Company Secretary, Accounting Records and Financial Statements

If directors are the decision makers of a company, the company secretary is the officer who makes sure the decisions are lawful, recorded and filed. The secretary calls the meetings, keeps the registers, files the returns and advises on compliance. The directors, in turn, have a duty to keep proper accounting records, prepare yearly financial statements and a directors’ report, and lay them before the members.

Examiners ask for the secretary’s qualifications and duties almost every year, and they ask for the contents of the financial statements as a list.

This topic covers the appointment, qualifications, duties and removal of the company secretary, the secretary’s authority to bind the company, the accounting records, the financial statements, the directors’ report, and the duty to lay and file them.

Appointment of the company secretary

Who must have one

Section 330(1) of Companies and Allied Matters Act (CAMA) provides that all companies except a small company must have a secretary. A company that had none when the Act began had to appoint one within six months. The directors appoint the secretary, and they must ensure that the person appears to have the requisite knowledge and experience to discharge the functions (section 332).

One point needs care. The syllabus says that all companies except small companies must have a secretary. In May 2022 the examiners asked which of five types of company may not appoint a company secretary, and their key gave the single shareholder company. Learn both: small companies are exempt in the syllabus, and the exam key also treated the single shareholder company as one that need not appoint one.

When there is no secretary

• An assistant secretary or deputy secretary may validly exercise all the powers and authority of the secretary.
• If there is no assistant or deputy, any officer of the company authorised by the directors may act as secretary (section 330(3)).
• A public company that breaks the rules on appointing a secretary is liable to a fine set by the Corporate Affairs Commission (CAC), and to a daily penalty for as long as the breach continues (section 330(4)).

The secretary and the director cannot be the same person

Where the law requires something to be done by a director and the secretary, it is not satisfied by one person acting as both (section 331). The annual return, for example, must be signed by a director and the secretary. In the Teletee Plc question the sole director was also the secretary, and that is not allowed.

Qualifications of the secretary

Section 332 requires the directors to take reasonable care to ensure that the person they appoint appears to have the requisite knowledge and experience. This is the only qualification for the secretary of a private company.

In addition, the secretary of a public company must be one of:

1. a member of the Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN);
2. a legal practitioner within the meaning of the Legal Practitioners Act;
3. a member of any professional body of accountants established by an Act of the National Assembly, such as Institute of Chartered Accountants of Nigeria (ICAN);
4. a person who has held the office of secretary of a public company for at least three of the five years immediately before his appointment; or
5. a body corporate or firm consisting of the professionals in (1), (2) or (3).

This list has been asked in November 2020 (four categories, 4 marks), May 2019 (four categories of persons qualified for the post), May 2016 (two persons) and November 2023 (four qualifications, 6 marks).

Duties and authority of the secretary

Fiduciary duties

The secretary owes fiduciary duties to the company only when acting as its agent. In that capacity he is liable to the company for secret profits, for allowing personal interest to conflict with duty, and for using confidential information for his own benefit (section 334).

Specific duties (section 335(1))

1. Meetings. Attend meetings of the company, the board and its committees, provide all necessary secretarial services for them, and advise on compliance with the rules that apply.
2. Registers. Maintain the registers and other records that CAMA requires the company to keep.
3. Returns. Render proper returns and give notifications to the CAC as CAMA requires.
4. Administration. Carry out the administrative and other secretarial duties directed by the directors or the company.

The examiners’ solution for November 2022 added that the secretary convenes the corporate, general and directors’ meetings, advises on regulatory compliance, files corporate returns with the regulators, maintains the registers of members and directors, and, with the authority of the board, exercises powers vested in the directors. Under section 335(2) he may not exercise the directors’ powers unless the board authorises it.

Authority to bind the company

The secretary has ostensible (apparent) authority to bind the company in matters of administration. In Panorama Developments (Guildford) Ltd v Fidelis Furnishing Fabrics Ltd (1971) the secretary hired luxury cars, giving the impression that they were for the company, but used them for his own purposes. The company had to pay, because he was held out as having authority to make such contracts.

The same facts were set for May 2016 (Mr Okoruma and Lukka Company Plc) and May 2018 (Adex Plc and Bee Enterprises).

Removal of the secretary

Section 333(1) lets the board remove the secretary as well as appoint him. Where the board intends to remove the secretary of a public company, it must give him a notice that:

1. states that it intends to remove him from office;
2. sets out the grounds for the removal;
3. allows him at least seven working days to make his defence; and
4. offers him the option to resign within seven working days.

If after the notice he neither resigns nor makes a defence in the seven days, the board may remove him and report to the next general meeting (section 333(3)). If the board finds his defence insufficient, and the ground is fraud or serious misconduct, it may remove him and report to the next annual general meeting.

For removal on other grounds, the board needs the approval of the general meeting, and until then it may suspend him and report to the next annual general meeting (AGM). The removal of a suspended secretary takes effect as the general meeting approves (section 333(4)).

