Company Directors’ Responsibilities

Directors in today’s global market are increasingly being held personally liable for their actions that harm their companies, as well as facing civil and criminal liabilities for failing to comply with the procedures and requirements of various laws. Further, there are several Acts, for which the violation thereof can result in criminal sanctions, including fines and even imprisonment. Directors can find themselves subject to criminal sanctions for such minor infractions as late filing or inadvertently filling out a form incorrectly.

By accepting the assignment as a director, the director establishes a contractual relationship with the company based on two distinguishable obligations:

  1. obligations relating to the functioning of the company; and

  2. management obligations.

Both categories are in the exclusive competence of the director. The obligations relating the functioning of the company pertain to all acts aimed at ensuring the operations of all corporate bodies, to which the director is responsible by law or by the Articles of Association of the company. In this context, the following can be included: the obligation to call the shareholder meeting; the responsibility to prepare and approve the draft budget and to convene the meeting for approval. Furthermore, the obligation to keep accounting records; to announce, register and fulfil the duties of the Business Register. The director is prohibited from acting in conflict of interest with the company or in competition with the latter.

The management obligations indicate all acts aimed to achieve the corporate purpose. For example, the obligation to provide the company with an adequate organisational and accounting structure, to guarantee safety in the workplace and to ensure that the company is acting in accordance with the law. From this point of view, the most important obligation is to act with diligence, i.e. to identify and implement all the necessary measures to take care of the interests of the company.

The scope of this obligation is measured on the basis of two criteria:

  1. nature of the assignment, where all characteristics of the company administered – such as size, activity performed, organisational structure and the position held by the director within the administrative body must be considered;

  2. specific skills, according to the particular knowledge of the director, his technical and managerial skills and his actual experiences need to be kept in mind.

In the event of a court judgment, the Judge will evaluate the director’s behaviour based on the aforementioned criteria. The level of diligence required from a long-experienced managing director of a multinational company may be different from that of a director of a private company with small turnover volumes.

If the following conditions are fulfilled, a Director is liable of non-fulfilment or incorrect fulfilment of his obligations:

  • the director has, in the performance of his duties, adopted a behaviour in violation of the duties and obligations provided law or by the Articles of Association;

  • this behaviour caused damage;

  • a causal link between the behaviour of the director and the damage exists (i.e. the damage is an “immediate and direct consequence” of the behaviour).

Actions to enforce the liability of a director of a limited liability company can be raised:

  • by the company itself,

  • by company’s creditors,

  • by individual shareholders and third parties, if the behaviour of the directors caused damage to them;

Directors can minimise their risks by being aware of their duties and responsibilities and ensuring that they are performed prudently and diligently. Among the steps that a director can take to minimise his liability are the following:

  • attend directors’ meetings regularly;

  • ensure that delegated authority is exercised properly;

  • ensure that directors’ decisions are implemented properly;

  • document measures taken to prevent mismanagement

It is notable that the director holds the position of the company’s legal representative according to the Companies House, based on which a lawsuit is in practice often filed together with a lawsuit against the company. For example, in an employee dismissal case, the director may be sued as the second defendant and claiming for compensation due to his authority to make a decision for the aforementioned act on behalf of the company. However, the law sees the director as a legal representative which is granted protection in terms of personal liability to third parties for any act that has been done prudently and diligently within the scope of his authority. By virtue of his legal representation, such action shall be attributed to the company.

If you need any assistance or require further information regarding company directors responsible please contact us on 0870 228 1999 or email us on info@stanleycarter.co.uk

It’s the New Year and we would like to list some legal considerations your business might be forgetting

New business regulations come into play all the time, and after a while, keeping up with the changes in legal requirements can start to feel like a job in itself. However, failing to adhere to these ever evolving rules can quickly land you and your business in hot water. To help you stay on the right side of the law, we have pulled together five of the most important things to consider.

Filing your company’s confirmation statement

A confirmation statement is a document providing the government with your company’s details, including your office’s address, your principal business activities and the names of any shareholders. Known previously as an annual return, every registered UK Company is legally required to submit a confirmation statement at least once a year to ensure the Companies House has your up-to-date company information.

