A good company secretary will work in tandem with the board chairperson and the CEO to create insightful board agendas that enable the board to review past company performance while keeping sight of future strategic endeavours. PHOTO | SHUTTERSTOCK
Many years ago I was going through a board evaluation assessment with a CEO and she shook his head in amazement. “I didn’t know that the outsourced company secretary was supposed to be doing all these things! I’ve clearly not been getting a good return on the monthly retainer I pay him.”
Not wanting the company secretary to get unnecessarily blamed, I gently told the CEO that perhaps she didn’t know what she didn’t know and had not structured some of the duties that the assessment was reviewing into the company secretary’s contract. “Well now I know and I’m going to extract my pound of flesh. We’ve been doing too much ourselves,” was her pithy response.
Corporate governance can be a pain to executives who just want to get their day jobs done and deliver value to their key stakeholder: the shareholders.
For many entrepreneurs who start up businesses, a large amount of their focus and energy is on driving revenue up, ensuring salaries and rent are paid and keeping the taxman off their weary backs. Bringing in a company secretary is viewed as a complete luxury and an unnecessary cost.
Under the Kenyan Companies Act 2015, company secretaries are only required for private companies who have a paid-up capital of Sh5 million and above. However, every public company must have a company secretary. Not surprisingly, even for some public companies the role of company secretary is undertaken by their law firm and limited to filing statutory returns.
Thames Ltd (not its real name) is a Kenyan company. A private equity fund approached the owners to begin talks on how they could make an investment into the fast-growing agro-processing company. The objective was to initially acquire up to 40 percent of the shareholding, which was attractive to the three original shareholders. However, upon undertaking legal due diligence, it emerged that there were several missing minutes from the board’s deliberations. The transaction came to a screeching halt.
The key reason cited was that it was difficult to determine how significant decisions had been arrived at in the past. Of concern was previous expansions that required heavy capital expenditure outlay and this, according to the private equity fund’s lawyers, was indicative of decision-making on the fly.
While this was not actually true as there had been extensive discussions about business expansions in the past, the three shareholders were hard put to provide written evidence.
Consequently, the private investor walked away. Following this debacle, the shareholders immediately appointed a company secretary who formalised their board meetings by issuing proper notices and agendas before each meeting, ensured board packs were prepared and sent out and created a proper minute recording regime including an action tracking log for matters arising.
The company secretary function allows entrepreneur-led businesses to begin aligning themselves into the corporate entities that years of growth and stability create. The function helps the entrepreneur separate board oversight from management execution.
A good company secretary will work in tandem with the board chairperson and the CEO to create insightful board agendas that enable the board to review past company performance while keeping sight of future strategic endeavours.
By keeping a record of deliverables promised at board meetings, the company secretary will also ensure that management feels the heat of external oversight which should ideally begin to provide comfort to the entrepreneur who wishes to step back from active management as she grows older and considers handing over the reins to a new crop of management.
The role should, therefore, be part of a founder’s retirement plan. Next time, ask your company secretary what he can do for your company’s sustainability as a business.
