Maria DeBono is an Associate within the Commercial and Corporate Department of Fenech & Fenech Advocates.
This is the third part of a series of FAQs regarding the office of the company secretary in terms of the Companies Act (Chapter 386 of the Laws of Malta). This third part will focus on the corporate governance function incumbent on the company secretary and any potential liability which may be incurred by virtue of the holding of such office.
1) Is the company secretary’s role solely administrative?
Briefly, the answer is no.
The responsibilities of the company secretary have developed substantially over time such that today, the company secretary does not merely carry out administrative functions but plays a key role in ensuring that the company’s internal operations run smoothly, effectively contributing to the company’s good corporate governance.
It is relevant to note, however, that the company secretary does not participate in the decision-making process of the company. In terms of Maltese law, this function is entrusted to the board of directors.
2) What are some of the main duties of the company secretary and where do they emanate from?
As an officer of the company, the company secretary has a plethora of duties and obligations emanating from law or practice, including the co-ordination and convening of Board and General meetings and the preparation and maintenance of all internal company registers, for example the register of members.
In practice, and by virtue of the Model Articles of Association in the Companies Act, it is the company secretary who typically takes internal responsibility for these duties even though the obligation to keep registers is imposed on all officers.
Please refer to Part 2 of these FAQs previously issued on 3 March 2022 for further information on the duties and obligations of the company secretary.
3) How does the company secretary’s role transcend the purely administrative role?
In practice, the company secretary partakes in the responsibility of promoting and sustaining a culture of good corporate governance and practice within the company.
For example, the company secretary is usually tasked with acting as interface between the Board of Directors and the Maltese authorities (such as the Malta Business Registry). The company secretary also acts as interface between the Board of Directors and any stakeholders within the company, such as shareholders and employees.
Moreover, the company secretary also usually acts as a bridge of communication between the Chairperson and the Board and may be required to act as an adviser to the Board in certain instances.
4) In practice, how does the company secretary contribute to a company’s overall good corporate governance, and is there any official guidance in this regard?
From a practical perspective, the company secretary must keep abreast with the powers, rights and obligations of the Board, shareholders and other stakeholders within the company. In addition to advising upon request, the company secretary is often tasked with managing the relationships between these different groups of persons.
Specifically, there are certain guiding principles concerning the responsibilities of the company secretary vis-à-vis the Chairperson and the Board, which emanate from the Code of Principles of Good Corporate Governance (the “CPGCG”).
The CPGCG contains principles drawn up by the MFSA which are designed to enhance the legal and regulatory framework for good governance in the Maltese corporate sector. While the CPGCG specifically targets entities whose equity securities are admitted to listing on a Regulated Market, it is worthy to list the following principles concerning the company secretary, which all companies (bearing in mind their size and nature) may, in effect, wish to consider:
- Under the direction of the chairman, the company secretary should ensure good information flows within the Board and its committees (if any) and between senior management and non-executive directors, as well as facilitate induction and assist with professional development.
- The Company Secretary should be responsible for advising the Board, through the Chairman on governance matters.
- The directors should have access to advice and services of the Company Secretary, who is responsible to the Board to ensure compliance with Board procedures.
5) What is the liability of the company secretary?
Anything required to be done by the company under the provisions of the Companies Act, shall also be deemed required to be done by the officers of the company (including the company secretary). Therefore, although the company’s directors are the persons effectively responsible to manage the company, liability can also be incurred by the company secretary qua officer of the company.
Moreover, the Maltese Interpretation Act states that where any offence against any provision contained in any Act under Maltese law is committed by any body of persons (like a company) – every person who was a secretary of such body of persons at the time of the commission of the offence, or purported to act as same, shall be guilty unless he proves that the offence was committed without his knowledge and that he exercised all due diligence to prevent it.
Moreover, a company secretary who has become liable to pay a penalty cannot ask the company for indemnification.
Finally, a company secretary may be found personally liable in terms of the Maltese VAT Act and the Maltese Income Tax Act in certain specified instances.
Look out for the final set of FAQs which will focus on meetings and the company secretary’s duties in that respect.