In recent years, the external environment in which companies operate has become increasingly complex and dynamic. The added regulatory obligations introduced over the years have increased the costs and the complexity of overseeing a company’s business activities, presenting new challenges from an operational and compliance point of view.
Shareholder engagement has also changed within the meaning of an integrated global economy. Shareholders want to engage with the Board of Directors and management even more, seeking a stronger voice in matters such as capital allocation and strategic decision-making. This increased access to the boardroom calls for a corresponding increase in shareholder responsibility. As in many areas of corporate governance, an ongoing commitment to transparency and openness is key.
There is no single approach to corporate governance that is suitable for all companies, wherefore we do not prescribe a universal set-up, but a company should look to the principles presented below as guidance in developing structures, practices and processes that are proper in view of the company’s activities and exigencies. Ultimately, the quality of any corporate governance arrangement may be measured by its success in creating long-term value.
An effective corporate governance arrangement essentially entails a clear understanding of the respective roles of the Board of Directors, Management (where applicable) and Shareholders, their interrelationship, and their relationships with other stakeholders. It requires a dedicated focus on the shared goal of creating long-term value through a robust framework that enables the corporate actors to address their key responsibilities.
The Board of Directors lies at the centre of any corporate governance arrangement. The business activities of a company are managed under the active oversight of the Board, which function encompasses a number of responsibilities, such as:
The Board’s size and composition are often overlooked. Giving due consideration to the nature, size and complexity of the company’s activities, as well as its stage of development, it is important that the Board is both generally independent and experienced. Choosing correctly is crucial in order to ensure that it is able to perform its oversight function effectively.
It is also important that where Management structures have been implemented, the Board fosters an open, ongoing dialogue with Management, having access to accurate information that is passed along in confidence and in a timely manner.
Finally, apart from knowing who the Shareholders and the Beneficial Owners of the company are, considering their interests in the context of achieving long-term value is also important. Outreach may be coordinated through effective protocols.
Against this background, companies should endeavour to be good citizens of the national and international communities in which they do business, in part by complying with the law.
Note that the above are guiding principles and are not necessarily suitable in your circumstances. A company’s corporate governance arrangement should not only be professionally designed, but once in place it should also be reviewed periodically to ensure its effectiveness.
Complying with regulatory requirements is of major concern to companies as the consequences of non-compliance are hugely significant; administrative penalties may run into the tens of thousands. With an ever-changing regulatory environment, understanding whether your company falls within the scope of a set of regulations, and if so, what action is needed, may be difficult to ascertain from the start. Compliance with anti-money laundering legislation is also becoming increasingly burdensome. The Prevention of Money Laundering Act, Chapter 373 of the Laws of Malta, the Prevention of Money Laundering and Funding of Terrorism Regulations, Subsidiary Legislation 373.01, together with the FIAU Implementing Procedures, apply to persons carrying out any ‘relevant activity’ or ‘relevant financial business’ for the purposes thereof.
Having an effective corporate governance arrangement in place is absolutely necessary, together with the right legal support.
LexPractis provides this support and assurance to help you meet your regulatory obligations by taking a proactive approach to regulation.
Are you uncertain whether or not your company is a regulated person?
Are you uncertain whether or not your company if fully compliant?
Do you want to upskill/train employees in light of new regulations?
Do you have the right corporate governance arrangement in place?
We can help you. Contact us for more information or to solicit advice.
