The Role of a Company Secretary in South African Law

The role of the company secretary in South African corporate law is one that is frequently misunderstood and often underestimated. Far from being a purely administrative position, the company secretary serves as a critical governance officer, ensuring that the company complies with its legal obligations, that the board of directors is properly supported, and that the interests of shareholders and other stakeholders are protected. The Companies Act 71 of 2008, together with the King IV Report on Corporate Governance for South Africa (2016), provides the regulatory framework within which company secretaries operate.

The Legislative Framework

The Companies Act 71 of 2008 (the Act) is the primary legislation governing the appointment, qualifications, and duties of company secretaries in South Africa. Section 86(1) of the Act requires every public company and every state-owned company (SOC) to appoint a company secretary. While private companies are not legally required to do so, many choose to appoint a company secretary voluntarily, recognising the significant governance benefits that such an appointment brings.

The appointment of a company secretary must be made by the board of directors (s86(1)), and the company secretary must be a person who has the requisite knowledge of, or experience in, relevant laws and the governance of companies (s86(2)). The Act does not prescribe specific academic qualifications, but it does require that the company secretary be resident in South Africa and not be a director of the company (s86(2)(a) and (b)).

Qualifications and Competence

While the Act itself does not mandate specific qualifications, the King IV Report on Corporate Governance for South Africa (2016) provides more detailed guidance. King IV recommends that the company secretary should be a person with the requisite competence, including a working knowledge of the Act and relevant governance frameworks, as well as demonstrated experience in the administration and governance of companies (King IV, Principle 10, Practice 67).

In practice, many company secretaries hold qualifications from the Chartered Governance Institute of Southern Africa (CGISA), formerly known as the Chartered Institute of Secretaries and Administrators. Membership of CGISA is widely recognised as the benchmark qualification for company secretaries in South Africa and provides assurance of the individual's competence in corporate governance, compliance, and board administration.

For companies listed on the Johannesburg Stock Exchange (JSE), the JSE Listings Requirements impose additional obligations. Paragraph 3.84(h) of the Listings Requirements requires that the company secretary of a listed company have the requisite competence, qualifications, and experience to effectively fulfil the duties of the position. The JSE retains the discretion to determine whether a company secretary meets these requirements and may require additional information or qualifications.

Duties and Responsibilities

The duties of a company secretary in South Africa are extensive and multifaceted, encompassing legal compliance, governance support, and stakeholder management.

Statutory Duties

Section 88 of the Act sets out the statutory duties of the company secretary. These include:

• Providing the directors of the company collectively and individually with guidance as to their duties, responsibilities, and powers (s88(2)(a));

• Making the directors aware of any law relevant to or affecting the company (s88(2)(b));

(c) Reporting to the company's board any failure on the part of the company or a director to comply with the Act, the company's Memorandum of Incorporation, or any rules of the company (s88(2)(c));

(d) Ensuring that minutes of all shareholders' meetings, board meetings, and the meetings of any committees of the directors are properly recorded in accordance with the Act (s88(2)(d)); and

(e) Certifying in the company's annual financial statements whether the company has filed required returns and notices in terms of the Act, and whether all such returns and notices appear to be true, correct, and up to date (s88(2)(e)).

These statutory duties are not merely administrative in nature. They require the company secretary to exercise professional judgement, to maintain a thorough understanding of the evolving legal and regulatory landscape, and to act with integrity and independence.

Governance Duties Under King IV

The King IV Report significantly expands the role of the company secretary beyond the statutory minimum. Principle 10 of King IV states that the governing body should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities. In this context, King IV recommends that the company secretary:

• Play a pivotal role in the company's corporate governance framework and processes;
• Ensure that board and committee charters are kept up to date;
• Prepare and circulate board and committee papers in a timely manner;
• Ensure that board and committee meeting procedures are followed;
• Provide guidance to the board on the discharge of its duties in the best interests of the company;
• Keep abreast of, and inform the board about, current corporate governance developments and best practice; and
• Facilitate the induction of new directors and the ongoing training of existing directors.

King IV also recommends that the company secretary should not be a director of the company and should maintain an arm's-length relationship with the board, in order to preserve the independence and objectivity of the role (King IV, Principle 10, Practice 69).

