Corporate Governance for Board Directors

2024 Director Duties, Roles and Director Responsibilities Courses, 2 Days, Maximum 8 Directors

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The Definition of UK Corporate Governance

Corporate Governance is the system by which companies are directed and controlled.

The roots of this definition lie in the review commissioned by the Secretary of State for Trade and Industry in 2003. That review was chaired by Sir Derek Higgs and the final report was entitled “Review of the Role and Effectiveness of Non-Executive Directors.” Much of the wording of that 2003 report can still be seen in the latest version (2018) of the UK Corporate Governance Code. The Corporate Governance Code was updated every 2 years from 2010 to 2018.

The Implications of Corporate Governance

Accepting the definition above would imply that for Corporate Governance to be effective, each of the main component parts of a company must be effective in their own right. These component parts are:

• The Board of Directors
• The Shareholders
• The Company as a “Separate Legal Persona”

These components must separately function effectively and also properly interact with each other:

  • The Board collectively (including the sub-committees) and the Directors individually, must perform their separate functions
  • The shareholders should perform their primary functions, which are providing risk capital, appointing new directors (for Plcs only, not for Private Limited Companies) and holding the Directors and the company to account for the management of the company. The latter is achieved by scrutinising, and where appropriate questioning, the statements and documents produced by the company and its Directors. That is why the timely filing of accurate information at Companies House, for the use of the shareholders and other stakeholders is very important
  • The company will be able to fulfil its primary functions through the actions and decisions of the Board provided the Directors are collectively properly performing their duties and responsibilities

According to BIS; The Department for Business, Innovation and Skills (BIS) as was, later BEIS until 2023:

Transparency and accountability are the most important elements of good corporate governance. This includes:

  • The timely provision by companies of good quality information
  • A clear and credible company decision-making process
  • Shareholders giving proper consideration to the information provided and making  considered judgements.

Minimum Director Standards of Corporate Governance Knowledge

All UK Directors of companies need to know and understand at least the requirements for Corporate Governance of:

  • The law in the form of the Companies Act 2006
  • The UK Corporate Governance Code

Corporate Governance Sources in the UK

There are several influential inputs to the advancement and development of Corporate Governance in the UK. These are:

  • The Companies Act 2006; this is UK law and therefore must be obeyed
  • The listing rules of the Stock Exchange, which are the responsibility of the Financial Conduct Authority (FCA). Previously they were the responsibility of the Financial Services Authority (FSA)
  • The UK Corporate Governance Code (previously the Combined Code), which sets out standards of Best Practice for board composition, director development, remuneration, shareholder relations, accountability and audit. The code is published by the Financial Reporting Council (FRC). It is aimed at listed (quoted) companies, but offers Best Practice guidance for all companies
  • EcoDA Corporate Governance is an EU wide standard aimed at unlisted companies in the EU. It is published by ecoDa, a not for profit association, which represents several national director institutes within Europe. It also offers Best Practice guidance for all companies
  • The International Accounting Standards Board (IASB), which is an independent, private-sector body that develops and approves International Financial Reporting Standards (IFRSs). These standards are compulsory for listing on any of the major stock markets in the western world and in Japan and Hong Kong (formerly?). When the UK was in the EU, it automatically amended UK standards to follow any IFRS accounting changes. When the UK left the EU, it ceased to automatically follow the IFRSs. Instead the UK introduced a new legal term, ”UK adopted international accounting standards” for IFRS Accounting Standards as adopted by the UK. The UK parliament has made a commitment to continue to follow IFRS accounting, but without fixing any firm timetable

Unquoted companies need only to comply with the Companies Act 2006, unless they have voluntarily opted for IFRS accounting. In which case they must also follow the IFRS accounting Standards (all of them). However it would be wise for unquoted companies to also pay attention to good Corporate Governance, as any significant departures from the UK Corporate Governance Code could be deemed to give rise to poor decision making, or possible even “Grossly Negligent” decision making, if the Directors are being sued by the creditors, due to a liquidation. The creditors be trying to blame the Directors and therefore strip away the limited liability protection normally enjoyed by UK Company Directors.

Quoted companies must always comply with the IFRS accounting Standards. They must also adopt and comply with a published Corporate Governance Code, but it can be any of the several possible published Corporate Governance standards. These companies must also comply with the Listing Rules of the London Stock Exchange (again all of the rules).

You could research Corporate Governance further, by reading this page or performing other personal research. Alternatively we offer director courses that explain exactly what Corporate Governance is and what are the implications for Board Directors. These courses provide the knowledge and skills necessary to implement and manage, effective and practical Corporate Governance. This knowledge and expertise will be confirmed and embedded through extensive case studies, that allow Directors to experience and to work through a range of realistic and likely business scenarios.

The course that specifically deals with the Director Duties and other obligations is the Director Duties, Role & Responsibilities Directors course.

The course that provides the financial knowledge to allow Directors to understand and to fulfil their legal financial Responsibilities, as well as to provide the knowledge to understand and read any Profit & Loss Account or Balance Sheet is the Finance for Non-Finance Directors course; also known as Finance for Board Directors or Finance for All Directors. It does not require any previous financial knowledge and will bring every director up to a high standard of financial expertise, including being able to assess and to value any potential company acquisition.

Our scheduled courses can also be run as in-house courses on a fixed fee basis, at your offices or at a convenient venue. We could customise the courses to design and develop specific material to meet any special requirements you may have. For bespoke course requests please contact us with the details of your requirements.

Please click here to see the courses we offer as internal single company courses, at a date and location convenient for your Board of Directors

Please click here to see the scheduled courses we provide for “Director Duties and Responsibilities”

Please click here to see the scheduled finance courses we offer to all Board Directors (no previous financial knowledge required) “Finance for Non-Finance Directors”

Please click here for more information about the Statement of Director Responsibilities. These are purely the Financial Responsibilities under the Companies Acts.

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