Nigeria: The Company Secretary In Nigeria - Pertinent Issues

Last Updated: 21 February 2014
Article by Felicia Mosuro

Adcax Nominees Limited (Adcax) a company secretarial outfit set up by the law firm - Adepetun Caxton-Martins Agbor & Segun(ACAS).

Why have a Company Secretary?

Section 293(1) of the Companies and Allied Matters Act Chapter C20 LFN 2004 ("CAMA") provides for and makes it compulsory for every company to have a company secretary. This has also been reinforced by a Corporate Affairs Commission ("CAC") directive which gave all companies the deadline of 31st December 2010 to comply with the provisions of CAMA by filing the particulars of the appointment of a company secretary with the CAC. Historically, the functions of the company secretary were ministerial and administrative and not concerned with the management of the company. The position of the company secretary in England in the 19th Century was summed up by Lord Esher, M.R. in the 1887 case of Barnett Hoares & Co. v. South London Tramways Co. [1887] 18 QBD 815, as follows: "

....a secretary is a mere servant. His position is that he has to do what he is told, and no person can assume that he has any authority to represent anything at all, nor can anyone assume that statements made by him are necessary to be accepted as trustworthy without further inquiry"

This position has since changed and the importance of the company secretary was recognized as early as in 1971 when Lord Denning, M.R. in Panorama Developments (Guildford) Ltd. v. Fidelis Furnishing Fabrics [1971] 2 QB 711 stated:

"A company secretary is a much more important person nowadays than he was in 1887... This appears not only in modern Companies Acts, but also by the role which he plays in the day-to-day business of companies. He regularly makes representations on behalf of the company and enters into contracts on its behalf which come within the day-to-day running of the company's business....All such matters now come within the ostensible authority of a company's secretary".

Today, the company secretary owes a duty to the management, board of directors, shareholders and the company. Indeed the role of the company secretary has evolved from being 'a mere servant' of the company to an officer of the company exercising extensive powers and duties.

Who should be appointed Company Secretary?

A suitable person for appointment as company secretary is a person who possesses knowledge of corporate issues and who understands the protocols of meetings, record keeping, documentation and correspondence. Further, a suitable person for appointment should be a person who understands regulatory issues involved in the running of companies.

Section 295 of CAMA provides for the qualification of a company secretary as follows:

"It shall be the duty of a director of a company to take all reasonable steps to ensure that the secretary of the company is a person who appears to have requisite knowledge and experience to discharge the functions of a secretary of a company."

The above provision is the only requirement a person must fulfill to be qualified for appointment as company secretary in the case of a private company.

The same section of CAMA provides as follows: "And in the case of a public company, he shall be-

a. a member of the Institute of Chartered Secretaries and Administrators; or

b. a legal practitioner within the meaning of the Legal Practitioners Act; or

c. a member of the Institute of Chartered Accountants of Nigeria or such other bodies of accountants as are established from time to time by an Act; or

d. any person who has held the office of the secretary of a public company for at least three years of the five years immediately preceding his appointment in a public company; or

e. a body corporate or firm consisting of members each of whom is qualified under paragraphs (a), (b), (c), or (d) of this section."

Section 294 of CAMA forbids the same person from carrying out any act which is required to be done by "a director and the [company] secretary". A clear interpretation of this section would be that there must be a secretary of the company as distinct from its directors. Section 296(1) of CAMA provides that a company secretary shall only be appointed and removed by the board of directors.

Most of the functions of a company secretary require profound knowledge of corporate affairs. Directors of a company should thus strive to appoint a company secretary bearing in mind the consequential nature of the tasks to be performed by the secretary. The effective company secretary has a very important role to play in ensuring that a company is run successfully without incurring unnecessary and avoidable liabilities.

What are the Duties of a Company Secretary?

The company secretary's duties are regulated by statutes, regulations and the Articles of Association of the company. The duties of a company secretary include the following:

a. Attendance at meetings of the company, board of directors meetings and board committee meetings. Rendering all necessary secretarial services in respect of such meetings and advising on compliance and regulatory issues;

b. Maintaining statutory registers and other records of the company;

c. Rendering proper and timely returns as required under CAMA;

d. Carrying out such administrative and other secretarial duties as directed by the directors or the company;

e. The secretary may, where duly authorized by the board of directors, exercise any powers vested in the directors.

The company secretary advises on changes to a company's share structure, capital issues and restructuring. He/she ensures that all documents are properly executed and authenticated and properly filed with relevant regulatory bodies.

Additionally, the company secretary is also saddled with the responsibility of advising on the importance of the balance of powers between the company's board of directors, management, shareholders and other stakeholders. The company secretary must provide facilities for the public inspection of documents. In the performance of these duties, a company secretary must ensure that the provisions of the Articles of Association, all statutes regulating the operations of the company, rules and regulations and international or sector specific corporate governance policies are complied with. The immense role of the company secretary cannot be understated.

