A Quarterly Newsletter from the UAE and Oman member firms of the PKF International Ltd.

VOL 14, Issue 2 April 2012

Secretarial Services for DIFC Companies

“Corporation: An ingenious device for obtaining profit without individual responsibility.” – Ambrose Bierce

Introduction

The Dubai International Financial Centre (DIFC) has emerged as a hub for finance and business, with world-class infrastructure and an internationally recognized regulatory framework and jurisdiction providing a stable platform for global and regional firms to access the region’s emerging markets. The number of registered companies within the DIFC has experienced an upward trend in recent times due to the growing prominence of Dubai which is being considered as a gateway for business between East and West.

In such a business environment it is imperative that administration of corporate guidelines and execution of tasks as required by the law are performed in an appropriate and timely manner. A company secretary has a pivotal role to play in assisting and coordinating between various shareholders and directors of a company for preparation and submission of documents to the DIFC authorities primarily the Registrar of Companies (RoC), updating and maintaining records, and advising the company’s board on changes in legislation which affects the administration and operations of the company. This article delves into the duties and responsibilities of a company secretary with specific reference to operating within the framework of the DIFC.

The role and responsibilities of a company secretary are set down in the Companies Law – DIFC Law No.2 of 2009, and the DIFC Companies Regulations, though there is no comprehensive code of conduct defining the scope of duties for company secretaries. The Companies Law states that every company shall appoint a company secretary who shall not be a director of that company. The appointment and removal of a company secretary is a decision of the board of directors of a company.

The company secretary of a DIFC company may be an individual, a body corporate or a partnership, provided that in the latter cases the entity must be incorporated, established or registered in the DIFC or registered in a jurisdiction approved by the RoC. A company secretary need not necessarily be an employee of the company, and the services can be outsourced to an individual or a professional firm. The DIFC does not lay down formal qualifications of a company secretary, and the appointment is left to the discretion of each company.

The services provided by a company secretary may be segregated into ‘annual recurring services’ and ‘miscellaneous services’, many of which result in an online submission to the RoC via DIFCSTAT. Annual services entail execution of tasks which are mandatorily required by the DIFC and need to be executed at least once annually, while miscellaneous services are performed as and when required, which could be more than once annually.

Annual recurring services (mandatory)

  • Coordinate and submit the annual returns of the company to the RoC. This involves completing the necessary details in the annual return, checking for data completeness and accuracy, and submission to the RoC before the end of the financial year.
  • Request/provide notices and conduct of annual general meetings (AGM) and statutory meetings. This involves:
    1. Ensuring that the mandatory AGM is conducted, at least once annually and by the prescribed date;
    2. Informing all directors and shareholders of the company through a minimum of 21 days notice, when a statutory meeting request is received from any of the directors / shareholders;
    3. Maintaining a record of the details of the meeting, such as date and venue of meeting, names of shareholders/directors attending, etc.;
    4. Attending all AGM and statutory meetings, either in person or through telephonic conferencing;
    5. Preparing minutes of all the meetings, obtaining the sign-off from the chairperson of the meetings attended and maintaining a record of the minutes of the meetings;
    6. Maintaining of a minutes register and providing shareholders with a copy of the minutes, if requested.
  • Renewal of the company’s commercial licence. This involves:
    1. Preparing all the necessary documents required for renewal of the licence;
    2. Submitting the prescribed fees on behalf of the company, and filing of the documents with the RoC.
  • Coordinate in the submission of the financial statements and auditor’s report (FSAR) to the RoC. This involves:
    1. Ensuring that FSAR is discussed and presented by the Board at the company’s AGM, and signed off by the company’s directors;
    2. Submitting the signed FSAR with the RoC, and maintaining a record of the same;
    3. Coordinating and providing a copy of the FSAR to shareholders, on request;
  • Complete the DIFCSTAT annual economic survey. This involves coordinating with the company to obtain the necessary information required to complete the survey on behalf of the company.

The above services are time-bound as prescribed by the DIFC. Failure to perform the above duties within the timeframes laid down can attract fines or penalties.

Miscellaneous services (non-recurrent)

There are various events that may occur during the lifetime of a company that require notices and/ or applications to be made to the RoC, as under:

  • Maintain and update the register of directors, secretary, and shareholders. This includes:
    1. Updating changes in particulars of directors, secretary, and shareholders and notifying the RoC;
    2. Ensuring that a resolution, if required, is passed prior to submission to the RoC;
    3. The register may be maintained at the registered office of the company.
  • Assisting in coordinating with the RoC on the following modifications or changes “
    1. Change in the name of the company;
    2. Reduction in share capital;
    3. Change(s) in the articles of association (articles);
    4. Changes in the allotment / transfer of new /existing shares of the company;
    5. Registered office address;
    6. Appointment/resignation of accountants/ auditors to/from the Company;
    7. Appointment of any person in the company authorized to accept service of any document or notice from the DIFC;
    8. Any dissolution notice issued by the DIFC authorities against the Company.

In each of the above cases, the company secretary is expected to:

  • Advise the company on the procedure, requirements, documentation, etc. mandated by DIFC;
  • Coordinate with the company to draft a special resolution required to record the change;
  • Prepare, modify and/ or update the relevant documents, registers, articles, as applicable
  • Submit the relevant documents to the RoC.

The miscellaneous services listed above are not exhaustive, and are for illustrative purposes. All the above services are required to be executed only on occurrence of the event. These services are time-bound as prescribed by the DIFC.

An important cog in the wheel

The company secretary is one of the many cogs that make the company wheel continue to turn. However, the role of a company secretary is often underestimated as the function is more administrative rather than managerial. Whilst not having the range of duties and responsibilities of directors, a company secretary has critical tasks delegated to him/her, and may be liable if those tasks are not carried out on time or in an appropriate manner, as prescribed by the DIFC law.

Pursuant to Clause 53 of the Companies Law, a company secretary or any other officer in the company in exercising his powers and discharging his duties shall:

  • Act honestly, in good faith and lawfully, and in the best interest of the company; and
  • Exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

A company secretary should exercise caution in ensuring that there are no conflicts of interest. Breach of the above duties, negligence and defaults in payments made on behalf of the company may result in fines being levied on the company and possibly in the secretary becoming subject to internal disciplinary proceedings.

There is an implicit understanding that information provided to the company secretary is accurate and bona fide in all respects. The company secretary is not expected to ratify and ensure the veracity of information provided and would not be liable if he is able to prove that he acted in good faith. Hence, a company secretary may not be held liable or be subject to criminal proceedings in case of fraudulent dealings of the company, misappropriation of funds, etc., unless he or she is knowingly involved in the wrong-doing.

In conclusion, the company secretary’s role, albeit administrative in nature, is a vital component in the operations of any company.

On a lighter vein, “Any man in business would be foolish to fool around with his secretary….” Barry Goldwater.

[This article has been contributed by Ms.Susan Daniel, Manager, Management Consulting, with critical inputs from Mr. Graham Martins, Managing Partner. PKF offers company secretarial services to entities  operating within the DIFC.]