CMA seeks cap on number of NSE firms secretaries can serve
Company secretaries will be limited to serving a maximum of three listed firms at any one time as the Capital Markets Authority seeks to curb potential over-commitment.
Company secretaries will be limited to serving a maximum of three listed firms at any one time as the Capital Markets Authority (CMA) seeks to curb potential over-commitment, marking the latest attempt to improve corporate governance.
The role of a company secretary is to ensure that a firm complies with the relevant legal and regulatory requirements and keeps board members informed of their legal responsibilities.
Adili, Bowmans and Maonga Ndonye are among the company secretaries in Kenya who have a key partner seconded to the boards of the firms they serve.Â
In its latest report on the state of corporate governance in Nairobi Securities Exchange (NSE)-listed firms, the regulator says it has noticed a growing trend of company secretaries serving multiple firms concurrently.
CMA warns that while company secretaries’ expertise is invaluable, the potential for over-commitment raises concerns about their ability to provide dedicated and effective service. It therefore wants to limit the number of firms that company secretaries can serve at a go, just as is the case with board directors.
“Juggling responsibilities across various entities may lead to delays in fulfilling critical duties, a diminished focus on company specific needs and ultimately, a reduction in the quality of governance support provided to boards,” says CMA.
“The Authority will be seeking stakeholder input regarding the limitation of the number of listed companies a company secretary can serve as is the case for directors under the corporate governance code.”
Under the code, which was enacted in 2016 and made compulsory starting December 2023, CMA cut the number of directorships that a member of the board can hold at any given time to three from the previous five.
However, the code does not put a limit on the number of listed companies a company secretary can support, opening room for such professionals to serve as many companies as they can concurrently.
CMA says that in recognises the critical role company secretaries play in entrenching good corporate governance practices in companies and is in consultation with stakeholders on a cap that is similar to that for directors.
Their responsibilities, as outlined in the CMA corporate governance code, include offering procedural and regulatory guidance, facilitating effective communication between the listed firm and shareholders, co-ordinating governance audits and maintaining essential records such as the conflict-of-interest register.
In addition, the company secretary is tasked with supporting board evaluations, managing the company’s seal and ensuring timely preparation of board and committee minutes. The secretary is required to be certified by the Institute of Certified Secretaries (ICS).
“Membership and being in good standing with ICS is fundamental, as it reflects ongoing professional development and compliance with the institute’s code of ethics. A lapse in this standing undermines their credibility and their ability to offer robust governance guidance,” says CMA.
CMA is further warning companies against merging the roles of company secretary and compliance officer, saying that this is presenting potential conflicts of interest since it means the individual tasked with reviewing compliance processes is also involved in executing those processes.
“It is advisable that these positions be held by separate individuals to maintain objectivity and independence in fulfilling their responsibilities. Issuers should approach any potential combination of these roles cautiously,” said CMA.
