Should You Outsource Your Company Secretarial Function?

Under the Companies Act, 2015, a private company must have a company secretary only if its paid-up capital is five million shillings or more (section 243(1)), while every public company must have at least one (section 244). Below that threshold, the decision whether to outsource your company secretarial function is commercial, not legal: the law lets a director or an authorised person do the secretary’s work, but it does not lessen the deadlines or the personal exposure of the company’s officers. Most small and growing companies never weigh this properly. They either do nothing until a filing deadline is missed, or they hand the job to whichever director has the most spare time.

When Kenyan law requires a company secretary

Section 243(1) says a private company is required to have a secretary only if it has a paid-up capital of five million shillings or more. Section 244 requires every public company to have at least one secretary. Qualification rules differ. Section 246 requires the directors of a public company to take all reasonable steps to ensure that its secretary has the requisite knowledge and experience and holds a practising certificate issued under the Certified Public Secretaries of Kenya Act; a director who fails to do so commits an offence with a fine of up to two hundred thousand shillings. Section 246 is written for public companies, and sections 243 and 243A, which deal with private companies, set no equivalent qualification test, so a professional qualification is not a statutory requirement for every company’s secretary.

A public company must also keep a register of its secretaries (section 248) and must lodge a notice with the Registrar within fourteen days of the appointment or cessation of a secretary, or of any change in the register particulars (section 249).

What happens if a private company has no secretary

Section 243(2) provides that where a private company has no secretary, anything required to be given to or served on the secretary may be given to or served on the company itself, and anything the secretary would do may be done by a director or by a person the directors authorise generally or specifically. A company below the threshold may still choose to appoint a secretary (section 243A(1)).

Section 243A(2) adds a separate requirement. A private company, or a company limited by guarantee, that has neither a company secretary nor a resident director must appoint a contact person, who must be a natural person with a permanent residence in Kenya, and must lodge a notice of the appointment with the Registrar. The contact person must keep copies of the records relating to directorship, shareholding, beneficial ownership and other information the company must keep, and make them available to competent authorities (section 243A(4)). The company must also notify the Registrar when the contact person changes or moves. So even a company with “no secretary” still has a named person tied to its records.

What the company secretarial function actually covers

Company secretarial work is a recurring set of obligations, each with its own deadline, and several carry statutory consequences:

Annual returns. Under section 705(3), the annual return must be lodged with the Registrar within twenty eight days after the date to which it is made up, and the return date is the anniversary of incorporation unless an earlier return was made up to a different date. If a company fails to lodge, the company and each officer in default commit an offence, with a fine of up to two hundred thousand shillings and, after conviction, a further fine of up to twenty thousand shillings for each day the failure continues (section 708).

Beneficial ownership. Section 93A(5) requires a company other than a public listed company to lodge a copy of any amendment to its beneficial ownership register within fourteen days after making it. The penalties, and the link to the Registrar’s strike-off power in section 894, are covered in our article on the beneficial ownership register and strike-off risk.

Registers, resolutions and records. Keeping statutory registers current, recording decisions of the board and members properly, and making sure the company’s filed position matches what has actually happened.

Should you outsource it?

None of these tasks is difficult in isolation. What makes them fail in practice is that no one owns them. A director or office manager with informal responsibility is also doing a full-time job, and a fourteen-day or twenty eight day clock does not wait for a quiet week. An outsourced company secretarial function puts a named person, with no competing role in your business, in charge of the calendar and the filings, and that person will usually have handled the same filings for other companies.

The trade-off is cost. Outsourcing is a recurring fee whether or not anything needs filing in a given month, while an in-house arrangement costs nothing extra until a deadline is missed. Keep one point in mind either way: the sections above place liability on the company and each officer in default, and nothing in them shifts that liability to a service provider. Outsourcing moves the work, not the responsibility.

A practical test is to ask what happens if the person now responsible leaves or becomes too busy for a quarter. If nobody else would notice a missed deadline until it became a problem, the company secretarial function needs a dedicated owner. A company approaching the five million shilling threshold, or one with several shareholders and frequent changes, should also check whether the law now requires a secretary.