Considerable disruption to companies’ usual management and governance processes has taken place as a result of the unprecedented uncertainty brought about by the COVID-19 outbreak.
So, when boards are looking to maintain strong corporate governance in such a time of crisis, what should some of their key focus areas be with regard to the preparation of their annual report and other corporate reporting?
The main steps that boards should take
There are various measures that we would advise boards to adopt during this time to ensure the highest possible standards of corporate governance are maintained within their companies.
Such steps should include the development and implementation of mitigating actions and processes to ensure the continuation of an effective control environment. You are urged to look afresh, for example, at key reporting and other controls that you may have historically depended on, but which may not be effective in the current drastically changed circumstances.
It is also important to think about how you will continue to secure reliable and relevant information for your management of the future operations, including the flow of financial information across major subsidiary, joint venture and associate entities.
Capital maintenance also ought to be a significant priority for boards at this time of crisis. You must ensure, for instance, that sufficient reserves are available at the time of the payment of the dividend, rather than merely when it is proposed. Furthermore, there have to be sufficient remaining resources to meet the company’s needs.
What about your firm’s corporate reporting during this time?
It is especially difficult right now to make forward-looking assessments and estimates for the purposes of financial statements and other corporate reporting.
We would therefore advise boards to focus most on those areas of reporting that are of particular interest to investors, as well as to provide clarity around their use of key forward-looking judgements.
It is especially crucial in the present moment, for instance, for narrative reporting to provide forward-looking information that is specific to the entity, and which is insightful in relation to the board’s assessment of business viability and the methods and assumptions that underpin this assessment.
There are also going concern and associated material uncertainties to consider, and certain matters to think about when confirming the preparation of the financial statements on a going concern basis.
Also heightened during this time of crisis, is the importance of providing information on the significant judgements applied when financial statements are being prepared, in addition to sources of estimation uncertainty and other assumptions made.
Finally, companies will also need to determine the appropriate reporting response to events after the reporting date, and the extent to which it may be appropriate to make qualitative or quantitative disclosures.
Don’t hesitate to seek out London Registrars’ company guidance and services
Here at London Registrars, we are pleased to be continuing to provide organisations with the benefit of a comprehensive range of company secretarial services during this time of uncertainty.
Contact our professional, capable and friendly team today to discuss your requirements in relation to such services as the maintenance of statutory registers, ensuring timely filings at Companies House, and forwarding any mail received from Companies House, HMRC and the Courts Service.