Company Secretary and Corporate Governance
Governance
Company Secretary and Corporate Governance
Syllabus tag: KASNEB CPA | Intermediate Level | CA21 Company Law | Topic 6 Company Secretary and Corporate Governance
Lesson objectives
By the end of this topic, you will be able to:
- State when a company secretary must be appointed
- Describe the qualifications required
- List the secretary's duties and explain their authority
- Explain the principles of corporate governance
- Describe the role of board committees
Why this matters
The secretary is the officer responsible for the company meeting its statutory obligations. Governance is the framework within which the board is held to account. Both exist because ownership and control are separated.
When a secretary is required
| Company | Requirement |
|---|---|
| Public company | Mandatory in all cases |
| Private company | Only where paid-up capital is KES 5 million or more |
Where required, the appointment is made by the directors, and a vacancy must be filled within the prescribed period.
Qualifications
The secretary must be a person the directors consider has the requisite knowledge and experience, and for companies where the appointment is mandatory, must hold the qualifications prescribed — in practice membership of the Institute of Certified Public Secretaries of Kenya, or another prescribed professional qualification.
A sole director of a company cannot also be its secretary, because the two offices exist partly to check one another. Where a document requires signature by a director and the secretary, the same person cannot sign in both capacities.
Duties
- Maintaining the statutory registers — members, directors, charges, beneficial owners
- Filing returns and notices with the Registrar within the statutory periods
- Convening meetings and issuing notices
- Taking and keeping minutes
- Advising the board on compliance and governance
- Ensuring the company's name and particulars appear where required
- Custody of the company seal, where one is kept
The advisory duty is the substantive one. A secretary who files accurately but never tells the board it is about to act unlawfully has done half the job.
Authority of the secretary
The secretary is an officer of the company and has ostensible authority to contract on its administrative side — engaging office staff, hiring cars, ordering supplies.
That authority does not extend to trading contracts, borrowing, or disposing of assets. A third party dealing with a secretary on a commercial matter cannot assume authority in the way they could with a director.
The distinction is between the administration of the company, which is the secretary's province, and its business, which is the board's.
:::checkpoint A company secretary orders office furniture worth KES 400,000 and separately signs a contract to purchase a delivery lorry for KES 4 million. Advise the suppliers on whether the company is bound in each case. :::
Corporate governance
Governance is the system by which companies are directed and controlled. It addresses the agency problem: those who own the company are not those who run it.
Principles commonly required:
- Board composition and balance — a mix of executive and independent non-executive directors, so no individual dominates
- Separation of chair and chief executive — one runs the board, the other runs the company
- Transparency and disclosure — timely, accurate reporting
- Accountability to shareholders and other stakeholders
- Risk management and internal control, reviewed regularly
- Fair and disclosed remuneration, not set by the recipients
The Capital Markets Authority Code applies to listed companies in Kenya, and its provisions operate on a comply or explain basis: a company that departs from a provision must say so and give its reasons.
That approach is deliberate. A rigid rule would suit some companies badly, so the discipline comes from having to justify the departure publicly rather than from prohibition.
Board committees
| Committee | Purpose |
|---|---|
| Audit | Oversees financial reporting, internal control, and the relationship with the external auditor |
| Remuneration | Sets executive pay, so that directors do not set their own |
| Nomination | Recommends board appointments, so the board does not simply replicate itself |
| Risk | Oversees the risk management framework |
The audit committee is the most examined. Composed of independent non-executive directors, it is the body to which internal audit reports and with which the external auditor discusses difficult matters. Its independence is what makes both those relationships work — an internal audit function reporting to the finance director cannot report adversely on the finance director.
:::checkpoint A listed company's chief executive is also the chair of the board and sits on the remuneration committee. Identify the governance failures and explain what each provision was designed to prevent. :::