A company secretary may be held personally liable should the rules laid out in the Companies Act not be adhered to. Just as directors themselves might be held financially responsible for negligence, so too does the Companies Act make clear, in almost 100 of its sections, the offences which any company officer could commit.
These might include serious criminal offences such as fraudulent trading, as well as more benign situations such as administrative oversights.
Most of these offences apply to every office ‘in default’, which means anyone who “authorises or permits, participates in, or fails to take all reasonable steps to prevent” a wrongful act from being carried out.
Where HMRC finds evidence of either negligent or fraudulent behaviour, it has various mechanisms in place, such as a Personal Liability Notice. These are sent to make officers personally responsible for debts owed to HM and Revenue.
Circumstances Where Personal Liability Could Occur
A company secretary can be held personally liable for debts or other financial obligations of the company in the following circumstances.
Wrongful Trading If a company secretary continues to allow the company to incur debts or liabilities while knowing or having reasonable grounds to believe that the company is insolvent or will become insolvent, they can be held personally liable for those debts under the principle of wrongful trading. This liability arises from the company secretary’s duty to act in the best interests of the company’s creditors when insolvency is a real risk[1]Trusted Source – GOV.UK – Wrongful Trading.
Personal Guarantees or Indemnities If a company secretary has provided personal guarantees or indemnities for the company’s debts or obligations, they can be held personally liable for those specific debts or liabilities in the event of the company’s failure to pay.
Breach of Fiduciary Duties Company secretaries owe certain fiduciary duties to the company, such as the duty to act in good faith and in the best interests of the company. If a company secretary breaches these duties, resulting in financial losses or liabilities for the company, they may be held personally liable for those losses or liabilities.
Fraudulent or Unlawful Conduct If a company secretary engages in fraudulent or unlawful conduct that directly contributes to the company incurring debts or liabilities, they can be held personally liable for those debts or liabilities, as well as potential criminal charges.
Failure to Comply with Statutory Duties Company secretaries have various statutory duties under company law, such as maintaining proper records, filing annual returns, and ensuring compliance with legal requirements. Failure to comply with these duties can result in personal liability for fines, penalties, or other financial obligations imposed on the company.
It is important to note that the extent of personal liability for a company secretary will depend on the specific circumstances and the nature of their involvement in the company’s affairs. In most cases, as long as the company secretary acts diligently, in good faith, and within the scope of their duties, they are generally shielded from personal liability for the company’s debts.
What is a Company Secretary Responsible for?
The company secretary is tasked with seeing that the core administrative responsibilities of the company are fulfilled. These include:
Filing Annual Returns
Ensuring the Confirmation Statement is sent to Companies House
Filing the annual director’s report
Files the auditors report if your company size make that applicable (£10.2m annuals or has assets totalling more than £5.1m )
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
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