You must file your statement no later than twelve months after your new company’s date of incorporation. For established companies, the review period is up to twelve months after your last confirmation filing. Even if you don’t have any updates on your company’s details, you will still have to confirm an annual statement. While there isn’t a fine for late submission of your form, it is a criminal offence not to submit one at all, and this could lead the registrar to believe your company is no longer operating and strike you off the register. This means that your company will no longer legally exist, and its assets will become Crown property.

This process is fairly simple and can be completed online. The likes of Online Filings require you to simply find your company in the Companies House register and choose a package that is right for you, and then fill out a short application form with your company number and authentication code. This process takes less than five minutes to complete, and can be approved within three hours. Submitting a confirmation statement online also saves you money, compared to submitting a paper form, which costs £40.

Employers liability insurance

It’s a simple fact that, if your business hires any staff, you will need to take out an employer’s liability insurance policy. If a worker makes a claim against you, this covers any compensation or legal fees. Whether your employees work on a full-time basis or on freelancing terms, this cover is a legal requirement for all businesses with at least one employee.

Staff can have multiple grounds to make a claim against their employers, such as if they injure themselves, or become seriously ill as a result of their work, or if a client or member of the public is injured or has their property damaged by your professional actions. Failing to have employer’s liability in place may result in your business facing hefty fines of £2500 per employee working for you, which could leave you with some considerable financial ramifications.

Ensuring your software is licensed

Your business likely uses a huge variety of software programmes on a daily basis, whether for word processing, accounts, billing, and databases. Regardless of which ones you use, they must be licensed for use. If you use unlicensed software, it most likely won’t do everything you need it to for long, as software providers can check their registrations and only allow their use for a certain amount of time before suggesting a paid software upgrade. You will also receive no additional support and face security risks, with viruses and malware issues rife amongst unlicensed programs. Illegal use can also land you with both civil and criminal penalties.

When initially accessing any software, you will have already agreed to its licensing terms and conditions, and complying with these terms is vital. It’s against the law to use unlicensed software, which includes any unauthorised use or distribution from downloading, sharing, selling or installing multiple copies. Although it may cost more to have licensed software, it’s worth it in the long run, as it prevents you from facing any potential legal problems.

To avoid legal issues, keep track of which programmes you use, and make sure to keep any relevant documentation which contains details of the software license. Write down the name of the software, its associated ID, the license number for that particular installation, when it was installed, and verification of compliance. Having this documentation protects you should a software vendor accuse your company of noncompliance to their terms.

Intellectual property protection

Protecting your intellectual property (IP) can safeguard a range of your creative business ideas, including your business name and logo, any products you have designed and created, and trademarks. It doesn’t just cover your ideas and concepts, but also business assets like any equipment that is essential for running your business.

With more businesses relying on the internet to promote and sell their products and services, there is a heightened risk of individuals having their unique ideas infringed upon. This includes violating the terms of any agreement made with third parties; for example, if you were to use someone else’s design without the owner’s permission you would be subject to an infringement claim. It’s worth protecting your IP in case people try to steal your ideas and sell them off as their own. For instance, if you own a trademark and someone uses a similar one to sell similar products or services, this could count as a case of trademark infringement.

By having IP protection, your business will be covered if anyone tries to copy your creative property. It also stops you from unintentionally stealing or copying other creative work from others.

For more information on how to meet your business compliance obligations get in touch with us on 08702281999 contact us via info@stanleycarter.co.uk or further details on our website www.stanleycarter.co.uk

Authorities ramp up enforcement of foreign companies’ non-compliance with national anti-bribery laws

In recent years, multinationals have increased their efforts to mitigate the risk of commercial bribery in particularly given the wide-reaching applicability of the UK Bribery Act.

The prosecution of commercial bribery has once again become a key issue following the amendment of the Anti unfair Competition Act (AUCA). With the restructuring of the act’s anti-bribery provision, which dovetailed with the national anti corruption movement, the government appears to be cracking down on unlawful commercial activities by both domestic and foreign companies.

Foreign companies’ compliance with anti-bribery laws is set to become as big a focus area as domestic companies compliance with foreign laws.

What constitutes commercial bribery under AUCA?

The AUCA defines ‘commercial bribery’ as “using money, things of value, or other means to bribe with the purpose of obtaining transactional opportunity or competitive advantage”. Possible recipients of unlawful commercial bribery under the AUCA are limited to:

  • the employees of a counterparty to a transaction;
  • organisations or individuals entrusted by a counterparty to a transaction to handle relevant matters; and
  • organisations or individuals that use their power to influence a transaction.

