What does good corporate governance look like?
18 May 2023 - The term ‘corporate governance’ first appeared in 1976 in the Federal Register, the official journal of the US federal government, but it came to prominence in the United Kingdom in 1992, with the publication of the Cadbury Report of the Financial Aspects of Corporate Governance. Broadly speaking, this term refers to a combination of rules, processes, laws and regulations by which businesses are operated, regulated and controlled. The responsibility of such is vested in the Board of Directors.
Corporate governance is critical for the proper functioning of an organization. Establishing and demonstrating good corporate governance underpins a company’s reputation and success. Bad corporate governance can result in a number of negative outcomes such as corruption, negligence and fraud.
The Cayman Islands Monetary Authority (CIMA) outlined the minimum expectations for regulated entities in the Statement of Guidance on Corporate Governance.
The Board of Directors is expected to oversee and supervise the activities of a regulated entity. To assist the Directors with discharging their duties, the service providers – such as the investment manager and administrator – should deliver regular reports and confirmations that the entity has been managed in accordance with its constitutional and offering documents. The Board of Directors should meet at least twice a year, together with the service providers who shall present their respective reports to the Board.
Good practice extends beyond oversight and the way in which things are done and the rigour of communication between the entity and its service providers, and includes the manner in which meetings of the entity's governing body are arranged, conducted and recorded. It is of paramount importance that full, accurate and clear records of each meeting are prepared. The minutes of the meeting should include agenda items, circulated documents, a list of attendees, all matters considered and decisions made.
The Board should also review its performance and composition on an annual basis to ensure that it collectively has sufficient knowledge and experience to efficiently perform its duties, including:
- Exercising independent judgement and acting in the best interest of the entity;
- Operating with due skill, care and diligence and acting honestly and in good faith at all times;
- Making relevant enquiries where issues are raised and being satisfied that an appropriate and timely course of action is being taken;
- Communicating with investors and financers of the entity;
- Exercising oversight over the service providers of the entity;
- Ensuring that the constitutional and offering documents comply with the local laws and regulations;
- Approving the appointment and removal of the service providers; and
- Communicating with CIMA.
The Corporate team at Citco Trustees (Cayman) Limited is composed of qualified professionals with well-rounded experience in providing company secretarial and board support services and ensuring that the functions are carried out with the highest degree of efficiency. Our teams are skilled at building effective relationships with Board and Committee members in order to develop tailored solutions to meet the needs of our clients.
By Katerina Mickova, Senior Manager – Corporate & Liquidations, Citco Trustees (Cayman) Limited