How company secretaries can add value to share plan management

What does a company secretary do?

A company secretary is responsible for a variety of legal and governance matters within a company, including maintaining up-to-date and accurate records, preparing annual or quarterly reports, and advising the board on governance and ethics considerations. 

There is no legal obligation for a private company to appoint a company secretary in the UK. In earlier-stage businesses, a founder or another senior executive often undertakes company secretarial (Cosec) duties. In public companies, though, appointing a company secretary is a legal requirement, and failure to do so could result in a fine. Large companies tend to build secretarial teams that work to carry out Cosec duties. 

Legal and governance matters are often broad and can affect various teams or individuals within a business. Company secretaries are expected to be omniscient, acting as the experts in all things governance. Secretarial teams must communicate and collaborate across all business functions, including the board of directors and C-suite. The vast administrative workload is constantly evolving, with changes in rules and regulations needing to be understood, communicated internally, and in some cases actioned to ensure compliance.

Corporate governance for company secretaries

Corporate governance is a term used to describe processes that drive compliant company decision-making and administration. Company secretaries or secretarial teams are often required to wear many hats – legal, finance and HR, working to implement the most efficient processes in all areas. Despite not being an exhaustive list, we have summarised some of the key responsibilities below:

Infrastructure for effective decision-making

Deciding on the correct course of action can take a very long time (in some companies) and be costly. This can be partly due to the number of people in the decision-making process, but the timeframe could be extended further due to inefficient implementation processes. Who will save us? Secretarial teams play the protagonist's role in this story.

To streamline decisions that are voted on or decided by the board of directors, there needs to be a robust and compliant process in place. The Cosec function is responsible for outlining the decision-making process, ensuring the relevant information is accessible to the relevant group of stakeholders, and progressing with the required next steps. 

Effective share plan implementation

The board of directors would need to approve a proposed equity plan before being implemented. The Cosec function would have been responsible for discovery, information gathering and then the planning or execution of the share plan once the board has approved. Given the various plans such as SAYE, employee stock option plan (ESOP) and share incentive plans (SIPs) just to name a few – this can be a significant undertaking. 

Reporting and auditing

Whether following annual or quarterly cycles, reporting and auditing tasks are also heavily reliant on the company secretary or secretarial team. The access to data and information that is needed to complete these reports will follow the well-placed guidance set by the Cosec function. And where there is data, there needs to be security. Cosec functions will often act as the gauntlet that new systems must pass through – checking that the systems meet the required standards before being implemented.

Due to the ever-changing regulatory environment, there is an ongoing need for regular audits of internal systems and processes, to ensure that reporting and data-led tasks are compliant. Cosec functions are required to keep their finger on the pulse of regulation, updating reporting and auditing processes or technology in line with the latest regulatory requirements.

Keeping an up-to-date cap table and compliant share plan reporting

In reality, having an updated and accurate cap table can be a significant undertaking in larger businesses. Depending on which territory employees and companies are based in will determine the financial reporting standards used, IFRS 2, UK and US GAAP are a few examples of varied reporting requirements. Dealing with a large variation in plan types, vesting schedules and performance conditions often used across employee equity plans, implementing an efficient share plan management solution can reduce the manual elements involved in reporting. Generating and automating reports, without the need for regular and time-consuming manual inputs, can lighten the load of financial reporting involved in share plans for Cosecs.

Approval process improvements and compliance

Linked to both of the previous governance examples, there are specific compliance considerations within approval processes. Whether at the board level or management level, approvals need to be completed and tracked efficiently, to enable the required audit trail for local authorities such as HMRC in the UK. An example of approvals and reporting working in tandem would be for the management of insiders.

What is the management of insiders?

This is an essential process, set up to ensure that employees are not at risk of making illegal trades based on confidential information (insider trading). The company secretary must decide who would be deemed to have access to sensitive and confidential information, and who could use their knowledge to profit from trading on the stock market. This varies significantly by the size of the business, industry and product or service that the business provides. Once identified, the company secretary would be responsible for managing the trading approval process for the identified group. 

Company secretaries need efficient approval processes and an accurate log of trades

The company secretary is usually the designated approver of trades in company stock for any ‘insider’. However, whilst waiting for the company secretary to approve a trade, stock prices could be falling. Therefore the trade approval process needs to be efficient and accurate. 

There is also a requirement for company secretaries to report trades (usually in the form of an announcement) of company stock by senior members of the business to the stock market – this is a legal requirement. This is so the company CEO couldn’t secretly trade shares of the business they are running. It usually makes the front pages when CEOs of the world's largest businesses trade their stock, and it can result in significant shifts in the market. 

Company secretaries and secretarial teams can simplify the process and reduce the manual burden by choosing flexible and modern financial reporting software. Ledgy provides a single source of truth, one platform to manage share plans and export or automate financial reports.

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