COMPANY SECRETARY: Bangladesh Perspective

INTRODUCTION
At last the Chartered Secretaries Act gets the recognition by the Parliament of Bangladesh. Indeed to say, the act was very much essential to be passed quite earlier so that it could help establish good governance in the corporate sectors. As an officer at the centre of the decision making process, the Company Secretary is in a powerful position of influence. Generally the Company Secretary assists and guides the directors in their quest of profit and growth but also act with integrity and independence to protect the interests of the company, its shareholders and employees. Todays Company Secretary plays a pro-active and central role in the governance of the company. This requires excellent communication skills, a thorough knowledge of the companys business and applicable regulations, strength of character, integrity, and above all a professional approach. The appointment of Company Secretary is the responsibility of the board of directors; yet despite this legal requirement, the law, whether in the form of the Companies Acts, does not state overtly what the Company Secretary should do once appointed. The limited number of references to the Company Secretary in the Companies Acts and in some circular by Securities and Exchange Commission (SEC) might lead a person newly appointed to the post to underestimate the scope of the responsibilities acquired. All directors should have access to the advice and services of the Company Secretary, who is responsible to the board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. Any question of the removal of the Company Secretary should be a matter for the board as a whole. Company Secretary is the key to the efficiency and effectiveness of the board and to the smooth running of the company. To fulfill the role, the Company Secretary must not only keep up to date with relevant legal, statutory and regulatory requirements but also be able to give impartial advice and support to directors (in particular, non-executive directors who might not have such detailed knowledge of the company as the executive directors). To distinguish between the duties which all Company Secretaries should perform (core duties) and those which they often perform (additional duties). Core duties are defined as those for which the Company Secretary is responsible as an officer of the company and those undertaken by the Company Secretary as a matter of established and best practice. The list of core duties is therefore a refinement of statute, common law and good practice. There has been an increasing need over the recent years for the Company Secretaries in the corporate sectors. Since long the role of Company secretary is recognized by the developed countries but in Bangladesh there are so many invisible obstacles to get the Chartered Secretaries Act approved/passed by the parliament. As we know that it is better if we can set one or more control points in business houses to check every unlawful activity by the other professional services or management of a company. This type of control points can help Government to check whether the company comply every legal obligation, Owner to check if there is any malpractice or fund defalcation, employees to get their wages paid appropriately and shareholders to have their dividend on timely and in terms of amount actually. The bad practice of fabrication of Financial Statements did not start yesterday but just after the Liberation

war in 1971. This has made the total business community corrupted as a whole. Though there are a few examples of honest business houses but a rare think we must not show as an example. As a result and eventually we are depriving of having so many facilities such as Government revenue, development work for the people of the country, justified remuneration for employment, actual dividend to shareholders and many more like this. But the fate of this professional service is unbelievable in terms of their assets, life style etc what everybody recognizes. Its really shameful for the people who are really stupid. Shame is not a remedial procedure to raise moral character. It is true that a bad or corrupted person can not be honest which is true as the light of day. So Government should come forward to set control points both in the private and public sectors to check the fabrication, corruption, bribery etc. As the secretary is an officer of the company, they may be criminally liable for defaults committed by the company. The liability could include failure to file: in the time allowed; any change in the details of the company's directors and secretary; and the company's annual return. The company secretary usually undertakes such duties as: 1. Maintaining the statutory registers - members, directors and secretaries and directors' interests 2. Ensuring that statutory forms are filed promptly 3. Sending the Registrar copies of resolutions and agreements 4. The main duty of the company secretary is to safeguard and protect such interests of the company at all levels viz. legal, statutory, administrative, arbitrational and in other policy matter 5. If authorized by the Board, it is duty of the secretary to convene a Board or Shareholders meeting in time, sign notices of such meeting, send annual and, half yearly accounts to shareholders, prepare minutes of the meeting timely and correctly, make sure that the quorum requisite is present in the meeting etc. 6. It is company secretarys duty to oversee before execution that the various agreements, deeds, contracts are properly framed, worded etc. 7. Sometimes company secretary has to work as public relations officer of the company etc.

Role of the Company Secretary

The three main areas, a Company Secretary has the role to play viz. to the Board, to the Company and to the Shareholder. Within each, the Company Secretarys role can be very diverse.

