Corporate Governance for Non-Listed Companies

Transparency and accountability, two often used words in the management and administrative world.

Conceptually, these are interconnected. Anything transparent can have greater accountability with potential productivity and stability. Corporate governance is structured under these phenomenal concepts. Good governance goes beyond compliance. In today's globalized world, it is a principle of sustainable development. Eventually, it is a question of sustenance for companies to opt for the governance mechanism in their corporate strategy.

Unlike the common law jurisdictions, the UAE commercial legal framework does not mandate the requirement of a deep governance mechanism for private companies. The gulf market, in general, is easily breakable due to multiple factors. Entry and exit happen tremendously. But the stable performance depends upon the quality of corporate strategy in line with the objectives of the company. The institutions, small and giants collapse alike due to internal corruption and failure of senior management.

Since there is no internal mechanism to describe ‘who does what’ within the organisation, it enables the unscrupulous elements to save their hands from the law. It is simply logical to keep the governance away to cut the cost at the initial level. But it should not be at the cost of losing the value of the organisation.

It is a usual complaint from SME industry that a trusted employee cheated, ex-employee joined a competitor, piracy of data, ex-employee using the technical know-how, management is not under control...etc. Ultimately, the business has become a big headache to the owners substantially result in collapse with higher liability.

The absence of proper documentation or existence of improper documentation is an issue which the industries suffer from often. Besides, the contractual relationship is not documented with appropriate terms and conditions or the legal documents are signed without knowing the repercussions of it.

Corporate governance practice eradicates the potential issues in the industry by placing an appropriate mechanism in compliance with the law of the land for keeping the organisation structured under the umbrella of the corporate manual of the organisation.

It acts, along with delegated documentation, as the master document for administration, management, operation and the end solution for achieving the objectives of the company through transparency, accountability and productivity with stable performance. The proper implementation of governance safeguards the company and mitigate the risk.

Written by:

Abduraheem Padinhare Kayakalil | Hamdan AlShamsi Lawyers & Legal Consultants