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2. Other company officersa) Discuss the appointment procedure relating to, and the duties and powers of, a company secretary. (a)

b) Discuss the appointment procedure relating to, and the duties and powers of, company auditors. (a)

COMPANY SECRETARY

Every limited company must have a company secretary. He/she must have requisite skill

and knowledge to discharge their functions (s 2!". #here are no specific qualifications

for the company secretary of a private company $eyond $eing as competent as can $e

e%pected of a company officer. However& the act sets a few guidelines on qualifications'stating that the person should'

Have $een a company secretary as at 22/2/)*.& which is when the detailed

rules on appointment came into effect.

Have $een employed as a company secretary for three out of the last five years

(preceding appointment".

+e a mem$er of one of a list of qualifying $odies e.g. ,--, and the -,.

0ust $e a solicitor& $arrister or advocate in the 1.

+e employed in a position or $e a mem$er of a professional $ody that appears toqualify him to act as company secretary.

, company with more than one director should have one of them acting as companysecretary $efore they appoint one. However& a soled director cannot $e the company

secretary at the same time $ut a company can have two or more 3oint secretaries.

#he specific duties of company secretary are set $y the directors $ut he/she has a generalduty of ensuring the company complies with statutory o$ligations' including'

Esta$lishing and maintaining company statutory registers.

4iling accurate returns with the registrar on time.

Organi5ing and minuting company and $oard meetings.

Ensuring that accounting records meet statutory requirements.

0onitoring statutory requirements of the company.

igning company documents as may $e required $y law.

#he com$ined code on corporate governance gives the - more duties including'

4acilitate induction of $oard mem$ers and assist with professional development.

,dvise the chairman and the $oard on all governance issues.

Ensure good information flows within the $oard and its committees.

On powers& the company secretaries act as agents to e%ercise ostensi$le authority. #heyare allowed to enter into administrative type contracts e.g. employing staff etc.

AUDITORS

#he corporate governance structure specifies the distri$ution of rights and responsi$ilities

among different participants in the corporation& such as& the $oard& managers&

shareholders and other stakeholders& and spells out the rules and procedures for making

decisions on corporate affairs. ,uditors have an e%tremely important role to play in that

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regard6 they are appointed to ensure that the interests of the shareholders in a company

are $eing met. #heir key function is to produce independent and authoritative reports

confirming& or otherwise& that the accountancy information provided to shareholders isrelia$le.

#he law relating to company auditors is to $e found in ss.7897)8 -ompanies ,ct (-,"): as altered $y -, )). Even where a company has passed an elective resolution to

dispense with laying accounts& the accounts are still required to $e prepared& audited and

circulated. -onsequently every company& only e%cepting dormant private companies& isrequired to appoint an auditor& who must $e appropriately qualified and in other respects

eligi$le (s.78(" -, ):".

Qualifications

#he essential requirement for any person to act as a company auditor is that they are&

eligi$le under the rules& and a mem$er of& a recogni5ed supervisory $ody (s.2: -, ))".

#his in turn requires them to hold a professional accountancy qualification. upervisory

$odies; are ones esta$lished in the 1 to control the eligi$ility of potential companyauditors and the quality of their operation (s.7* -, ))". #he recogni5ed supervisory

$odies are6(a" #he nstitute of -hartered ,ccountants in England and ".

t is a criminal offence to act while ineligi$le.

Appointment and remoal

,uditors are appointed annually (s.7: -, ):"& generally& at each annual generalmeeting.

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auditors are not appointed& or re?appointed& then the ecretary of tate may appoint

auditors to act (s.7>(" -, ):".

1nder the -om$ined -ode on -orporate @overnance& a company;s audit committee must

$e involved in the appointment and dismissal of $oth the e%ternal and internal auditors.

,udit committees must have annual procedures to ensure the independence ando$3ectivity of the e%ternal auditor which should involve a consideration of all

relationships $etween the company and the firm carrying out the e%ternal audit.

,n auditor may $e removed at any time $y an ordinary resolution of the company

(s.7)("". #his does& however& require special notice. ,ny auditor who is to $e removed

or not re?appointed is entitled to make written representations and require these to $e

circulated or have them read out at the meeting (s.7), -, ):".

,n auditor may resign at any time (s.7)2 -, ):". Aotice of resignation must $e

accompanied $y a statement of any circumstances that the auditor $elieves ought to $e

$rought to the attention of mem$ers and creditors (paya$les"& or alternatively a statementthat there are no such circumstances (s.7)8 -, ):".

#he company is required to file a copy of the notice with the registrar of companies

within 8 days (s.7)2 -, ):".

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9 . also entitles the auditor to require information and e%planations from a wider group

of people than merely the officers of the company. -onsequently employees may now $e

su$3ect to the auditor;s authority'9 su$section (8" makes it an offence for a parent company to fail to take all steps

reasona$ly open to it to o$tain the information or e%planations which the auditor has

required it to o$tain from its non?1 su$sidiary and those associated with it' and theoffence applies also to any officer of the company who knowingly and willfully

authori5es or permits the failure'

9 .) requires that Birectors; Ceports must contain a statement that the directors are notaware of relevant information which has not $een disclosed to the company;s auditors.

#he directors are placed under the duty to ensure that they have taken all the steps they

should have taken as a director to make themselves aware of such information and to

esta$lish that the auditors are aware of it. t will $e a criminal offence to issue a falsestatement. #he stated purpose of s.) is to ensure that each director will have to think hard

a$out whether there is any information that they know a$out or could ascertain which is

needed $y the auditors in connection with preparing their report.

,uditors are entitled to receive notices and other documents in connection with all

general meetings& to attend such meetings and to speak when the $usiness affects theirrole as auditors (s.7)* -, ):".

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(c" 4inancial assistance for purchase of own shares (s.:! -, ):".

Potential lia#ilities

Caparo Industries plc vDickman ())*"

-ompany accounts were audited in accordance with the -ompanies ,ct ):. #he

respondents& who already owned shares in the company& decided to purchase more sharesand take over the company after seeing the accounts. #he accounts were inaccurate. #he

respondents then incurred a loss& which they $lamed on the negligently audited accounts.

t was held that& when the accounts were prepared& a duty of care was owed to mem$ersof the company (that is& the shareholders"& $ut only so far as to allow them to e%ercise

proper control over the company. #his duty did not e%tend to mem$ers as individuals and

potential purchasers of shares. #he onus was clearly on the appellants in these

circumstances to make their own independent inquiries& as it was unreasona$le to rely onthe auditors.