To the Board
A Company Secretary must ensure that the procedure for the appointment of directors is properly carried out and assist in the proper induction of directors, including assessing the specific training needs of directors/executive management. Secretary needs also to be available to provide comprehensive practical support and guidance to directors both as individuals and as a collective with particular emphasis on supporting the non-executive directors. He/she should also facilitate the acquisition of information by all board and committee members so that they can make best use of their ability to have a say to board meetings, discussions etc. Further to these tasks, he/she needs to assist in the compilation of board papers and to filter them to ensure compliance with the required standards of good governance. It may also be part of the Company Secretarys role to raise matters which may warrant the attention of the board.

To the Company
Secretary ensures compliance with all relevant statutory and regulatory requirements and that due regard is paid to the specific business interests of the company, for example, a manufacturing company may require a different approach from that of a bank or a financial services company or from that of a charitable company. Secretary also need to assist in the implementation of corporate strategies by ensuring that the boards decisions and instructions are appropriately carried out and communicated. Further to this, he/she should be available to provide a central source of guidance and advice within the company on matters of business ethics and good governance.

To the Shareholder
The Company Secretary needs to communicate with the shareholders as appropriate and to ensure that due regard is paid to their interests. He/she also need to act as a primary point of contact for institutional and other shareholders, especially with regard to matters of Corporate Governance.

Duties as an Administrative Officer

The Companies Act 1994 imposes numerous obligations on companies regarding, the conduct of their affairs. As an officer of the company, the Company Secretary can be prosecuted for most of these offences. Responsibility for ensuring compliance with these matters ultimately rests with the directors. However, by making the Company Secretary liable, the Act not only recognizes that the directors usually rely on the Company Secretary in this regard, but also provides a strong indication that they should give the Company Secretary responsibility for (or an involvement in) these matters. This is reinforced in the case of public companies by the requirement that the directors appoint as Company Secretary someone they believe is capable of performing the functions. Indeed, a director will often escape personal liability if they are able to show that the breach was not caused by their own acts or omissions and that the board had appointed a suitably qualified Company Secretary with responsibility for these matters. It is clear that, in view of their potential liabilities, Company Secretaries should not close their eyes to cases of non-compliance even if the directors have purported to make someone else responsible for those matters. Company Secretary should draw such cases to the attention of the directors and advise on the company's duties and obligations. It can therefore be argued that the Company Secretary has a duty as an officer of the company to keep an eye on these matters, regardless of the terms of their employment control. Chartered Secretaries should also ensure that where certain of their responsibilities are delegated, such tasks are properly executed, since they can still be held accountable in law for any failure by the company to comply. The fiduciary duties of directors can apply equally to executives occupying senior management positions in the company and authorized to act on its behalf. This usually includes the Company Secretary who, in any occasion, as an officer of the company has the following fundamental duties: act in good faith in the interests of the company; not to act for any collateral purpose to avoid conflicts of interest not to make secret profits from dealings for or on behalf of the company.

Core Duties of the Company Secretary

Below mentioned duties includes both those duties which are legal obligations as well as those which result from best practice. Besides, a Secretary may have to use his/her inventiveness to ensure that all core duties are fulfilled. 1. Meetings of the Board of Directors Facilitating the smooth operation of the companys formal decision making and reporting machinery; organizing board and board committees meetings (e.g. audit, remuneration, nomination committees etc.); formulating meeting agendas with the Chairman and/or Managing Director/The Chief Executive Officer and advising management; collecting, organizing and distributing such information, documents or other papers required for the meeting; ensuring that all meetings are minuted and that the minute books are maintained with certified copies of the minutes and that all board committees are properly constituted and provided with clear terms of reference. 2. General Meetings Ensuring that an annual general meeting is held in accordance with the requirements of the Companies Act and the companys Articles of Association; preparing and issuing notices of meetings, and distributing proxy forms; trying to prepare directors for any shareholder questions and helping them create briefing materials; overseeing the preparations for security arrangements; ensuring that proxy forms are correctly processed at meeting and that the voting is carried out accurately. 3. Memorandum and Articles of Association The Company Secretary must ensure that the company complies with its Memorandum and Articles of Association and, drafting and incorporating amendments in accordance with correct procedures. 4. Requirements of Stock Exchanges Maintaining, monitoring and ensuring compliance while dealing in the companys securities, as appropriate, managing relations with the Stock Exchange through the companys brokers; releasing information to the market; ensuring the security of unreleased price-sensitive information; making applications for listing of additional issues of securities. 5. Statutory Registers Following statutory registers has to be maintained: 1. Members register 2. Register of directors 3. Register of contracts with Directors 4. Directors interests in shares and debentures 5. Interests in voting shares 6. Register of mortgages & charges 7. Minutes book 8. Books of Accounts 9. Register of debenture holders (if applicable). Etc. 6. Statistical Books A Secretary has also to maintain the following statistical books:

1. Application and allotment register 2. Register of share transfer 3. Attendance record book 4. Agenda book 5. Proxy register 6. Index cards for maintaining specimen signatures of members 7. Share certificate and debenture book. etc. 7. Statutory Returns There are requirements to file periodic statutory returns and to report certain changes regarding the company with the Registrar of Joint Stock Companies and Firms, which are: 1. Annual returns (Schedule X), within 21 days of general meeting 2. Filing of accounts, within 30 days of general meeting with the annual return 3. Return of Allotment (Form XV), within 60 days of allotment 4. Amended Memorandum and Articles of Association 5. Notices of appointment, removal and resignation of directors (Form XII), within 14 days of any change in the structure of directorship 6. Consent of Directors to act (Form IX), 7. List of persons consenting to be Directors 8. Agreement to take qualification shares in a proposed company (Form XI) 9. Notices of appointment, removal or resignation of auditors 10. Change of registered office (Form VI), within 28 days of incorporation or of any change thereon 11. Special resolution (Form XIII) within 15 days of passing resolution thereof 12. Increase of Authorize Capital (form IV), within 15 days of passing resolution thereof, etc. 8. Report and Accounts A Company Secretary has also to co-coordinate the publication and distribution of the companys annual report , accounts and interim statements, in consultation with the companys internal and external advisers, in particular, when preparing the directors report. 9. Registration of Shares He/she has to maintain the companys register of members; dealing with transfers and other matters affecting share-holdings; dealing with queries and requests from shareholders and different stakeholders. 10. Communications to and from Shareholder Communicating with the shareholders (e.g. through circulars); arranging payment of dividends, interest; issuing documentation regarding rights issues and capitalization issues; maintaining good shareholder relations; maintaining good relations with institutional shareholders and their investment committees. 11. Shareholder Monitoring Monitoring movements on the register of members to identify any apparent stake-building in the companys shares by potential take-over bidders; making appropriate inquiries of members as to beneficial ownership of holdings. Etc.

12. Issues of Share and Capital and Restructuring

Implementing properly authorized changes in the structure of the companys share and loan capital; devising, implementing and administering directors and employees share participation schemes. 13. Acquisitions, Disposals and Mergers Participating as a key member of the company team established to implement corporate acquisitions, disposals and mergers; protecting the companys interests by ensuring the effectiveness of all documentation; ensuring that due diligence disclosures enable proper commercial evaluation prior to completion of a transaction; ensuring that the correct authority is in place to allow timely execution of documentation. 14. Corporate Governance Good corporate governance is the much talked and burning issue in corporate sector all over the world. As a Company Secretary, he/she has to review continually developments in corporate governance; facilitating the proper induction of directors into their role; advising and assisting the directors with respect to their duties and responsibilities, in particular compliance with company law and, if applicable, Stock Exchange requirements; counseling them when preparing presentations and memoranda 15. Non-Executive Directors The Company Secretary Acts as a channel of communication and information for non-executive directors. 16. Common Seal of the Company Company Secretary ensures the safe custody and proper use of company seals. 17. Identity of the Company Ensuring that all business letters, notices and other official publications of the company show the name of the company and any other information as required by the statutes and that company name plates are displayed in a conspicuous place of registered address of the company. 18. Subsidiary Companies Ensuring that procedures are in place for the correct administration of subsidiary companies and that correct information is given to the holding company; maintaining a record of the groups structure. Etc.