Compliance and Regulatory Duties

Beyond the Act and King IV, the company secretary is responsible for ensuring compliance with a wide range of legislation and regulations applicable to the company. This may include, depending on the nature of the company's business:

• The Companies Regulations, 2011, made under the Act;
• The Public Finance Management Act 1 of 1999 (PFMA), applicable to state-owned companies;
• The JSE Listings Requirements, applicable to listed companies;
• The Financial Sector Regulation Act 9 of 2017, applicable to financial services companies;
• The Broad-Based Black Economic Empowerment Act 53 of 2003 (B-BBEE Act); and
• Sector-specific legislation relevant to the company's industry.

The company secretary must maintain a comprehensive compliance calendar and ensure that all statutory filings, returns, and notices are submitted to the Companies and Intellectual Property Commission (CIPC) and other regulatory bodies within the prescribed timeframes.

Outsourced Company Secretarial Services

The Act permits companies to appoint an external service provider to fulfil the role of company secretary, provided that the appointed person or entity meets the competency requirements of the Act (s86(2)). This practice, known as outsourcing the company secretarial function, has become increasingly common in South Africa, particularly among smaller public companies, non-profit companies, and state-owned entities that may not have the resources or need for a full-time, in-house company secretary.

Outsourcing offers several advantages. It provides access to specialised expertise and experience across multiple companies and industries. It offers flexibility, allowing companies to scale the level of service according to their needs. It can also be more cost-effective than employing a full-time company secretary, particularly for companies that only require company secretarial services on a periodic basis, such as for quarterly board meetings and the annual general meeting.

However, it is important to note that the outsourcing of the company secretarial function does not relieve the board of directors of its responsibility to ensure that the company secretary fulfils the duties prescribed by the Act and applicable governance codes. The board retains ultimate accountability for the company's governance and compliance.

The Company Secretary of a Listed Company

For companies listed on the JSE, the company secretary plays a particularly important role. In addition to the statutory and governance duties described above, the company secretary of a listed company is responsible for:

• Ensuring compliance with the JSE Listings Requirements, including the timely publication of financial results, the submission of required documentation, and compliance with the JSE's continuing obligations;
• Acting as the primary liaison between the company and the JSE;
• Overseeing the preparation and distribution of the company's integrated annual report;
• Managing the relationship with the company's transfer secretaries and share registrars; and
• Ensuring that the company's securities dealings comply with the JSE's dealings rules and any applicable insider trading legislation.

The JSE may, in terms of Paragraph 3.84(i) of the Listings Requirements, require the removal of a company secretary who, in the JSE's opinion, does not have the requisite competence, qualifications, or experience. This underscores the importance of ensuring that the company secretary of a listed company is appropriately qualified and experienced.

Penalties for Non-Compliance

Failure to appoint a company secretary when required to do so, or failure by the company secretary to fulfil the duties prescribed by the Act, can have serious consequences. The CIPC may issue a compliance notice to a company that has failed to appoint a company secretary (s171 of the Act), and failure to comply with such a notice may result in administrative penalties or referral to the Companies Tribunal.

Directors who knowingly permit the company to trade without a company secretary, or who fail to ensure that the company secretary fulfils their duties, may be held personally liable. In serious cases, the court may make an order declaring a director delinquent or placing a director under probation (s162 of the Act).

The Strategic Value of the Company Secretary

In today's increasingly complex regulatory environment, the role of the company secretary extends far beyond mere compliance. A competent and experienced company secretary adds significant strategic value to the organisation by:

• Enhancing the effectiveness of board processes and decision-making;
• Reducing the risk of regulatory non-compliance and associated penalties;
• Supporting the company's reputation and stakeholder relationships through good governance;
• Providing a bridge between the board, management, and external stakeholders; and
• Contributing to the long-term sustainability and resilience of the organisation.

Conclusion

The company secretary is an indispensable component of the South African corporate governance framework. Whether appointed in-house or through an outsourced arrangement, the company secretary plays a vital role in ensuring legal compliance, supporting effective governance, and safeguarding the interests of the company and its stakeholders. At Ramirez Attorneys, we provide comprehensive outsourced company secretarial services to public, private, non-profit, and state-owned companies, drawing on extensive qualifications and experience in corporate law, governance, and compliance.