In this sense, the AUCA not only includes counterparties as potential recipients for commercial bribery purposes, it also prohibits the provision of discounts to counterparties or the payment of commission to intermediates unless the discount or commission is offered and accepted in accordance with the agreement and in an honest manner. In addition, where commercial bribery by an employee is demonstrated, the AUCA requires the employer to prove its irrelevance; otherwise, the employer is liable.

If you have any concerns or require some assistant contact our expert team on 08702281999 or send us an email info@stanleycarter.co.uk

Every CEO cares about compliance

But not every CEO makes compliance a top priority. That means compliance wouldn’t be just a company issue, but also a personal one.

Pressure to strictly follow the rules comes from other directions as well. Various regulatory bodies have long signalled their intentions to hold executives individually responsible. Unlike before, executives accept the responsibility for compliance. Even more significantly, they now will accept the risk of noncompliance. Meeting that standard will require a lot of adaptation, and it needs to begin now.

Building Beneficial Partnerships

It’s unrealistic to expect CEOs to bear the entire compliance burden. The CEO should get help from the Chief Compliance Officer (CCO) in achieving compliance.

No matter the company’s regulatory requirements, it’s vitally important that the CEO works to supply the necessary tools and resources to enable the CCO perform his core duties, as well as serve as a primary point of communication and guide for ensuring a culture of compliance within its business.

Again, comprehensive support is key; consider the breadth of responsibility a CCO assumes, including serving as in-house expert to stay up to date about the latest regulatory revisions; acting as program director to build the company’s specific compliance policies; communicating the importance of compliance across the entire organisation; and evaluating and continuously monitoring compliance performance.

Each of these roles is important, and together they lead to consistent compliance. Increasing the compliance department’s budget is one way the CEO can help to strengthen compliance efforts. Additional funds could be used to hire staff, bring in consultants and managed service providers, or pay for professional development. These investments are necessary to stay compliant, and therefore necessary to keep executives out of trouble.

When the company does well by its customers in areas of compliance, after all, it receives a committed customer base in exchange.

Staying Away From Trouble

To be sure, the reason regulators are getting tough is not to penalise executives; it’s to underline the importance of compliance even in the midst of today’s fast paced, ever disruptive economy. In that context, staying compliant is an urgent obligation, but it’s also an opportunity for executives and their companies who embrace it. Here are a few strategic steps to ensure compliance is a consistent priority:

  1. Build a compliance dashboard: Compliance is a systematic process. A number of third-party organisations sell compliance checklists tailored to specific industries and even individual companies. Following one of these governance checklists (under the supervision of the CCO) is an effective way to check all the boxes of compliance. As the CEO, emphasise that your company’s compliance policy must align completely with the checklist guide. Finally, make time to review your checklist and dashboard with the CCO periodically to stay on the right side of ever-changing regulations.
  2. Make compliance part of the culture: One reason companies have neglected compliance is that the penalties have been relatively small. Now, in addition to executive penalties, compliance breaches lead to bad publicity and lost consumer confidence. The simple fact is that compliance breaches hurt companies in deep and lasting ways, so they must be avoided at all costs. Talent, technology, and policies can serve that effort. In the end, however, compliance is consistent only when the company culture mandates it. As the steward of the organization, the CEO can do a lot to cultivate that culture: Regularly talk about the importance of compliance, participate in compliance planning and training, and provide a personal example for your company
  3. Fully support the CCO: The CEO should be eager to support the CCO at every turn. That becomes especially important if and when a compliance investigation starts. The CEO should oversee the investigation process, ensuring that it’s conducted fairly and transparently. Satisfying the requirements of investigators is a lot easier if CEO is also willing to invest in effective technologies, such as information archiving. That way, any documents requested by regulators are easily retrievable from a searchable database. The right tools make compliance easier on everyone.

A new era of accountability is coming, and CEO must adapt. It’s time to stop thinking of compliance as an obscure subject or noncompliance as a minor setback. It affects the entire organisation, and it starts at the top. CEO who get in front of this issue place both themselves and their companies in greater positions to succeed. For those who don’t, compliance is about to get a lot more contentious.