Additional Duties of the Company Secretary

The duties which a Secretary commonly undertakes in areas such as accounting, property, labour relations, public relations, personnel welfare and facilities (union, training, medical, accommodation, etc.) i.e. general administration and other subsidiary duties cannot be considered to be core duties. These duties will frequently take up a substantial proportion of the Company Secretarys time and their importance should not be underestimated. The professional background, previous work experience and general personal capabilities of the Company Secretary will generally dictate the nature and scope of these additional responsibilities. For example, a lawyer is more likely to specialize in litigation and an accountant is more likely to manage a treasury function. A Chartered Secretary, being specifically trained for the role, is more likely to take-on additional responsibilities such as assets management, welfare of staff/workers, medical, Intellectual property, contracts, negotiation, litigation, contract drafting, Conveyancing, consumer credit contract, Accounting/Finance, Payroll, Financial management, Credit control, Taxation, Financial accounting, Project finance, Internal control system, Corporate finance, Employee and executive Profit share schemes, Other employee benefits, Performance appraisal, Risk management, Office administration,

Management Information system, General Management Strategic planning, Corporate planning Liaising with professional advisers for Directorship in group subsidiaries. Etc. Most Company Secretaries could probably add to the above list, particularly where their companys business is subject to further specific external regulation.

Powers of the Company Secretary

The Company Secretary can authenticate documents or proceedings of the company and the signature of the Secretary on a written resolution is evidence of the proceedings. The Companies Act 1985 provides that a document signed by a director and the Secretary of a company and expressed (in whatever form of words) to be executed by the company has the same effect as if executed under the common seal of the company. If the office of Secretary is vacant, or the Secretary is incapable of carrying out his/her duties, the assistant or deputy secretary shall carry out the functions of the Secretary and the document is deemed to be executed by the company. In addition, a document which purports to be signed by a director and the Secretary or by two directors shall be deemed to have been duly executed in favor of a purchaser in good faith for valuable consideration who acquires an interest in property. In Panorama Developments (Guildford) Ltd. V Fidelis Furnishings Fabrics, the Court of Appeal ruled that a third party could assume that the Company Secretary had authority to bind the company in contracts of an administrative nature.

Company Duties
Running a limited company involves certain duties which have to be undertaken by the Directors and Company Secretary. This article points out the main duties that need to be remembered when being involved in the administration of a private limited company.

Separate Legal Entity

One vital point to remember is that a company is a separate legal entity. It is a legal person in its own right, quite separate and distinct from those who own it, (being the members, usually the shareholders) and from those who run it, (the directors). This founding principle of company law, as established in the case of Salomon v. AC Salomon Co Ltd (1897) AC 22, has often been the cause of many court cases where people fail to recognize the difference between business people and the companies with which they are involved.

Capital
There is no statutory minimum or maximum capital amount for a private limited company. It is possible for a company to have only one member and for that member to have only one share but, this is exceptional.

Limited Liability
A company may have limited liability for its members. If the company is unable to pay its debts and is put into liquidation, the members will not be required to contribute more than they have actually paid or agreed to pay towards settling its debts (s.3 CA 1985).

Memorandum and Articles of Association Every company must have a Memorandum of Association which details (s. --- CA 1994): 1. the name of the company - s. --- (1)(a) 2. whether the registered office is to be situated in England and Wales, or in Scotland - s. --- (1)(b) 3. the objects of the company - s. --- (1)(c) The memorandum must be signed by each subscriber in the presence of at least one witness. A company may not alter the conditions contained in its memorandum except by express provision of the Companies Act. The 'objects' of the company are a statement as to what the object of the company is. The statement of a company's object can be a 'general commercial company'. In this case the object of the company is to carry on any trade or business whatsoever. \ If the objects are more specified and the company wishes to alter them, they have to be altered by a special resolution (s. --- CA 1994 as substituted by s. --- (2) CA 1994). In the case of a company limited by shares, there must also be Articles of Association (s. --- (1) CA 1994). The standard form for articles of a company limited by shares is known as 'Table A' and this can be used in its entirety to constitute the Articles of a company (s. --- CA 1985). Table A is as prescribed by regulations made by the Secretary of State. The company can draw up its own Articles or modify Table A, but they must contain the rules for the conduct of the internal affairs of the company. Directors Every private company shall have at least two director (s. --- (3) Companies Act 1994). Where the company only has one director, that director cannot also be the company secretary (s. --- (2) CA 1994). There must be a separate individual holding the office of company secretary (s. --- (2) CA 1994). There are no legal qualifications that are needed by an individual to be a director of a company. The director(s) are responsible for the management of the company. Their powers can be restricted by the company's articles but, in most cases, they can do anything that the company can do. The director(s), acting as and for the company, must ensure that the company does everything that it is legally obliged to do. The decisions that are made by the director(s) must be made in the best interests of the co. If they are not the decision will be 'ultra vires'. The interests of the company are those of the shareholders as a whole. They are not the interests of employees, individual shareholders or the director(s) themselves. Directors are personally responsible for ensuring that accounts are prepared and delivered to Registrar. Company directors are responsible for delivering information to the Registrar, in particular: 1. accounts (only for limited companies) 2. annual returns (Schedule X) 3. notice of change of directors or secretaries or in their particulars (Forms XII) 4. notice of change of registered office (Form IV) Accounts All limited companies, whether trading or not, must keep accounting records and file accounts for each accounting period with the Registrar. Subject to exceptions, the accounts will include: 1. Directors' report signed by a director or the company secretary 2. A balance sheet signed by a director 3. A profit and loss account (or income and expenditure account if the company is not trading for profit) 4. An auditors' report signed by the auditor

