Knowing how to appoint a Company Secretary is a consideration that can be crucial for companies when setting up or replacing the Company Secretary. It’s not one of the checkboxes that can simply be ticked. It is important to get this right from the beginning as it will impact the way your company maintains statutory records, prepares statutory filings and ensures statutory compliance.
However, the issue is that a lot of businessmen don’t even realize that they need a company secretary. The real questions are who the person or provider should be, whether the provider is qualified, and what should be formally documented. A careful appointment will minimise risk going forward, particularly as deadlines, shareholder changes or regulator queries begin to crop up.
How to appoint a company secretary step by step
The nomination of a company secretary is generally straightforward; however, it is essential that it is done correctly. The company’s overarching approach is to select a suitable appointee, document the selection by making the relevant corporate resolution, add the same to the statutory records, and make any necessary notifications within the applicable periods.
The secretary is frequently appointed at the time the company is incorporated. The directors will typically make an appointment by board resolution if the company has existing directors and it is required to add another or replace one. The company should then verify the appointee’s information and get their permission to act and make sure that the company’s registered records accurately reflect this.
This is where practical details matter. The name, identity, address and effective date should all be the same throughout the company’s records and if filed externally. Missteps in the record can lead to bigger problems later on should it be required to compare with other records.
Who can be appointed as company secretary?
It depends on the type of company and the rules applicable to that company. Every limited company in Hong Kong is required to have a company secretary. The appointee may be a person or any corporate service provider who meets the conditions of eligibility.
If a company has only one director, then the director cannot serve as the company secretary. Many novice entrepreneurs are surprised by this. They believe that one person can fill two roles to make things easier,but in this case, the law makes those two roles distinct.
Typically, the person needs to be a resident if one is appointed. The corporate body, if appointed, should generally be based in Hong Kong. This is the time when it becomes practical to outsource for overseas founders. For a professional firm, there is continuity, a local presence and a more defined compliance process than with a friend, employee or nominee arrangement.
There’s also a judgement call to be made about the capability. The company secretary is more than a paper title. The duties include maintaining statutory books, changes in directors, managing shareholders, annual returns, etc. But when the appointed one doesn’t know what those responsibilities are, the company will still be held accountable.
What the company secretary actually does
It’s a good idea to understand the role in business terms before the appointment. The company secretary supports the role of the governance and compliance framework of the company. This includes updating of company information, establishment or revision of registers, making or documenting company decisions and keeping key legal documents on time. For businesses looking for company secretary services explained in practical terms, these duties illustrate the role’s close connection with up-to-date corporate compliance.
The job can grow in significance over time as the business expands, and is not always less significant. Additional stock can be sold. Directors may change. The registered office may change. Investors might request more streamlined documentation. Banks and/or counterparties may seek corporate records. A straightforward post at incorporation can be the main driver of the company’s operational discipline.
That’s why a lot of small and medium enterprises would rather have an appointment than simply make it a dry run. If the secretary is integrated into the wider compliance and accounting support system, the risk of one issue being dealt with and another ignored is reduced.
Documents and records needed for the appointment
This can be different papers depending on the constitution of the company and if it is the first appointment or replacement. In most instances, the company should draft a board resolution approving the appointment and enter details of the secretary in the company’s statutory books.
Additional documentation of the appointee and supporting identification or corporate documents may be required, depending on whether the secretary is an individual or a corporate entity. If the appointment supersedes an existing secretary, the termination should be properly documented as well with effective dates reflecting the period of the company history that are clear and have no gaps or overlaps.
It’s one of those things that founders tend to overlook when it comes to administration. When the internal resolution sets out one date, the register lists another and the notice filed lists a third, the company creates needless confusion. Good record-keeping is not record-keeping by itself. It safeguards the company in the event of any concerns in the future.
Common mistakes when appointing a company secretary
The worst mistake is choosing someone available, not legal and cannot perform the job. A common error is thinking that the appointment is made when the name is called but before the proper resolution or records are updated.
One typical problem is appointing the company secretary to an individual who is not the company’s principal compliance officer. In fact, secretarial duties are closely related to the annual maintenance, financial record-keeping, and regulatory action. When these areas are distributed across multiple providers or not managed in-house, deadlines and responsibilities can fall by the wayside.
There is also a trade-off of costs. Some companies opt for the lowest price to meet the minimum requirement. While this works for a dormant or a very basic company, it can be costly if the company is slow and difficult to reach, or if it’s so responsive to changes that it simply doesn’t put the effort into its own. A lower annual fee may not be the more cost-effective choice if there are problems filing, notices are not being received, or records are not being maintained.
Appointing an individual versus a corporate service provider
This is an important decision that is often taken for granted. The person who is the individual secretary may sound more personal or less expensive especially if the person is someone who you already know in the business. If this person goes on vacation, changes jobs, moves, or just doesn’t want to take part, though, continuity can pose an issue.
Typically, a corporate service provider will have a more formalized procedure. The system to maintain records and track deadlines and the changes that occur regularly. This can save management time and give founders a straight line of responsibility when they don’t want to develop an in-house compliance department.
However, not all service models are alike. There are those that will only deal with the minimum, and there are those that will provide support for the entire lifespan of the company, such as incorporating, managing the registered office, bookkeeping, filing taxes, and annual maintenance. For businesses that operate, expand, or are foreign-owned, a joined-up support may be more helpful than a limited appointment service.
When should you change your company secretary?
The new company secretary is not always the issue, it’s usually when to replace the current company secretary. If your provider isn’t responsive, records may not be properly updated or the service may no longer be appropriate for the size of your company, it may be time to rethink the provider.
It also may be beneficial to restructure if there is a more significant change of use like new investors, change of ownership or new markets. The company secretary should be able to do more than mere filing at that time. The position should help to bring order, visibility and confidence to your corporate records.
Switching secretaries is typically an easy task, but the quality of the handover is important. All complete and accurate records, registers, resolutions and prior history of filing should be handed over to the incoming secretary. The new provider may need to first establish the statutory position if these records are incomplete before they start routine maintenance.
A practical way to make the appointment smooth
Most founders and small businesses can approach this as one of a larger compliance program, and not a one-off project. This means that the provider has to be able to undertake not only the role of company secretary, but also coordinate the ongoing statutory and record-keeping tasks that are required of the company.
This is particularly useful to foreign owners and under-resourced management teams. Rather than searching out their own advisers for incorporation, secretarial duties, and accounting records, they can count on one functioning partner to help ensure these essentials are in alignment. Gee Kay Systems & Accounting Limited operates on those terms, helping to alleviate the administrative burden without making compliance law unworkable and unpredictable.
When choosing a secretary for a company, the easiest to choose on the surface is not necessarily the best. It’s the one that will sustain your business while you’re busy with the day-to-day tasks, the books must be ready for review, and you need to be focused on the business.
FAQs
1. Who can be appointed as a company secretary in Hong Kong?
Depending on the situation and requirements of the company, the company secretary needs to be an eligible person or a corporate service provider.
2. Can the sole director also be the company secretary?
If there is only one director for a private company, they may not be the company secretary.
3. What documents are needed to appoint a company secretary?
In general, the company will require a resolution by the board, the secretary’s signature and consent, and any supporting documents that may be necessary.
4. Can a company change its company secretary?
Yes. A company may replace a secretary if it considers it necessary, provided that the process of replacing the secretary is properly approved, recorded and reported as required.
5. Should I appoint an individual or a corporate service provider?
It is based on the company’s requirements. A corporate provider may be able to provide more continuity and organised assistance in the creation, filing of statutory records and ongoing compliance.
