The Annual Performance Review
It is highly recommended that a fund board voluntarily adopt the Irish Funds Corporate Governance Code (Code). One key aspect of the Code requires the board to review the overall performance of the board, individual directors, and the chair on an annual basis, with a formal documented review taking place at least once every three years.
All Directors are expected to attend and participate, and the discussion on the annual performance review should be minuted by the Company Secretary.
The Company Secretary may supply the board with a document outlining key discussion points for the annual performance review, including a questionnaire. It is best practice that the questionnaire be circulated to the board in advance of the board meeting to help facilitate an informal discussion on the performance review. Where a board is due for a formal review (every three years), this questionnaire can be filled out by the directors and sent to the Company Secretary to form part of the written record of the formal review. The answers are then discussed at the board meeting.
Below are some key aspects of the Code that should be discussed in detail by the board:
Board Composition: The board shall be of sufficient size (minimum three directors) and have adequate expertise to oversee operations of the company and its delegates. The Code recommended that the board comprise a majority of non-executive directors, at least one independent director, and at least two directors must be an Irish resident. Board diversity, tenure, and independence (where required) are essential aspects to discuss when considering the adequacy of board composition.
Board Engagement: An attendance schedule should form a part of the annual performance review process, and same is tracked by the Company Secretary throughout the year. Directors are required to disclose their other time commitments, including time devoted to the role of directors of entities domiciled in foreign jurisdictions. The Company Secretary will have updated directorship lists for each member of the board. The Code requires that the board must be satisfied that the directors have sufficient time to fully discharge their duties. In addition, the board should discuss if there is adequate engagement from each director at the board meetings, including sufficient challenge to the board reporting and service providers. Time commitments and skill-set are key aspects when considering adequate director engagement.
Frequency of meetings should also be reviewed to ensure that the board is satisfied that they are meeting (at least quarterly) proportionately to the scale and complexity of the company structure.
Board Reporting: The directors should consider the quality of board reporting received from service providers and delegates. In addition, the board should consider the efficacy of the Company Secretary and the quality and timely delivery of the minutes and board materials. Directors should also review all delegate appointments and assess the quality of their services.
Committees of the Board: The directors should review the terms of reference for any committees of the board to ensure that it remains fit for purpose. Particular attention is required for audit committee composition to ensure that independence and skill-set remain adequate. The directors should also review any schedule of reserved powers for board decisions.
Conflicts of Interest: The board should review the company’s conflict of interest policy and register on at least an annual basis to ensure all potential conflicts of the board are captured. In addition the connected/related party transaction policy and register should also be reviewed. These policies and registers should be maintained by the Company Secretary.
Chair Performance: The directors should consider the performance of the chair, and it is best practice that the chair excuse themselves from the meeting to facilitate a more open discussion on same. The Code requires that the chair shall be a non-executive director, and consideration should be given to ensure that the chair leads the board meetings, encourages critical discussions and challenges at the board meetings, and promote effective communication between all directors and service providers.
Financial Position: The Code requires the board to ensure that all relevant accounting records are properly maintained and are readily available, including production of financial statements on at least an annual basis. The board should also ensure that a qualified auditor is appointed to carry out the audit of the annual financial statements, and ensure that the accounts are filed with the regulators and provided to shareholders in a timely manner.
The board should be satisfied that based on the nature, scale, and complexity of the company, the board composition, engagement, and quality of service providers is adequate and fit for purpose. The minutes should include a resolution to this effect and include any action items that arise from the annual performance review.
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