5. Notes to the accounts 6. Statement of changes in equity 7. Cash flow statement 8. Group accounts (if appropriate). Annual returns (Schedule-X) Annual return is a snapshot of general information about a company giving details of its directors and secretary, registered office address, shareholders and share capital.

Directors Responsibility
The position of director confers a certain status upon an individual. Whether you are appointed to the Board of the company you work for or you are involved in establishing a new business and take on the role of director you will feel a sense of accomplishment. However the office of director should not accept lightly. It involves a number of duties and responsibilities. Some of them are briefed below. COMPANIES An incorporated business is normally referred to as a company. A limited company can be a private or public company. Although there are unlimited companies but the cosmic majority of companies are limited by shares that means the liability of shareholders is limited to the amount unpaid (if any) on their shares. A public company must include 'Limited as its last word in its name and can offer shares to the public and the responsibilities and penalties are more onerous on directors of a public company. A company has a 'Memorandum of Association', and 'Articles of Association' which constitute its rules and will contain specific regulations regarding the duties and responsibilities of the directors. DIRECTORS When one being appointed as a director of a company he/she becomes an officer with widespread legal responsibilities. A Director is normally appointed by the Board and the appointment is to be confirmed by the shareholders. Director can usually resign at any time, but can only be removed by the shareholders. The rules of the company may vary these procedures. There are two separate types of responsibility common law - here decided legal cases have established that your position as director is similar to that of a trustee and an agent statute - here company law imposes a large number of duties upon you. COMMON LAW DUTIES Fiduciary duty of a Director As a director one should act in good faith act in the best interests of the company avoid conflict between personal and company interests not make any secret profit not make any personal gain from opportunities which arise by virtue of your position. The law recognizes that your position as director is similar to that of a trustee; that is the shareholders have 'entrusted' the company assets to you and you must act in their best interests. Skill and care A Director must put into effect due skill and care when acting as a director.

Breach of duty Failure to fulfill duties vested upon a Director can result in an action by the company against him/her for any breach or duty, contact or damages.

STATUTORY DUTIES OF A DIRECTOR Accounting Directors of a company are required by law to produce accounts. The law specifically covers the following matters. Accounting records Proper records must be maintained as defined by the Companies Act. Accounts Directors are responsible to prepare accounts for each year to a date. The accounts must give a true and fair view and must comply with the form and content prescribed in the Companies Act. A copy of the accounts must be provided to each shareholder of the Company. Filing Accounts must be filed at Registrar of Joint Stock Companies and Firms within a specific period after the year end. Failure to meet this deadline will result in automatic penalties on the company. Audit A limited Company is required to have an audit. Audit confirms that the accounts give a true and fair view of the state of the affairs of the Company. Administration Company law establishes a number of administrative requirements which you must comply with. These include maintaining statutory registers of shareholders, directors keeping minute books holding meetings conducting business by passing resolutions in the correct manner In addition the law reinforces the fiduciary position of a director by including specific legislation relating to transactions between a company and its directors. These rules cover prohibiting loans to directors restricting other credit to directors disclosing details of loans and other transactions in which a director has an interest The Companies Act contains a large number of fines / penalties which can be levied against directors if they fail to comply with their statutory duties. These vary from a modest fine to imprisonment.