IN today’s business environment, sound corporate governance is fundamental for sustainable growth, fostering investor confidence, and ensuring corporate accountability. Corporate governance refers to the systems, principles, and processes by which companies are directed and controlled. It ensures that businesses are operated in a way that balances the interests of stakeholders, including shareholders, directors, employees, customers, and the wider community. The Companies Act of Jamaica (the “Act”) imposes certain requirements to ensure that companies operate transparently and ethically.

Accountability of Directors

Under the Act, every director and officer of a company, in exercising his powers and discharging his duties, must act honestly and in good faith with a view to the best interests of the company. Directors and officers must exercise the care, diligence and skill that a reasonably prudent person would, in comparable circumstances, including but not limited to the general knowledge, skill and experience of the director or officer. These duties are owed to the company alone.

Directors also have a duty to avoid circumstances which would constitute a conflict of interest. In circumstances where a director is directly or indirectly interested in a matter which is considered a conflict of interest or may result in a conflict with the interests of the company, the director must disclose the nature of his interest at a meeting of the directors and must not take part in any deliberations at the meeting of the directors in relation to that matter.

The shareholders, members of the board of directors, creditors of the company or the trustee of the company may file a complaint to the Registrar of Companies in instances where they believe a director is unfit to be concerned in the management of the company. Upon receipt of such a complaint, the Registrar of Companies is empowered under the Act to investigate the matter. If the Registrar is satisfied that there are sufficient grounds for a hearing of the matter by the court, the Registrar may issue a certificate to the aggrieved party affording them the right to make an application to the court.

The court, in making an order as to whether the director is unfit and should no longer be concerned with the management of the company, will have regard to matters including a breach of the director’s fiduciary duty, any misfeasance or to the extent of the director’s responsibility for any failure by the company to keep and maintain proper accounting records. Therefore, directors and officers of a company must ensure they understand both their legal and fiduciary responsibilities under the Act.

Transparency and Disclosure

Effective corporate governance requires that the company maintains transparency in relation to its processes and operations. Under the Act, every company is required to keep proper books and documents of account which give a true and fair view of the state of the company’s affairs and explain its transactions. These books and documents of account must be kept at the registered office of the company or at such other place as the directors think fit. The accounts of the company must be prepared in accordance with the generally accepted accounting principles as implemented by the Institute of Chartered Accounts of Jamaica, or such other body prescribed. Therefore, the company must ensure it is adopting the International Financial Reporting Standards as well as conducting regular audits to ensure compliance.

The directors of every company must at least once in every calendar year, lay before the company in general meeting the company’s audited financial statements and a report by the directors with respect to the state of the company’s affairs and other relevant financial matters. Failure to do so is an offence under the Act.

The minutes of all general meetings must be entered into the company’s minute book and must be open to the inspection of any member without charge during business hours (subject to reasonable restrictions in accordance with the Act). The company must also maintain a register of members and beneficial owners, and file an annual return, a beneficial ownership return and relevant notices at the Companies Office of Jamaica, which disclose to the Registrar information on the company’s members and beneficial owners, along with any changes in the company’s structure.

Risk Management

Risk management has an imperative role in good corporate governance. Companies must efficiently identify, assess and mitigate potential risks to achieve their objectives. Integrating risk management into decision-making processes allows the company to anticipate and respond to uncertainties, reduce potential vulnerabilities in its processes and improve overall sustainability. Establishing a robust risk management framework which includes regular risk assessments and the integration of risk management into the company’s operations is key to sound corporate governance.

Steps to Strengthen Corporate Governance in Your Company

Below are a few initiatives that a company can implement to bolster its corporate governance.

1) Education and Awareness

Conduct workshops for the directors and officers to ensure they are aware of their duties and the requirements under the Companies Act and any other relevant legislation as well as the key principles of good corporate governance.

2) Policy Development

Develop comprehensive governance policies and procedures covering areas such as ethics, conflicts of interest, risk management and board operations.

3) Independent Oversight

Establish committees for audit, risk management, and governance to ensure objective decision-making.

4) Continuous Improvement

Regularly review governance practices to align with evolving legislation/regulations and stakeholder expectations.

Corporate governance is not merely a regulatory requirement; it is a strategic advantage for Jamaican businesses. By adhering to the principles outlined in the Companies Act, companies can enhance operational efficiency and ensure long-term success.

Rachel Poole is an Associate in the Commercial Department at Myers, Fletcher and Gordon. She may be contacted at rachel.poole@mfg.com.jm or through the firm’s website www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.