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Best practice governance for Limited Company?

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  • 05-04-2013 3:20am
    #1
    BenEadir
    Registered Users Posts: 4,539 ✭✭✭


    Hi,

    I'm looking for information on what the recommended best practice corporate governance/management structure is for SME sized Limited Companies i.e. turnover up to €10m.

    My view is that the shareholders own the company but delegate strategic management of the business to a Board of Directors who in turn delegate implementation of their strategy/business plan to a CEO who reports to the Board. Is this correct? Are there any easy to read/summary articles which deal with this issue which you can point me in the direction of? I've done the usual Google search but all I can find are references to the Cadbury Report which deals with PLC's. Is there an equivalent for SME's?

    Ben


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    #2
    T L
    Registered Users Posts: 84 ✭✭T L


    Yeah you're on the right track.

    The UK Corporate Governance Code (applicable to companies listed on the Irish Stock Exchange) is the main source for best practice for public companies. There's no equivalent for private companies that I'm aware of. As long as private companies comply with Company Law provisions, anything additional on top of that is usually tailored to the size and complexity of the company.

    A lot of the stuff in the Code is very good and provides a good outline for all companies, public or private. The Code is based on principles (pages 6 and 7 of the link below) which can be applied to most private companies. I'll link the Code, but just to say first that some of the things in it, such as references to an audit committee, and non executive directors, aren't really applicable to private companies (due to the generally routine nature and lack of complexity in the financial reporting framework of small companies for example). The Code is very easy to read, it's not technical at all.

    http://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-September-2012.aspx

    I'd read pages 6 and 7 as I mentioned, and maybe skim through the rest of it if you have time.

    To summarise, the most common type of management structure I see in SME's is the one you mentioned: board of directors (who are often the shareholders themselves), supported by a CEO and CFO. If you have any more detailed questions or if the above isn't any use, let me know.


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