For all your business and corporate needs give us a call on 0870 228 1999

or send us an email info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

Corporate Compliance

Don’t be complacent with your corporate compliance

As a normal citizen, we deal with compliance every day whether or not we are aware of it. Every time we obey traffic lights and stop our car when the light turns red, we are being compliant with local traffic laws. When we stand clear of the train doors after a train announcement, we are compliant with safety regulations.

Compliance is everywhere around us and the workplace is no different. But how does this everyday action translate to the business world? What does compliance mean for a company and how can businesses ensure they are maintaining their compliance?

What is the purpose of corporate compliance?

The purpose of corporate compliance goes beyond following the letter of the law. A recent study cited that almost two-thirds of organisations believe that their compliance efforts helped reduce the legal cost and resolution time of regulatory issues and fines.

Corporate compliance is about prevention as much as it is about obeying the law. The right compliance strategy can keep your company out of hot water, protect your employee data, and keep your company out of hot water.

To better understand where corporate compliance comes into play, we have outlined a common example of corporate compliance failure.

Does that sound like something straight out of a Mission Impossible film? It’s not; It’s actually happening to Goldman Sachs. The company is accused of promoting a company culture that enabled two of their bankers to steal billions from the Malaysian government. The Goldman Sachs x 1MDB scandal is just the latest example of a financial compliance failure.

Corporate compliance is about control and consideration. Is corporate compliance the most interesting part of your business model? Of course not; but it is a vital component to the health of your business. Before you decide to innovate to try and get ahead, make sure you are staying compliant in the process.

For all your business and corporate needs give us a call on 0870 228 1999

or send us an email info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

Auditing in the UK is undergoing unprecedented scrutiny.

The magnifying scope is focusing on all aspects of the sector

The multitude of reviews, some of which are ongoing, are being conducted by regulators, politicians and government departments, each separately looking at audit’s effectiveness, competition across the sector, and its future in general.

High profile failures of big high street names have captured the headlines and raised questions of ‘where were the auditors?’ resulting in some having a lack of confidence in the sector’s effectiveness.

Concerns have also been raised over a conflict of interest in firms selling consultancy services, while their auditing arms are carrying out an audit in the same company.

This has prompted suggestions that a full structural or operational split could be the answer.

Outside of the reviews and reports, the general public have identified what they see as one answer to improving corporate reporting; a good and clean audits.

Despite audit being under growing and intense scrutiny, the public still regard it as part of the solution to what is perceived as unacceptable corporate behaviour.

The purpose of an audit is to ensure that financial statements give a true and fair view, ensuring that material fraud is detected, and appropriate levels of professional scepticism are applied.

Everyone with an interest in financial reporting and strong corporate governance has a responsibility to work together to address the public’s legitimate concerns about audit.

It is clear that the profession must continue to focus on improving audit quality, working proactively with other stakeholders to support better understanding of the auditor’s role.

But, most importantly, all stakeholders connected to the audit process; such as regulators, professional bodies, investors, governments and the media; have a responsibility to inform the public in a fair, balanced and understandable way about audit regulations and standards. It is in the public interest that they do so.

For all your business and corporate needs give us a call on 0870 228 1999

or send us an email info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

FRC needs greater transparency

Despite some negative coverage in recent months, the majority of the Financial Reporting Council’s (FRC’s) stakeholders still consider it to be independent of the auditing profession.

corporate governance, FRC, UK
More transparency needed within corporate governance

However, the UK audit watchdog could do more to help itself; particularly when it comes to convincing institutional investors who are the most concerned about its independence, by making its processes and outcomes more transparent.

Given the variety of areas that the FRC covers, nevertheless, a number of clear messages for the FRC come across, not least that as an organisation that holds others accountable, it also needs to be seen to be holding itself accountable to the same measures.

More than a quarter of institutional investors told researchers that they did not believe the FRC was independent of the audit profession. Reasons cited include the fact it hires many ex-auditors, it receives funding from audit firms, and a suspicion that it does not always hold auditors as accountable as they should be.

When you’re setting standards of governance for other companies and telling companies what they should be doing, then you have to be whiter than white.

Stakeholders want more transparency in the FRC’s disciplinary and enforcement activities.

One way round this issue would be for the FRC to step up its communication about its goals and activities, the researchers suggest. They point out that those stakeholders who are more engaged with the FRC have a greater understanding of its internal processes and constraints. Increasing outreach and communication with less-engaged stakeholders could help to improve favourability and perceptions of transparency.

