Why should you engage the right person to be your company secretary?
If you are the sole director of a company, you will realise that you cannot appoint yourself as the Company Secretary, so what then do you do?
Most people appoint Company Secretaries out of convenience, thinking “my Grandmother’s a Singaporean and she wouldn’t mind…” or “I can use my wife’s Singpass to access e-services on the ACRA website…”
And yes, while for Singapore private companies any individual with a SingPass and ordinarily resident in Singapore qualifies as a company secretary, simply appointing a willing friend or family member out of convenience may inconvenience them instead.
Here’s why:
1. A “named” Company Secretary isn’t just for namesake
The Companies Act states that company secretaries must have the “requisite knowledge and experience to discharge the functions of secretary of the company”; the Company Secretary guides the Company’s Directors on the process of complying with the many statutory responsibilities of the Act, which may be a mammoth task for the unfamiliar, given the Act’s technical jargon.
At the very least, a Company Secretary should be equipped to:
· maintain the company statutory registers and records
· arrange for shareholder and director meetings
· lodge and file in time all necessary documents required by law, ensuring that the company meets all its legal obligations
· stay updated on relevant developments and changes in statutory and regulatory obligations
2. If he/she doesn’t know how to do it, he/she really doesn’t know
There are stories of clueless “grandma” named corporate secretaries who upon receiving important notices from ACRA, deemed them as “junk” and threw them away. Here are two scenarios which are often overlooked and their impact on the Company:
a. Failure to create a business resolution.
Let us say that you have an important deal with the bank or a key stakeholder but you have failed to either hold a relevant general/board meeting to approve it. When the bank or key stakeholder requests for it, your Company will lose valuable time/business sorting that out.
Or perhaps you have named a new company shareholder but forgot to arrange a General Meeting to acknowledge it; without this mandatory step, the said shareholder will be considered void in the court of law.
b. Records that are not properly managed
Poorly maintained records can prove to be disastrous to any company. Without a secretary to maintain and manage statutory or financial records (which includes important documents proving company ownership and record of members), when certain records are required (for example in filing of taxes or issuing of new shares/cancelling of share certificates or updating of registers), confusion can arise.
3. You don’t want to get your loved ones unknowingly in trouble
ACRA’s advice on who is responsible for non-compliance with statutory requirements is clear: although the ultimate responsibility lies with the company directors, the company secretary may also be held liable for the company’s failure to comply with the law in certain situations.
Why? Because ACRA recognises the dependence of company directors on the company secretary for guidance on statutory compliance issues.
ACRA sees a Company secretary as an ‘officer’ of the Company, which means that he/she is bound by all the relevant duties and obligations pertaining to the directors; the Registrar is empowered to debar any director or company secretary of a company that has failed to lodge any documents at least three months after the prescribed deadlines.
4. The price you pay for saving that $500-$800 a year may not be worth it
There are at least 10 common offences for penalties and prosecutions under the Companies Act, for example:
- failing to notify ACRA of changes in certain company information (Registers, Office, Officers, Registered Office, etc.)
- failing to lodge Annual Returns of the company within one month from holding the AGM
Most Secretarial firms charge $500-$800 annually for corporate secretarial services. You’ll find that parting with that small sum will save you a lot more in the long run!