Corporate governance is the system by which a business is directed, controlled and held accountable. It includes the roles of directors and shareholders, decision-making procedures, financial controls, reporting, risk management and the maintenance of statutory records. Harper James is a UK full-service commercial law firm advising start-ups, scale-ups and established companies on the laws of England and Wales.
A growing company should keep its articles of association, shareholder agreement and internal decision-making practices consistent. The articles provide the company’s constitutional framework, while a shareholder agreement can address matters such as transfers of shares, investment, reserved decisions, board appointments and dispute procedures. Directors must understand their duties under the Companies Act 2006, including duties to promote the success of the company, exercise independent judgement, avoid conflicts of interest and maintain appropriate care and skill.
The board should meet at suitable intervals and keep accurate minutes showing the information considered, the decisions made and any declared interests. A schedule of reserved matters can identify decisions requiring board or shareholder approval, such as borrowing, issuing shares, acquiring another business, entering major contracts or changing the company’s business model. Clear delegations help employees act within defined authority while retaining appropriate oversight.
Growth increases the need for reliable financial and operational controls. These may include approval limits, segregation of payment duties, contract-signing procedures, cash-flow reporting, management accounts and a register of significant risks. The company should also maintain its statutory books, file confirmation statements and accounts on time, record changes to directors and persons with significant control, and keep its Companies House information accurate.
Governance arrangements should be reviewed when the business raises investment, issues an employee share scheme, appoints new directors, enters a joint venture, acquires another company or prepares for a sale. A periodic review can identify conflicting documents, informal practices that no longer suit the business and decisions that require formal approval. The objective is proportionate control: sufficient structure to support sound decisions and accountability, without imposing processes that obscure responsibility or delay ordinary commercial activity.