Effective from the 6th April 2008, UK limited companies now have the option of whether or not to appoint a company secretary at the time of their incorporation.

The change is brought about as a result of the provision contained in the Companies Act 2006 (which is being introduced on a piecemeal basis).

Up until the 6th April 2008 every company formation in England, Wales and Scotland required at least two persons to act, one as a director and another as a secretary. The changes mean that now a single individual can register a company and be the sole director.

In some cases prior to 6th April where a person was setting up a company on their own, they would ask a family member to act as the secretary simply to satisfy the legal requirement to have one.

Many of these “stand in” secretaries were unclear as to their potential exposure towards acts that the company could commit. The alternative to engaging a family member was to purchase a nominee secretary service which was usually available from a company formation agent.

In the above scenarios, the entrepreneur could now save the expense of purchasing a nominee secretarial service or asking a family member and simply form the company on their own.

The Companies Act 2006 regulation applies to both future company formations and existing private incorporated businesses.

Existing companies now have the option to resign their company secretary should they not wish to have one. Such companies should review their memorandum and articles of association, which in some instances, might refer specifically to the company secretary.

Where such references exist, the company would either have to submit new memorandum and articles of association with the required resolution to Companies House or make a change to the specific sections which refer to the company secretary and submit these, again with the relevant company resolution.

A recent enquiry was received from a company formation client who asked whether these new provisions had any affect on Northern Ireland companies. The Department of Enterprise, Trade and Investment and not Companies House currently regulate company registrations in this jurisdiction.

The answer to the question is yes, the Companies Act regulations which make the appointment of secretaries optional do apply to Northern Ireland companies.

Opinion as to what extent the new rules will affect new company set-ups and existing entities is divided. There are those who argue that as there is no reduction in the scope or volume of company secretarial work which must be carried out, most incorporated business will opt for having a person act as secretary.

On the other hand, some commentators suggest that a large proportion of secretaries of private companies were largely unskilled in statutory matters and in fact did not perform many of the traditional secretarial duties. Therefore, their omission at the time of registering a company would have little or no effect on the preparation of statutory records and documents.

Whether or not companies continue to be incorporated with secretaries remains to be seen. From what we have witnessed, so far, where people have been aware of the new rules, they are choosing to set-up their companies without them.
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Simon - Company Formation Services