Question

A company secretary works for a small company and is also the financial officer for the company who generally advises the directors on the day-to-day operations of the company. The company has a constitution, which limits the ability of the company secretary from borrowing any amounts over $5,000 without the matter being referred to a meeting of the board of directors. The company specifically created a constitution because the shares are all held by family members and the company secretary is not a family member. The company secretary does in fact organise a line of credit for the company for some $50,000, which is directly in breach of the company constitution. When the directors discover the company has a liability to a bank for nearly the full amount of $50,000, they take action to suspend the company secretary and inform the bank that, due to the company secretary exceeding his authority, the company is not responsible for inappropriate lending by the bank, and that the bank needs to find some solution against the company secretary personally. What is the liability of the company for the actions of the company secretary? (Minimum 200 words)

Answer 1

solution :-

A Company Secretary is a poor servant of the Company, consequently his removal and stay is directed by the normal law as relevant to master and servant.

If the Company Secretary is elected for a fixed term, he cannot be removed ere the expiry of the term except he is found he has been declared guilty of misconduct, inexperience etc.

As a characteristic body of a group he is liable for any neglect done on his part which may occur in the release of his duties; responsible for making anything behind his jurisdiction; following the responsibility of having secrets of a company from strangers; liable to be released on account of doing any secret profits from company. Other than this he cannot access into a guarantee on behalf of the company unless approved by directors; cannot borrow money in name of the company; cannot acknowledge a debt upon a suit against a company; cannot register or assign shares without due authority of Board of Directors.

The Articles of Association include provisions empowering the Board of Directors to dismiss or transfer the secretary from the services of the company.

The Company may be removed without notice for willful violation, misconduct, negligence, and inability or due negligence.

The Company have rights to take Civil and Criminal actions into the Company Secretary for his due negligence and Fraud. The Company will compare the Courts & Company Law Board to raise a secretary eighter wholly and partly from his liability in any proceedings against him or her for negligence, default, breach of duty, or breach of trust

A company is also able to recuperate the cash from Company secretary for his carelessness, error, or breach of duty by way of recording the suit into the Courts.