Dr Sarah Fenech is a senior associate within the Corporate & Commercial Department of Fenech & Fenech Advocates.
As corporate practices evolve and regulatory trends emerge, the responsibilities and expectations placed upon the office of the company secretary continue to be redefined.
In the context of entities whose shares are listed on a stock exchange and/or that require a license to be able to operate – such as gaming businesses, credit and financial institutions, custodian and payment services providers, insurance companies, investment managers, collective investment schemes and the like – the company secretary may be said to assume increased and more cumbersome responsibilities so as to be able to effectively assist the company to meet the demands posed by the regulatory framework to which it is subject. This has brought to the fore the significance of the company secretary’s office and the, often underestimated, role that the company secretary plays in ensuring the smooth functioning of licensed and listed companies.
By way of preliminary comment, the Maltese Companies Act does not specify any academic, professional or specific qualifications that are required to be able to hold the post of the company secretary. Rather, the onus of responsibility expressly falls on the directors, who are called to appoint a person who appears to them to possess the requisite knowledge and experience to discharge the functions of the company secretary.
While no guidance is provided as to what constitutes “requisite knowledge and experience”, considering the responsibilities shouldered by the present-day company secretary and the mounting emphasis on good corporate governance, it is of no surprise that boards, today, are seeking to appoint as company secretary, a person who is well-versed in Maltese company law and who can, in the long run, contribute to the company’s longevity and success. This is because the effectiveness of the board of directors is significantly impacted by the level of support it receives from the company secretary.
The company secretary’s responsibilities fundamentally involve facilitating good corporate governance, primarily by preparing meeting agendas, assisting with the orderly conduct of meetings and guiding the board in ensuring that board procedures are followed and board decisions implemented. However, the nuances of these roles are, in turn, moulded by the distinctive demands of the market in which the company operates and the regulations to which the company is subject.
Bearing in mind the frequency, length and subject matter of meetings typically held by the directors and shareholders of licensed or listed companies, the company secretary is continuously privy to a wealth of significant and confidential company information, automatically placing such person in a position of trust among the organs of the company.
From the outset therefore, it is necessary that the person appointed to the office of the company secretary is a person of good moral and social conduct, who possesses robust interpersonal skills to help cultivate a healthy working rapport with the company’s board of directors, key senior managers, external advisors, stakeholders and the public at large. In the same way, the company secretary must create and maintain a good working relationship with the relevant Maltese industry regulator/s (most commonly including the Malta Financial Services Authority, the Malta Gaming Authority and the Malta Stock Exchange, as applicable).
Tasked with the recording of minutes and resolutions, the company secretary, acting on a licensed or listed entity, must be able to closely follow all discussions held at meetings and more importantly, discern the required level of information to be formalised in writing, and this in line with the Board’s expectations and in such a manner as is in compliance with the company’s legal and regulatory framework. Moreover, in the context of capital markets and regulated industries, the ability to articulate complex regulatory matters in a comprehensible and concise manner is a key strength that is, today, expected of a company secretary – rendering the recording of meetings not always a straightforward task.
With the regulated sector inherently facing increased scrutiny and risk exposure, industry regulators are setting higher standards of compliance and disclosure. The company secretary must therefore provide the required support to the directors and key personnel of the company so as to ensure that the company’s books and records are maintained up to date at all times and that all required communications and submissions are carried out in a proper and timely manner.
Default in these areas can lead to penalties, financial loss or damage to the company’s reputation and these duties are therefore garnering particular importance, especially in light of the notable rise in inspections being carried out on regulated Maltese entities at large, and the authority of regulators globally to request and share company information between themselves.
In addition to assisting the board with corporate administrative matters, company secretaries are, today, commonly requested to contribute advice on corporate legal matters within their purview. Moreover, directors are also increasingly seeking individuals who are sufficiently knowledgeable and/or experienced in the relevant industry sector of the entity in question. It is therefore imperative that the company secretary constantly keeps abreast of changes in Maltese legislation and regulation that may affect the company. In this light, the preference for appointing, as company secretary, a legal professional is compelling.
While the scrutiny placed on corporate governance practices generally is on the rise, it is particularly heightened in the context of listed and/or licensed entities. Now more than ever, therefore, it is crucial that the board of directors acting on such entities is supported by the right team of persons to be able to successfully steer the company forward. In this context, the significance of the office of the company secretary and the person appointed to take on this role cannot be overstated.
Should you require any further information you can contact Sarah Fenech at sarah.fenech@fenechlaw.com