Corporate governance is a set of guidelines and rules used to direct and manage a company.
All companies require good corporate governance. However, small businesses may not have it because maintaining business relationships and setting out responsibilities is much simpler.
Good corporate governance can help both small and big companies succeed, and make them more attractive to investors.
Here’s what your business should have:
1) A sound constitutional framework
This should set out the basic management/administrative structure of the company. Consider updating your Articles of Association to account for changes introduced by the Companies Act 2006, especially those which simplify administration for companies.
In addition, draw up a shareholder’s agreement to manage relationships between shareholders. This includes rules on how to resolve disputes, or control the sale of the company.
2) A structure that clearly defines roles and responsibilities
Create a decision-making structure that clearly sets out which decisions are to be made by the board, the shareholders, and management.
3) Policies for managing risks
Establish formal policies regarding the employment of family members (if relevant). Use corporate controls to safeguard the shareholder’s investment.
A successful company needs the right people driving them forward, along with the proper controls, checks and balances.