The Budget - And Why Your Business Should Now Get a Governance Health Check

Several measures announced in the Autumn Budget will affect businesses, and this serves as a timely reminder to review and update plans for your business.

As a company director, the subject of business governance should be at the forefront of your mind. By adopting a robust and methodical approach to governance, you can ensure that your company is well managed, with no key items being overlooked. In turn, this will minimise your risks and liabilities, maximise your efficiencies, and set the foundations for business growth.

‘A business governance health check is very helpful to ensure that you are operating from a stable and sustainable base, and the recent Budget is a good prompt to schedule one,’ says James Conduit, Head of the Corporate & Commercial Team. ‘By keeping a close eye on governance, you can build resilience into your business from top to bottom. If you think that your business could benefit from strengthening in this area, you should consult our company solicitors and they will be able to analyse your governance structure and advise on any areas for improvement.’

James delves into the topic of business governance, looking at six major areas of focus, and discusses what you can do to improve governance in your own business.

2024 Budget and Strategic Financial Planning

The Chancellor introduced various measures in the 2024 Budget which will impact the vast majority of UK businesses, including an increase in the employer rate of national insurance contributions (from 13.8% to 15% from April 2025) and various changes to business rates.

Notably, there have also been key measures introduced regarding capital taxes, including an immediate increase in the main rate of capital gains tax (effective 30th October 2024) and planned increases to both Business Asset Disposal Relief and Investors’ Relief, due April 2025 and April 2026. Additionally, insofar as Inheritance Tax is concerned, the drastic reforms to agricultural property relief and business property relief (effective from 6 April 2026) will require careful consideration by business owners.

As with all new government changes to taxation and regulations, it is always important to:

• Seek professional advice – speak to trusted, experienced professionals who will be able to guide you through matters and navigate the best route forward.
• Assess the measures – consider how the changes might have a practical impact on running your business, on your cash flow or other financial aspects.
• Diarise when they come into force – since the measures in the Budget take effect at staged intervals, it is always sensible to diarise key dates early on so that nothing gets missed.
• Consider long term aims – think carefully about how the changes may affect your future plans and objectives. For example, where applicable, with regards to the changes to agricultural property relief and business property relief – how might future inheritance tax liability be funded by the next generation? And how might this impact on the future viability of your business?

Business Ownership and Governance Structure

Good governance starts from the very top. It is crucial that your ownership and management structure is fit for purpose. Division of responsibility should be clear and documented and important officer roles, such as those of managing director and finance director, should only be held by those whose skills, competencies and personality truly fit the roles.

This approach is paramount in family businesses, where division of responsibility and succession planning can get overlooked and critical conversations can be harder to have. It is vital that these conversations are held, and that an honest appraisal of management strengths and weaknesses is undertaken.

Any boardroom issues such as director underperformance, a personal dispute or a conflict of interest, should be dealt with promptly and resolved before it starts to impact on company performance.

Corporate Documentation and Filing

It is important that your corporate documentation accurately reflects matters as they are within your company at all times, and that your company registers and Companies House filings are always kept up to date. This will ensure that your company is meeting its legal obligations and avoiding fines, penalties and other sanctions for non-compliance.

Furthermore, you should not overlook matters such as preparation of board meeting minutes and shareholder meeting minutes and resolutions. Whilst such matters may seem long-winded and tedious, they are an important aspect of company governance and are fundamental for audit and compliance purposes.  They can also protect directors, giving a contemporaneous account of the reasons for actions taken.

We will be able to advise you on all these matters and give you peace of mind that your corporate documents are legally compliant.

Contract Management

In running your business, it is normal that the number of contracts you enter increases over time. Many organisations fail to realise that actively managing these contracts, and maximising their value and benefit, requires continuous ongoing focus. As such, contract management should be seen as a core function of your business.

You should check your contracts and your standard terms regularly to ensure they remain compliant, are in accordance with all agreed commercial terms and are in line with your insurance arrangements. It is prudent to have a system for logging your business contracts so that you can record and monitor key timescales, such as a break window or renewal date, and to spot potential issues before they arise.

Risk Management

Adopting robust risk management helps underpin your approach towards corporate governance. Some examples of areas to look out for from a practical risk management perspective include:

• Health and safety – be aware of all your duties of care and review your policies, procedures and working practices regularly.
• Working arrangements – the recent shift in working arrangements, including shifts towards more remote and hybrid working, may require you to revisit aspects of your employee policies and procedures.
• Insurance policies – check that your policies of insurance are fit for purpose, maintained on risk, and include realistic financial cover for your activities.
• Apply common sense – you know your own business better than anyone. As such, make sure that your decision making is always grounded in logic and reason.

Regulatory Framework

All matters pertaining to the issue of regulation should be handled with great care. Whether you are in a regulated sector or not, all businesses have to comply with some degree of regulation, whether it be permits, licences, accreditations, data protection, or packaging and environmental requirements etc.

Meeting these regulatory obligations is essential to the continued success of your business, and the sanctions for failing to do so can be severe.

How We Can Help

Our solicitors can help you with your governance health check and guide you through any areas requiring improvement.

This can include reviewing your corporate structure, drafting any necessary documents such as company articles, shareholder agreements and director service agreements, preparing board and shareholder minutes and resolutions, updating company registers and handling Companies House filings. We can also advise on risk issues and assist with licensing and other regulatory matters on your behalf.

For an informal conversation on any matter related to business governance, please contact our Corporate & Commercial Team on 0800 542 4245 or email info@sillslegal.co.uk. We have teams in all of our offices across the region.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.

Photo by Kampus Production