Accounting records

Section 374 requires every company to keep accounting records. The rules are:

• The records must disclose the company’s financial position accurately, and enable the directors to ensure that the company complies with CAMA.
• Every public company must keep its audited accounts displayed or posted on its website (section 374(6)).
• The records are kept at the registered office or at another place in Nigeria that the directors think fit, and are open to inspection by the company’s officers (section 375(1)).
• The company must preserve them for six years from the date they were made, subject to any direction on disposal under the winding-up rules (section 375(2)).
• An officer who fails to comply commits an offence, punishable by a fine the CAC specifies, unless he shows that he acted honestly and that the default was excusable in the circumstances in which the business was carried on (section 376).

These are the company-law rules on accounting records. The tax-law duty to keep books, which is also six years, is in the topic on annual returns and taxation.

The financial statements

Section 377 requires the directors of every company to prepare financial statements for every year. The statements include:

The form and content of individual and group statements are in sections 378 to 380, with extra disclosures in section 382. The year end of all subsidiaries must coincide with that of the holding company unless the directors decide otherwise for good reason. November 2017 asked for six individual reports in a public company’s financial statements (6 marks) and May 2023 asked for six contents of the directors’ annual financial report (6 marks).

The examiners accepted items such as the balance sheet, profit and loss account, notes, auditors’ report, directors’ report, statement of cash flow and statement of value added.

The directors’ report

The directors must prepare each year a report giving a fair view of the company’s business. It states the proposed dividends, the names of the directors during the year, the financial activities of the company and its subsidiaries, and any significant change in those activities during the year. Generally it must state the matters in Parts I, II and III of the Fourth Schedule (section 385).

Laying and filing the statements

• Section 388: the directors must lay the financial statements before the general meeting within 18 months of incorporation and then at least once every year.
• The auditor’s report is read before the company in general meeting and any member may inspect it.
• With a completed annual return signed by a director and the secretary, the company delivers to the CAC each year a copy of the balance sheet, the profit and loss account and the notes laid before the meeting, and pays the filing fee.
• Section 389: if the company fails to lay the report before the AGM or to deliver the return with the statements, every person who was a director immediately before the end of the period is liable to a penalty set by the CAC.

Working through the rules

Choosing the secretary

Timing the first laying of accounts

A company is incorporated on 1 March 2025. The directors must lay the first financial statements before the general meeting within 18 months, that is, by 1 September 2026. After that, the statements are laid at least once every year.

The two kinds of authority

Worked problems

Problem 1: the secretary who hired cars

1. The rule. The secretary has ostensible authority to bind the company in administrative matters, and a person who deals with him in good faith is entitled to rely on it (Panorama Developments v Fidelis Furnishing Fabrics).
2. The application. Hiring cars is the kind of arrangement a secretary appears able to make. Bee did not know that the cars were for A’s private use.
3. Advice to Adex. Adex is likely to be bound to pay Bee. It may then claim against A, who owes the company fiduciary duties as its agent and must not make secret profits or use his position for himself (section 334).
4. The notice. The notice must state the intention to remove him, set out the grounds, allow at least seven working days to defend, and offer him the option to resign within seven working days.

Problem 2: Teletee and the sole director

1. Two roles. Section 331 says that a requirement for something to be done by a director and the secretary is not met by one person doing both.
2. The public company rules. The company needs at least two directors and a secretary who is ICSAN, a legal practitioner, an accountant, a three-in-five years public company secretary, or a firm of those.
3. Advice. Appoint a second director and a qualified secretary, and hold the meetings due. The company and its officers are in default.

Problem 3: late accounts

1. The rule. Statements must be laid within 18 months of incorporation, that is, by 10 July 2025, and then at least yearly (section 388).
2. The application. The company is more than a month late.
3. Consequence. Every person who was a director immediately before the end of the period is liable to a penalty set by the CAC (section 389).
4. Advice. Prepare the statements, have them audited, lay them at once, and file the annual return with the CAC and the filing fee.

Questions that have been asked on this topic, and how to answer them

Common mistakes in the exam

• Applying the public company list of qualifications to a private company. A private company needs only the knowledge and experience test.
• Forgetting the “three years out of the last five” category, or the body corporate or firm.
• Saying the members remove the secretary. The board does, and general meeting approval is needed unless the ground is fraud or serious misconduct.
• Quoting five calendar days instead of seven working days.
• Saying a company is not bound by its secretary’s hire of cars. The company is bound by his ostensible authority.
• Listing the cash flow statement, value added statement and five-year summary for a private company. They are for public companies.
• Saying records are kept for three years. It is six.

Quick revision

• Secretary: all companies except small ones. Directors appoint. Same person cannot be director and secretary where both are required.
• Public company secretary: ICSAN, legal practitioner, accountant body, 3 of 5 years as public company secretary, or a firm of those.
• Duties (s.335): meetings, registers, returns, administration. Fiduciary only as agent (s.334). Ostensible authority (Panorama).
• Removal (s.333): notice, grounds, 7 working days to defend, option to resign.
• Accounting records: s.374 to 376, registered office, six years. Financial statements: s.377. Directors’ report: s.385. Laying: s.388, within 18 months and then yearly. Default: s.389.

Practice questions

These are original questions written in the style of the ICAN exam. Try each one before you open the answer. Full model answers follow the written questions.

Section A style: multiple choice

Section B style: written questions

Model answers

Spotted a mistake? Tell us and we will check it.