ACCA Applied Skills · Corporate and Business Law (Global)

Other company officers: formula sheet

Full chapter guide

Key formulas

Must a company have a secretary?: Depends on company type and national law; Typical pattern: public company must have one; private company may not need one. Use the rule stated in the question.
Who can be appointed: Individual (or, where allowed, a corporate body) who is suitable and competent; Public company secretaries often need a qualification or experience. Private company requirements are usually lighter.
Who appoints: Board of directors, unless the articles say otherwise; The appointment is recorded and notified to the registrar.
Status of the secretary: Secretary = officer of the company; Officer status brings personal responsibility for statutory duties and potential liability for defaults.
Typical duties: Registers + meetings + minutes + filings + notices; Administrative and compliance functions, not management of the business.
Panorama rule: Administrative contract + outsider acts in good faith = company bound by secretary's ostensible authority; Typical examples are hiring cars, ordering office equipment and engaging office staff.
Limit on authority: Trading or commercial contract = no ostensible authority from the secretary's office alone; Authority must come from the board or from a separate representation by the company.
Type of authority: Actual (express or implied) or apparent (ostensible); Apparent authority needs a representation by the company and reliance by the third party.
Company's liability: Misuse of authority by the secretary does not free the company if the outsider had no notice; In Panorama the secretary's fraud on his own company did not stop the company being liable.
Core administrative duties: Registers + notices and minutes + statutory filings + compliance advice; These are the administrative functions that normally fall to the secretary.
Appointment by members: Auditor appointed by ordinary resolution of members (more than 50% of votes cast); This is the normal route at the general meeting where accounts are laid.
Appointment by directors: Directors fill the first appointment or a casual vacancy; Members can still fill the vacancy. Directors' power does not apply if the members must appoint.
Removal: Ordinary resolution + special notice (28 days) + copy to auditor; Removal is at any time. The auditor can make written representations and speak at the meeting.
Resignation: Written notice + statement of circumstances (or statement that there are none); The company sends the statement to members. The auditor can require a meeting to explain it.
Remuneration: Fixed by whoever appoints the auditor; Members by ordinary resolution, or directors if they made the appointment.
Rights versus duties: Rights = what the auditor may demand; Duties = what the auditor must do; Use this to sort any list of auditor powers and obligations.
Negligence elements: Duty of care + breach of the standard + loss caused by the breach (not too remote); All three must be shown for a claim to succeed.
Standard of care: Skill and care of a reasonably competent auditor; Judged against professional standards, and higher for specialists.
Caparo three-part test: Foreseeable harm + proximity between the parties + fair, just and reasonable to impose a duty; Applied to auditors and third parties. Reliance by an unknown investor is usually not enough.
Third-party duty exception: Auditor knew the third party, knew the purpose and knew they would rely; Only in this narrow case may a duty be owed outside the company.
Limiting liability: Liability limitation agreement with the company: permitted only if fair and reasonable; total exclusion is void; Check the conditions of the jurisdiction. Principle is the same in Global variant questions.
Small company exemption test: Exempt if: small by size tests AND not an excluded type AND no valid member demand for audit; Size limits vary by jurisdiction. Use the figures given in the question.
Size tests: Qualifying = meets the required number of limits (turnover, total assets, employees); Check how many tests must be met and whether they must be met in consecutive years.
Excluded companies: Public companies, banks, insurers and (often) members of a group lose exemption; Always check the company type before the size test.
Auditor eligibility: Eligible = recognised qualification + supervisory body membership; An individual or a firm can be appointed.
Auditor independence: Not eligible if: officer or employee of the company, or connected to one; Connected typically includes a partner or employee of an officer or employee.

Quick revision

The secretary is an officer of the company who handles administration and compliance.
Check whether your study material says a secretary is mandatory for the type of company in the question.
The secretary's authority is limited to administrative and routine matters, so check the facts before saying the company is bound.
The auditor is independent of the directors and reports to the members.
Know who appoints the auditor, and who can remove the auditor, in the normal case.
Resignation and removal each have their own procedure. Do not mix them up.
Auditors have a right of access to the company's records and may ask officers for information.
Auditors have a duty to report their opinion on whether the accounts give a true and fair view.
Auditor liability depends on duty of care, breach and loss.
Audit exemption applies only if the stated conditions are met, so check every condition.
Independence is threatened by self-interest, familiarity and similar relationships.
Read all four options in objective questions. Partial answers earn nothing.

Common mistakes

Saying every company must have a secretary. Fix: Always check company type and the stated national law before answering.
Assuming any person can be secretary of a public company. Fix: For a public company, look for a qualification or experience requirement.
Saying the secretary can bind the company to any contract because they are an officer. Fix: Remember the limit: only administrative contracts. Trading and borrowing deals need other authority.
Relying on Barnett, Hoares v South London Tramways as current law. Fix: Use Panorama as the modern view of the secretary's status and ostensible authority.
Saying directors can remove the auditor. Fix: Removal is a members' power by ordinary resolution. Directors have no power to remove.
Saying removal needs a special resolution. Fix: It is an ordinary resolution, but with special notice.
Saying auditors owe a duty to all shareholders as individuals. Fix: The audit is for members as a body. Individual shareholders buying more shares cannot claim under Caparo.
Mixing up rights and duties. Fix: Ask who acts. If the auditor can demand it, it is a right. If the auditor must do it, it is a duty.
Saying a small company has no duty to keep accounts. Fix: Exemption removes only the audit. Records and accounts are still required.
Applying a size test without checking the company type. Fix: Check type first. A small public company or bank is still not exempt in most systems.

Exam tips

Read the company type first. It usually decides the answer.
If the question states a national rule, use it over what you remember in general.
Remember the word officer. Exam options often test status and liability.
In Section B scenarios, link your answer to the exact facts, such as the appointee's qualifications.
Separate this topic from the secretary's authority to bind the company, which is tested as a different point.
In scenarios, classify the contract first: administrative or commercial. That decides most questions.
Name Panorama Developments v Fidelis Furnishing Fabrics in written answers, and state the fact that the cars were hired for business purposes.
Remember that objective questions are all or nothing, so read every option for the limit on trading contracts.