3 Ways to Assess Your Company’s Current Governance Practice

September 17, 2024

By Stephen Thompson

Corporate governance has been a hot topic in recent years, often highlighted by scandals at major companies such as Carillion and Patisserie Valerie, but with the vast majority of registered companies in the UK being SMEs, all companies regardless of size can benefit from implementing good corporate governance practices.

Effective corporate governance is crucial for the sustainability and success of any organisation, and by adopting good governance practices early it ensures that a company operates within its legal framework, maintains transparency, and meets the expectations of its stakeholders. It can also provide numerous benefits, such as attracting external expertise, improving financial performance, securing funding and attracting investors and buyers if and when the business is subsequently sold.

There is no “one size fits all” when building a governance framework, each company will need to develop practices that fit their organisation, industry and market.

Here are three ways to assess your company’s current governance practices:

1. Review Your Governance Frameworks

The foundation of good corporate governance lies in robust governance frameworks. These frameworks include the company’s articles of association (Articles), which is the key constitutional document regulating the basic governance and decision-making structure of a company.  For those operating in the charity sector or as a not-for-profit, the Articles will also set down the objects the company has been set up to achieve.

It is important to review and update the Articles from time to time to reflect any changes in the company’s structure or operations.  It is also important that any incoming directors and shareholders familiarise themselves with the terms of the Articles to ensure that they can discharge their duties effectively.

2. Ensure Accurate and Up-to-Date Governance Documentation

Accurate and up-to-date governance documentation, policies, and procedures are vital for guiding decision-making and ensuring compliance. This includes maintaining records of board meetings, company books, financial statements, and other critical documents, in particular:

• Governance Policies and Procedures: these should clearly outline the roles and responsibilities of the board, management, and other stakeholders. They should also include procedures for decision-making, risk management, and conflict resolution.
• Company related documentation to be filed with Companies House: these should be accurate and up-to-date in order to maintain ongoing compliance with regulatory recording requirements. This includes adhering to the rules set out in the Companies Act 2006 and other relevant regulations.  Recent legislative changes have given Companies House more powers, in particular the ability to impose sanctions for late or incorrect filings.  It is therefore more important than ever to ensure these filings are up to date.

Regular audits and reviews of governance documentation can help identify any gaps or areas for improvement, ensuring that your company’s governance practices remain effective and compliant. It is also worth noting that maintaining accurate accounts and company books can also support the due diligence process which is an essential part of any business sale. Accurate and well-organised company records make this process smoother and faster, and prospective buyer will appreciate the ease with which they can verify the company’s financial health, which can expedite the sale process and potentially lead to a higher sale price when the time comes.

3. Engage your stakeholders

Stakeholders play a crucial role in the governance of a company. Engaging with and seeking regular feedback from shareholders, employees, customers, and suppliers, can provide valuable insights into the effectiveness of your governance practices, particularly in relation to risk oversight. This includes:

• Establishing formal feedback mechanism, which allows stakeholders to voice their concerns and suggestions. This feedback can be used to make informed decisions and improve governance practices. This can be done through surveys, meetings and other forms of communication.
• Being open and willing to change and adapt based on stakeholder feedback, which is essential for continuous improvement. This demonstrates a commitment to transparency and accountability, which are key principles of good corporate governance.

Where appropriate and commensurate with the size and complexity of your organisation, establishing an effective board can significantly improve governance practices and overall performance.

Summary

Assessing your company’s current governance practices is an ongoing process. By reviewing your governance frameworks, ensuring accurate and up-to-date documentation, and engaging your stakeholders, you can ensure that your company’s governance practices are effective, compliant, and aligned with best practices. This not only enhances the company’s reputation but also contributes to its long-term success.

How Darwin Gray can help?

1. Governance Audit

We conduct comprehensive audits of current governance practices to identify strengths and areas for improvement. This includes reviewing your Articles to ensure they are fit for purpose and updating them if necessary. Our audits can help outline the current rules governing your company and provide recommendations for enhancing your governance framework.

2. Policy Development

Our team regularly assists companies (especially those operating in the third sector) in the preparation of governance documentation, such as handbooks, to support leadership decision-making. We develop policies that align with best practices and regulatory requirements, ensuring your company can operate efficiently and compliantly.

3. Board and Committee Support

We provide advice on the structure and functioning of boards and committees. This includes defining roles and responsibilities, establishing best practices, and ensuring effective governance.

4. Training and Education

We offer tailored training programs for board members and executives on governance issues and legal responsibilities. Our training ensures that leadership teams are well-equipped to handle governance challenges and uphold the highest standards of corporate governance.

5. Company Secretarial Services

Our company secretarial services manage essential administrative tasks, including filing the annual confirmation statement, making updates to directors and maintaining statutory registers. We help you stay organised and compliant with all legal requirements.

If you need advice or assistance with your governance matters, contact Stephen Thompson using the contact form, on sthompson@darwingray.com or via 029 2082 9136 for a free initial chat to see how we can help you and your business.