Corporate Governance and your business: Sense and Sensibility?

How do you go about making important business decisions? Are you relying mostly on your gut feeling, or dispassionate yet precise calculations? In running your company, are you more likely to listen to your intuition or adopt a more cautious strategy?

These are all interesting questions, and all relevant day-to day business management; yet whatever your preferred decision making process (intuitive or rational), it is important that your company remains compliant with relevant legal requirements. Decisions related to commercial activity are influenced by a number of factors, but whether you are planning to increase share capital, appoint a new director to the board or change your company name, there are always certain legal provisions to be followed.

It is at this stage that corporate governance principles should be considered. But what does corporate governance actually mean? The term can broadly be defined as a system by and through which companies are directed and controlled. In an increasingly complex world of constantly evolving regulations, a thorough understanding of the legal framework is a must. Recent amendments to the Small Business, Enterprise and Employment Act 2015 provide a noteworthy example.

Already thoroughly discussed in our previous blog posts, changes set forth by the Act include (amongst others): the abolition of bearer shares, prohibition on corporate directors, and the introduction of the PSC Register. The latter in particular has wide-reaching consequences for businesses of all sizes, since identifying Persons with Significant Control cannot be considered an ad-hoc process; it is instead a continuous one for maintaining the register going forward. In light of company law developments such as these, it is essential to have an understanding of what is expected of your business, and what steps need to be taken for legal obligations to be satisfied.

Elon Musk, the founder of Tesla Motors and SpaceX, pointed this out succinctly: ‘If you’re trying to create a company, it’s like baking a cake. You have to have all the ingredients in the right proportion’. Ultimately, your expertise, professional attitude, energy and personality make your business successful. Good corporate governance can become an ingredient easily forgotten.