In response, the FRC says that it has already made changes to meet many of the issues raised, including revising its governance structure to improve processes, publishing its register of interests and investing in its enforcement division.

For your corporate governance queries send us an email on info@stanleycarter.co.uk or check our website for details

www.stanleycarter.co.uk 

Corporate Governance and the pay gap

Executive pay fell last year but top bosses will still have made more money in three days than the typical worker earns in a year, new figures reveal.

UK top companies, Corporate Governance, pay gap
UK top executives pay gap

The mean pay of chief executives in FTSE 100 companies fell by a fifth from £5.4 million to £4.5 million – 120 times more than an average full-time worker, a slight drop on the ratio of 122-1 in the previous year.

The High Pay Centre think tank and the Chartered Institute of Personnel and Development (CIPD) said there had been “modest” restraint by company boards but the pay gap between the top and average workers remained wide.

All listed companies will have to publish the pay ratio between bosses and workers under new corporate governance reforms this year.

While it was encouraging to see a tiny amount of restraint on pay at the top of some FTSE 100 companies last year, there are still grossly excessive and unjustifiable gaps between the top and the rest of the workforce. Publishing pay ratios will force boards to acknowledge these gaps.

The drop in pay in the last year is welcomed but will have largely been driven by the Prime Minister’s proposed crackdown on boardroom excess.

It is crucial that the Government keeps high pay and corporate governance reform high on its agenda, but we also need business, shareholders and remuneration committees to do their part and challenge excessive pay. We need a radical rethink on how and why we reward chief executives, taking into account a much more balanced scorecard of success beyond financial outcomes and looking more broadly at areas like people management.

The current review of the UK Corporate Governance Code provides a great opportunity to broaden the remit of remuneration committees to ensure that there is much more focus on the wider workforce and employee voice when decisions on chief executive pay are being made, to improve fairness and transparency.

We are experienced on corporate governance and if you have any queries send us an email  info@stanleycarter.co.uk or check our website for further details www.stanleycarter.co.uk

Accounting and finance professionals and the new automated roles

More than nine in ten finance and accounting professionals (92 per cent) are optimistic about increased automation in the profession.  Despite the increasing role of technology, only 12 per cent believe their job will be completely automated within the next five years, with most seeing new tools

as an opportunity rather than a threat.  

Emerging technologies are set to transform the finance and accounting sectors, with many professionals already feeling the impact on their day-to-day responsibilities, and it’s encouraging to see that, far from being intimidated or threatened by these new ways of working, the majority of professionals are excited and optimistic, believing automation will improve and expand their role in the coming years.

Couple that with a new corporate governance code that aligns the pay of top execs and workers.  The code includes requirements for UK firms to ensure board appointments are “based on merit” rather than “group think”. It also proposes giving pay committees broader responsibility and discretion over exec remuneration and is more specific on what steps need to be taken when companies encounter significant shareholder opposition. Will be essential to restoring trust in business, attracting investment and ensuring the long-term success of companies for members and wider society.

If you require support and impartial advice please email us on info@stanleycarter.co.uk or check our website for further details  http://www.stanleycarter.co.uk

Corporate governance

Compliance with the UK corporate governance code among FTSE 350 companies has improved this year, but governance and reporting remains “patchy”

According to Grant Thornton’s (GT) corporate governance review, 66% of the 350 biggest UK companies declared full compliance, up 4% from last year.

However, only 33% of the FTSE 350 provided informative insights, down from 64% in 2014.

The report found that longer-term viability statements, internal control reporting and gender diversity had seen little improvement since last year, while investor engagement continues to decline.

Moreover, only 12.5% of the FTSE 350 reported that the remuneration chair held face-to-face meetings with shareholders regarding executive remuneration.

Grant Thornton also revealed diversity in the boardroom still lacked improvement, with only 26% of FTSE 100 board roles filled by women and 77% of the FTSE 100 and 85% of the FTSE 250 without a woman in an executive role.

The report also found improvements in culture-related reporting, with 39% of companies now providing a strong overview of the culture of their organisation, up from 20% last year.

But GT said it was “disappointing” that only 29% of CEOs made personal reference to culture in their opening statements despite the Financial Reporting Council (FRC) recently highlighting the role’s importance in setting and embedding a company’s culture.

For the UK economy to thrive post-Brexit then companies needed to ensure they were complying with governance requirements.