Blog : BOARD TALK
|Posted on June 12, 2014 at 11:50 AM|
"In June 2013, having lived through the subprime mortgage crisis, Lehman Brothers’ bankruptcy, the near collapse of two UK clearing banks and other corporate crises, I wrote to the Secretary of State, Vince Cable, to ask him to consider amending the Companies Act 2006.
From the outset, ICSA has made representations against the decision to remove the requirement for private companies to have a company secretary, for two main reasons. First, it may encourage larger private companies to dispense with the person best equipped to maintain standards in governance and processes. Second, given that someone still has to undertake all the duties and tasks previously assigned to a secretary, this change does not seem to offer much benefit.
In response, Jo Swinson, Minister for Employment Relations and Consumer Affairs wrote to ICSA to state that the 2006 Act would only be amended if there was ‘clear evidence’ that the current requirements are detrimental.
It is fair to say that direct cause and effect cannot be proven but poor governance has undoubtedly been a contributory factor in a number of the scandals that have hit the headlines since 2006. The ‘flexible framework’, that BIS favours, seems to be working against its stated aim of ‘ensuring that we create the right environment for all companies to grow’.
Merely requiring large companies to appoint a secretary will not prevent corporate failures but anecdotal evidence indicates that adherence to good governance standards promotes confidence and lowers the cost of capital.
The UK strategy seems particularly short-sighted given that the government in the Republic of Ireland now recognises that a properly qualified company secretary is essential. The Irish Companies Bill 2012 (expected to be enacted this autumn) makes it a requirement for all companies to appoint a secretary.
I believe that introducing the same requirement into UK law, at least for larger private firms, would go some way towards restoring trust in business and reassuring the public. I will continue to lobby our government to adopt this more enlightened approach.
For more on the Irish Companies Bill, look out for my forthcoming article in the July edition of Governance + Compliance magazine.'
(ICSA's software arm sponsors this blog with no editorial control - sponsorship going into 2nd year in July).
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