What are the strengths and weaknesses, of allowing the same person to be both Director and Company Secretary?

Question

Some countries forbid a company's Sole Director to be company secretary.

Singapore's Accounting and Corporate Regulatory Authority (ACRA)

The sole director of a company and the company secretary cannot be the same person.

HKSAR's Companies Registry.

7. Can a non-Hong Kong resident be appointed as a director and company secretary of a local limited company?

A private local limited company must have at least one director who is a natural person and one company secretary. The sole director cannot act as the company secretary of the same company.

But other countries allow a company's Sole Director to be Company Secretary.

Australia's Corporations Act 2001, Section 1.5.5

5.4 Company secretaries

The same person may be both a director of a company and the company secretary.

What are the advantages and drawbacks of a Sole Director also being Company Secretary?

Answer 1

The same rule applies in United Kingdom.

The company Complete Formations Ltd writes

Companies with One Director
Prior to the 1st October 2009 (when certain provision of the Companies Act 2006 were introduced) if when forming a company, there was be only one director (single director companies as they are known), then that same person could not also then be the secretary. In this case another person or company would have been required to fill the role of secretary.

More than One Director
Again before the inception of the Companies Act 2006 regulations, where there was to be more than one company director, one of these persons could then also act as the company secretary.

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The Institute of Directors writes:

Formal duties
According to the July 2018 UK Corporate Governance Code, “All directors should have access to the advice of the company secretary, who is responsible for advising the board on all governance matters. Both the appointment and removal of the company secretary should be a matter for the whole board.”

This means that if there is only one director, it would be impossible for them to consult the company secretary, being one and the same person. The page goes on to say (quoting the Cadbury Report 1993)

The company secretary has a key role to play in ensuring that board procedures are both followed and regularly reviewed. The chairman and the board will look to the company secretary for guidance on what their responsibilities are under the rules and regulations to which they are subject and on how these responsibilities should be discharged. All directors should have access to the advice and services of the company secretary and should recognise that the chairman is entitled to strong support from the company secretary in ensuring the effective functioning of the board.

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Since April 2008, only a public company is required to appoint a (suitably qualified) Company Secretary. It is optional for a private company unless required by their Memorandum & Articles of Association. In one company I was associated with, the articles described the appointment and duties of the secretary, adding that the position was not a Company Secretary as described known by the Companies Act.

Answer 2

australia

The Company Secretary role is somewhat anachronistic

The Corporations Law imposes obligations on officeholders, a term that includes directors, company secretaries, and anyone controlling a corporation even if not formally appointed to do so.

Private companies are no longer required to have a company secretary; if they do have one, they must live in Australia. In addition, private companies can have a single director unless they have crowd-sourced funded shareholders, when they need a at least two; the majority must live in Australia.

Public companies must have a company secretary and at least three directors. The secretary and a majority of the directors must live in Australia.

So, legally, there is no difference between the secretary and the directors. For a listed public company, the secretary acts as the point of contact between the exchange and the company and is generally the officer tasked with corporate compliance.

So, in an Australian context, the question boils down to what are the pros and cons of having at least two directors.

Well, for a public company there must be at least three so the question is moot.

For a private company, once the company is no longer tightly held (e.g. by an individual or a single family), third-party shareholders will normally insist on a board seat. So, they normally have multiple directors and, again, the question becomes moot.

For the rest, the advantage of multiple directors is a divergence of views, however, unless some of the directors are independent, there is a risk of group-think, particularly if the directors are closely related. The disadvantage is cost - independent directors expect to be paid.