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Appointing a Company Secretary can make the difference
Since the 6th of April 2008, an amendment to the Company Act 2006 has meant it is no longer mandatory for a Limited Liability Company to appoint a company Secretary. To find out how this can affect a company it is necessary to spend a little time to explain what a Company Secretary is and what their duties are. The main responsibilities for this officer are administrative in nature and they can vary from firm to firm.
The exact role depends on the size of the company, with only occasional administrative tasks required by the typical small business and for medium/large sized firms being responsible for arranging company meetings, keeping notes and keeping the minutes of any meeting. A Company Secretary can be either a person or a corporate entity and does not need to be qualified (on the contrary for a PLC it has to be a Solicitor, Accountant or a Barrister). Every time you appoint or resign a Company Secretary Companies House should always be informed by filing the proper forms.
The appointment of the Company Secretary, even though facultative, can be really relevant when a company has got the same person appointed as Director and Shareholder. In fact, in this case there is a really borderline difference between the status of a Ltd company and the one of a Sole trader. Even though it can appear like a useless difference, it can affect your business and yourself directly. Until now, the law does not state clear rules to define the two categories therefore you may think that if you satisfy what it is required by law and you register your company everything should be fine. However, you should also consider that the law can change at any time and also if your business suddenly stops doing well and you get involved in a compulsory winding up there is a risk that the liquidator may try to question the concrete existence of the company by trying to disqualify it to a sole trader category.
When you set up a business the last thing you want to be focused on are negative aspects, but if you do not think about what the consequences of this are, your business might have a bitter end. In fact, a sole trader is ultimately responsible for any liabilities should anything go wrong. The Ltd is a separate legal entity which is entitled to carry rights and duty, therefore separate from his officers. Creditors will be able to claim their credit from the Ltd and to get the repayment from the company’s capital. A sole trader is personally liable for all amounts owed to creditors and the government. This also means that should the sole trader not be able to make suitable arrangements to settle any debts, their personal possessions (including the house) will be collectable by creditors and may result in bankruptcy.
Full differences of Ltd and Soletrader companies are not considered here but the main differences reported so far are enough to underline what risks can occur if the company officers are not carefully chosen. Thus, when the officers of a company merge in one unique person the appointment of a Secretary is very advisable because it will bring a sort of “depersonalization” and will nullify the risk of being personally liable for your company business.
By Jenny Suprani
Company Administrator |
