SECRETARIES AND DIRECTORS

Greymouth Evening Star, 22 June 1937, Page 9

SECRETARIES AND DIRECTORS

A QUESTION OF KIGHTS

Recently a correspondent submitted the following case to “The Accountant” (London): —

“A limited laibility company has a managing director who attends at the office every day and a board of directors who meet at regular intervals. One of the directors went personally to the secretary and asked him for certain information concerning the company’s business. The secretary supplied the information which could not possibly, have been of any benefit to the director’s own private business. The secretary was severely reprimanded by the chairman, at a latci meeting of the board, and was .told that in no circumstances should he give information to a single director but only to the Tull board or a committee appointed by the board, at their request. Was the secretary wrong in supplying the information ? If so, it. means that a director can only exercise his powers at board meetings and is not entitled to enquire into the working, or inspect the books, of the company whose course he is directing except through the official medium of the board.”

In reply the editor wrote:--“The point, thus described in concrete terms is one which in one form or other is often encountered by secretaries in the course of their duties: and the matter is perhaps the more difficult in that the considerations involved are often less than those of law than those of ethical and tactful .conduct. “We think we rightly express the general view when we say that the Companies Act envisages a kind ol ‘cabinet’ responsibility falling on (lie board as one whole, for which the individual directors arc held to be responsible. The degree of this responsibility may be defined ami limited by the articles but failing this the ‘cabinet’ theory seems to apply in full force.

“In these circumstances we think that every director has a right' to ask the secretary for full information on any point within the business of the company and the secretary has an equal ’right' and even 'duly' to reply. The secretary will also be correct in allowing a director his statutory right to inspect the books of ;<<• count. If the secretary has been lorbiddm! by th'- chairman t<> suiq'ly information it. difficult personal situs (ion arises which every secretary as bi tween himself and his board, must settle for himself as a fundamental matter of personal relations. If he decides that he cun accept those instructions. and retain his appointment at the same time, he will then I refer the inquiring director to the i chairman and await results.”