There is never a greater need for clear leadership, strong governance and informed decision-making than in times of trouble, as firms seeking company secretarial subscriptions – one of London Registrars’ core services – have had reason to appreciate in recent weeks.
Widespread disruption to working practices, as well as frequently changing resource demands, necessitate new forms of management and control. This is all the more reason for your organisation to carefully consider the various elements of its corporate governance during such testing times.
Management information
The present circumstances may have disrupted your company’s usual flow of management information.
Boards planning their route through the current emergency with a view to reactivating their full business activities will therefore need to consider how they can maintain and/or complement such missing information, as can also be crucial for the preparation of financial statements.
Risk management and internal control systems
The movement of staff and some business locations being rendered inaccessible may lead to the relaxation of existing risk management processes and internal controls.
Such changes may be unavoidable or regarded as necessary to preserve some level of operations in the short term. However, we would advise boards to carefully monitor these changes while implementing any alternative mitigation controls needed to ensure an effective control environment.
Dividends and capital maintenance
While many firms have already sought to support their balance sheets and maximise financial flexibility by adjusting their approach to dividends and shorter-term dividend policies, other companies may have proposed, but not yet made, a dividend.
If the latter is the case for your organisation, it is crucial for directors to consider the company’s position – not only at the time of the dividend being proposed, but also when it is made. If the company is no longer able to pay a dividend, any such plans should be halted by the directors, with this being appropriately communicated to the market.
Corporate reporting
Investors’ key information requirements are those related to companies’ liquidity, viability and solvency. However, it is also difficult for boards to easily predict how long or damaging the COVID-19 pandemic will be, including its impact on the global economy.
Nonetheless, investors can still reasonably expect companies to be able to articulate what they expect the potential impacts to be on their particular business in a range of scenarios.
The Strategic Report
While it is always crucial for the Strategic Report to be forward-looking, this importance heightens in crises like the present one. An entity-specific approach should also be taken, given that while all businesses and individuals will be affected by COVID-19, there will likely be significant differences in the critical implications from one company to the next.
This, in turn, means different organisations will need to set out different plans for mitigating the effects of the Corona virus. Firms will also vary in their capacity to follow such plans and the level of resources they have to withstand the ongoing effects of the pandemic.
Would you like to take advantage of the first-hand know-how in these aspects of corporate governance that the London Registrars team can lend you? If so, please note that we remain available to serve your firm’s wealth of requirements, including through company secretarial subscriptions, when you contact our professional and friendly team.
April 2020