functioning secretary (in other words, those companies at which there is a real job to do) will, without a doubt, continue to have one.  The smallest private company, where one of the directors has always taken care of the statutory filings and suchlike, and a secretary has been appointed in name only, might sensibly take advantage of the deregulation.
The issue for private companies to bear in mind is that they will still have to meet certain statutory obligations, including filing forms for changes of director and filing both the annual return and the accounts, so it is likely that to ensure there is someone taking the responsibility for this, the safest thing may well be to appoint a secretary (if only as a reminder that these things need to be done).
Where a private company does not have a secretary, the Act says that anything authorised or required to be given or sent to, or served on, the company by being set to its secretary may be given or sent to, or served on, the company itself, and if it is addressed to the secretary will be treated as addresses to the company.  Also, anything else required or authorised to be done by or to the secretary of the company may be done by or to a director or a person authorised generally or specifically in that behalf by the directors.
Under the new Act, a private company must have one director, and a public company two.  At least one director must be a natural person and – unlike under current law, where a private company has only one director – that director may also be appointed secretary.  However, he or she need to be aware of the clause on ‘acts done by persons in dual capacity’ which will state that a provision requiring or authorising a thing to be done by or to a director and the secretary of a company is not satisfied by its being done by or to the same person acting in both capacities.  This means, for example, that a single director-secretary would have to use the director/witness option to execute a document: he or she could not sign as both director and secretary.
A secretary of a private or public company will continue to be able to be a body corporate or firm that is a legal person.

Bridget Salaman, Head of Policy, Corporate, ICSA

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