The role of the company secretary has thus moved away from that of being a mere administrative assistant to being a necessary official for ensuring the corporate success of a company. We can safely state that behind every successful board is a competent company secretary.

The Company Secretary and Corporate Governance

The way and manner a company is managed will determine whether such company will succeed or fail. The most recent cases of corporate failure involving Nigerian companies and banks revealed excessive corporate fraud, lack of internal control measures, regulatory complacency and generally, non-compliance with the acceptable codes of corporate governance. Every company must have a corporate governance structure in place and most importantly, someone who must oversee the implementation of the structure. This is the role of a company secretary.

The concept of corporate governance has aroused the interest of shareholders, investors, creditors, regulatory agencies and governments all over the world owing to developments in the financial and economic markets globally. The governance of corporations is now as important in the world as the governance of countries. Developments at the global level have made it necessary for companies and their shareholders to imbibe the full complement of corporate accountability and efficiency.

To check incessant corporate failures in Nigeria, the Federal Government has begun the process of adopting a unified code of corporate governance for business organisations as a way of instilling accountability and transparency in the conduct of businesses. The need for a mandatory, rather than persuasive, code of corporate governance can be discerned from the multiplicity of corporate governance codes currently applicable in Nigeria, a number of which have been codified by regulatory bodies such as the Central Bank of Nigeria ("CBN"), the Securities and Exchange Commission ("SEC") and National Insurance Commission ("NAICOM").

The Financial Reporting Council of Nigeria ("FRC or the Council") which was established in 2011 currently has the responsibility to develop a national code of corporate governance for Nigeria. This code is expected to harmonise the existing corporate governance codes in Nigeria, including: the 2011 SEC Code of Corporate Governance, the 2009 NAICOM Code of Corporate Governance, the 2006 CBN Post-Consolidation Code of Corporate Governance, the 2008 Code of Corporate Governance for Licensed Pension Operators as well as the SEC Code for shareholders associations.

The present situation is quite confusing for companies presently regulated by more than one body such as the publicly listed banks regulated by both the CBN and the SEC. In instances where the provisions of corporate governance codes are at variance on the same subject, the company secretary has the onerous task of finding the middle ground in addressing such matters.

International Financial Reporting Standards (IFRS) and the Company Secretary

The Financial Reporting Council of Nigeria Act ("FRCN Act") was signed into law in 2011. The FRC is the first unified independent regulatory body set up in Nigeria to oversee corporate reporting, actuarial practice, monitoring of accounting and auditing standards, valuation and corporate governance. The passage of the FRCN Act enables the Council to undertake responsibilities which were previously unavailable to other regulators. The Council acts through its eight directorates, the directorate for accounting standards (private sector), accounting standards (public sector), audit practices standards, inspection and monitoring, auditing practices standards, actuarial standards, valuation standards and corporate governance. The Council's Committee on Corporate Governance has been given a mandate to issue a Code of Corporate Governance and industry specific guidelines.

The FRCN Act also empowers the Council to "ensure accuracy and reliability of financial reports and corporate disclosures, pursuant to the various laws and regulations currently in existence; and harmonise activities of relevant professional and regulatory bodies as relating to Corporate Governance and Financial Reporting". The FRCN Act provides timelines for the conversion to reporting in accordance with the IFRS for all companies in Nigeria. Clearly, the company secretary has an important role to play in ensuring that his/her company converts to IFRS reporting within the required timeline.

It is important to mention that the FRCN Act now makes it mandatory for all professionals who sign financial statements (including the company secretary) to register with the FRC. Section 41(1),(2) and (5) of the FRCN Act provides as follows –

"(1) The Council shall maintain a register of professionals.

(2) A person shall not hold any appointment or offer any service for remuneration as a professional for public interest entities, unless he is registered under this Act.

(5) Where the Council is satisfied that the applicant holds a practicing certificate, the Council shall enter the name of the registered professional and such particulars as it considers relevant, in the Register of Professionals".

The Council presently insists that all professionals who sign a company's financial statements must be members of a professional body in Nigeria. All such professionals are required to reflect their FRC registration number on the financial statements signed by them. Since all financial statements are signed on behalf of company secretary, it follows that all of these persons must now belong to a professional body in order to qualify for registration with the FRC. Only time will tell what will happen to the numerous small scale businesses in Nigeria which though required to file annual accounts with the CAC, cannot afford the cost of hiring the calibre of professionals required for the signing of financial statements.

Conclusion

It is clear that the office of a company secretary is very critical to the operations of a company. We have thus attempted to provide a quick guide in respect of the role of this all important officer. The functions of the company secretary can be likened to that of a lubricant in an engine. Without the lubricant, the engine is destined to fail or collapse. Therefore, the fact that the position of a company secretary is necessary in today's corporate world cannot be over-emphasised. It would amount to corporate suicide for a company to attempt to run without the company secretary.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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