Part two: Jane Mayfield reports on Part II of the Corporate Governance Guidance
In Part II of the guidance the Institute of Directors (IoD) set out 14 governance principles. The IoD’s objective is to suggest a design for the governance framework for an unlisted company in the UK. In implementing the principles a company should exercise common sense ensuring that such framework is both proportionate and specifically tailored to such company.
The 14 principles are split into two phases. The first phase (Principles 1 to 9) applies to all unlisted companies; the second phase (Principles 10 to 14) to larger and more complex unlisted companies including those with significant external financing or aspiring to a public listing.
Principles 1 to 9 provide the core framework of basic governance principles.
Principle 1 states that shareholders should establish an appropriate constitutional and governance framework for the company through its constitutional documents, ie the articles of association, and any shareholders’ agreement. A shareholder needs to consider the existing framework and identify what is required to support the long-term interests of the company.
Principles 2 to 6 cover the
