UK Law and Practice Contributed by: Gareth Sykes, James Palmer, Isobel Hoyle and Hannah Whitney, Herbert Smith Freehills Kramer
Once the relevant provisions of the ECCTA are brought into force, all new and existing company directors will need to have their identity verified and it will be an offence for an unverified person to act as a director of a company. From April 2025, individuals have been able to voluntarily verify their identity, ahead of identity verification becoming mandatory for all directors on incor - poration and appointment in autumn 2025 (with a 12-month transition period for existing direc - tors). Requirements Under the Governance Code The Governance Code provides that at least half the board, excluding the chair, should be com - prised of independent non-executive directors. The Governance Code also provides that com - panies should form three committees: a nomina - tion committee, a remuneration committee and an audit committee. The nomination committee should lead the process for making and recom - mending appointments to the board. The main role of the audit committee is to monitor the integrity of the company’s financial statements and review the company’s internal controls. The remuneration committee should have respon - sibility for determining the policy for executive director remuneration and setting remuneration for the chair, executive directors and senior man - agement. The remuneration and audit commit - tees should be comprised entirely of independ - ent non-executive directors and the nomination committee should have a majority of independ - ent non-executive directors. 4.2 Roles of Board Members Directors can be executive (with a service con - tract) or non-executive. The board of directors will typically comprise the following. • Chair of the board – their role is to chair board meetings and take on a leadership
role to ensure the effectiveness of the board. The Governance Code states that the chair should not be the same person as the CEO, to ensure independence. • Non-executive directors – the Governance Code provides that at least half the board, excluding the chair, should be independent as assessed by reference to various criteria set out therein. The Governance Code says that the role of non-executive directors is to chal - lenge and advise the board on the company’s strategy and policies. The Wates Principles state that privately held companies should have due regard to the benefits independent non-executive directors can bring. • Senior independent director (SID) – the Governance Code provides that the board should appoint one of the independent non- executive directors to be the SID, who should provide a sounding board for the chair and serve as an intermediary for the other direc - tors and shareholders. • Executive directors – executive directors on the board may include a CEO, CFO and chief operating officer (COO). There are no specific legal requirements regarding which execu - tive directors a company should appoint. The number and type of executive directors appointed will depend on the business needs of the company. The role of the executive directors is to implement the decisions made by the whole board and to discharge overall managerial responsibilities. For example, a CEO is typically responsible for the overall management of the company, while a CFO is responsible for the company’s accounts and finances, and a COO is responsible for the overall operations and administration of the company. The executive directors will be sup - ported in their role by members of the execu - tive team, who are not part of the board.
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