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Effective corporate governance is essential for business success, regulatory compliance, and stakeholder confidence. Whether you're a startup establishing governance frameworks or an established company navigating complex compliance requirements, proper governance protects directors, shareholders, and the business itself.
Statutory Duties Under Companies Act 2006:
Consequences of Breach:
Board Composition Considerations:
Board Committees:
Fundamental Shareholder Rights:
Minority Shareholder Protection:
Companies House Requirements:
Sector-Specific Regulations:
Essential Policy Areas:
Board Procedures:
Governance-Based Risk Controls:
Financial Controls:
Initial Setup Costs:
Ongoing Compliance Costs:
Listed Company Additional Costs:
Effective corporate governance provides the framework for sustainable business success while protecting stakeholders and ensuring regulatory compliance.
This information is for general guidance only and does not constitute legal advice. For specific legal advice tailored to your situation, please consult with a qualified solicitor.
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Find Your SolicitorCommon questions about corporate governance and how our solicitors can help
UK company directors have seven statutory duties under Companies Act 2006: 1) Act within powers granted by company constitution, 2) Promote company success for shareholders' benefit while considering stakeholder interests, 3) Exercise independent judgment without improper delegation, 4) Exercise reasonable care, skill and diligence expected of someone in their position, 5) Avoid conflicts of interest between personal and company interests, 6) Not accept benefits from third parties that might compromise judgment, 7) Declare interests in proposed company transactions. Breach can result in personal liability, disqualification, and requirement to compensate company losses. Directors should document decision-making processes and seek advice when conflicts or complex situations arise.
While small companies aren't subject to corporate governance codes applicable to listed companies, good governance practices benefit businesses of all sizes. Basic governance includes: regular board meetings with proper minutes, clear decision-making procedures, conflict of interest policies, and compliance with statutory obligations. Family businesses particularly benefit from governance frameworks managing relationships between family members, business interests, and professional management. Investors increasingly expect governance standards even in smaller companies. Good governance reduces disputes, improves decision-making, demonstrates professionalism to stakeholders, and creates frameworks for growth. The key is proportionate governance appropriate to company size and complexity rather than gold-plated procedures.
Essential corporate policies include: Code of Conduct covering ethical standards and behavioral expectations, Conflicts of Interest Policy for directors and employees, Anti-Bribery and Corruption Policy complying with Bribery Act 2010, Whistleblowing Policy enabling confidential reporting of misconduct, Data Protection Policy ensuring GDPR compliance, Health and Safety Policy meeting regulatory requirements, and Risk Management Policy identifying and mitigating key risks. Additional policies may cover social media use, expense procedures, procurement standards, and environmental commitments. Policies should be regularly reviewed, updated for legal changes, and supported by training programs. Board approval and regular monitoring ensure policies are embedded in company culture.
Board meeting frequency depends on company size, complexity, and circumstances. Private companies typically hold quarterly board meetings, though monthly meetings suit rapidly growing or complex businesses. Annual general meetings are mandatory for companies with shareholders. Statutory minimums require sufficient meetings to fulfill director duties and manage company affairs effectively. Between formal meetings, directors can make decisions by written resolution for non-complex matters. Meeting frequency should reflect: business complexity, regulatory requirements, investor expectations, risk profile, and growth stage. During crises or major transactions, more frequent meetings may be necessary. Best practice includes annual calendar planning, structured agendas, proper notice periods, and detailed minutes recording decisions and rationale.
Executive directors are full-time employees with operational responsibilities and detailed knowledge of day-to-day business activities. They typically include CEO, CFO, and other senior management. Non-executive directors are part-time appointments providing independent oversight, strategic guidance, and objective challenge to management. They bring external perspective, specialist expertise, and governance experience without conflicts from employment relationships. Non-executives typically chair audit, remuneration, and nomination committees. Listed companies require independent non-executive directors, while private companies benefit from non-executive input particularly when seeking investment or professional governance. Non-executive appointments require careful selection based on relevant skills, experience, and cultural fit with existing board dynamics.
Directors should have Directors' and Officers' (D&O) insurance protecting against personal liability claims arising from directorship duties. D&O insurance covers legal costs and compensation for claims including: breach of duty allegations, employment practice liability, regulatory investigations, and shareholder disputes. Coverage typically ranges from £1m-£50m+ depending on company size and risk profile. Professional indemnity insurance covers advice-giving activities. Employment practices liability covers discrimination and wrongful termination claims. Cyber liability insurance increasingly important for data protection failures. Company should pay premiums as permitted benefit. Insurance doesn't cover criminal acts, deliberate wrongdoing, or regulatory fines. Regular review ensures adequate coverage as business grows and risks evolve.
Director removal procedures depend on company articles of association and any shareholders' agreements. Standard process involves: ordinary resolution at general meeting requiring simple majority vote, or special notice (28 days) if calling meeting specifically for removal. Removed directors have right to make written representations and speak at meeting. Employment law protections apply if director is also employee - removal from board doesn't automatically terminate employment contract. Articles may include enhanced voting thresholds or weighted voting rights protecting certain directors. Shareholders' agreements often include specific removal procedures and triggers. Alternative approaches include director resignation, compromise agreements, or court applications in extreme cases. Professional advice essential to navigate legal, commercial, and relationship complexities.
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