Private companies form the backbone of the UK economy, encompassing everything from family-owned businesses to high-growth scale-ups and private equity-backed ventures. While they may not be subject to the same regulatory scrutiny as listed companies, the need for robust corporate governance is no less critical. In fact, a well-structured governance framework can be a powerful enabler of growth, resilience and investor confidence.

With private companies accounting for the vast majority of registered companies in the UK, there is significant diversity in their size, structure and complexity. It follows that governance frameworks must be equally diverse, tailored to meet the specific needs and ambitions of each organisation.

Corporate Governance Frameworks

Corporate governance refers to the system by which companies are directed and controlled to ensure they operate effectively, ethically and in alignment with their strategic objectives.

A corporate governance framework is the tangible structure by which this is achieved. It defines the roles, responsibilities, rules and processes that guide decision-making and should be founded on a balance of stakeholder interests, in line with directors’ duties under section 172 of the Companies Act 2006.

Every company’s governance framework will look different, but most are built from the following core components:

• Board structure and composition
• Delegation of authority and accountability
• Risk management and internal controls
• Ethical standards and compliance
• Stakeholder engagement

Recognised benefits of an effective governance framework include:

• Improved decision-making through clearly defined roles and accountability
• Enhanced access to capital by building investor and lender confidence
• Risk mitigation via structured oversight and controls
• Smoother succession planning and leadership transitions
• Stronger reputation with customers, suppliers and regulators

Private Companies: Applying Governance Proportionately

The largest of listed companies are mandated to apply the UK Corporate Governance Code, which sets out detailed provisions for board composition, audit committees, shareholder engagement and other areas. Companies are expected to ‘comply or explain’, which means adhering to the provisions as set out or identifying and explaining what alternative approach is more appropriate. Companies not mandated to apply the Code may still voluntarily follow it or select a different corporate governance code to follow instead.

The principle of proportionality is apparent here. Boards have responsibility for building bespoke corporate governance frameworks that reflect their company’s unique context – their stage of development (including size and complexity), stakeholder expectations, and strategic goals.

This is no different for private companies. The majority of private companies are not mandated to follow a particular corporate governance code, but they may choose to do so for the structure, discipline or credibility that one can provide. Others simply draw inspiration from established codes, applying selected principles that align with their business model and growth trajectory.

For smaller companies, proportionality means asking the right questions:

• Scalability – Is the governance framework flexible enough to support future growth?
• Complexity – Is the governance framework understandable and achievable given current resources?
• Formality – Is there a need (and capacity) at this stage to establish, for example, board sub-committees, appoint a full-time company secretary, or formalise practices into written policies?

As a company matures, so too must its governance framework. Directors should regularly assess whether the framework remains fit for purpose. This might include introducing new elements such as internal audit, formalising board processes, or enhancing stakeholder engagement. In some cases, it might involve a realisation that certain elements go overboard and should be stopped or reduced to focus on the areas that matter. A periodic governance “check-in” can help to ensure the framework continues to support strategic goals.

Large, private companies (defined as those with at least 2,000 employees and either a turnover of at least £200m or a balance sheet total of at least £2bn) are mandated to apply the Wates Corporate Governance Principles for Large Private Companies. The Wates Principles themselves recognise that there is no ‘one-size-fits-all’ approach to governance. Instead of prescribing detailed provisions for companies to follow, the Wates Principles provide a flexible framework built around six core principles. Companies are expected to ‘apply and explain’, that is, to interpret each principle within the company’s specific context and explain how they have been applied. Again, the key to compliance is to intellectually grasp and meaningfully live out the spirit of a corporate governance code, as opposed to ticking boxes.

For private companies of all sizes, the message is clear: good governance should be proportionate to scale and complexity. Consider the following examples:

• A small owner-managed business might not need a formal board committee structure, but could benefit from appointing an independent advisor to provide constructive challenge.
• A fast-growing scale-up might introduce board evaluations and succession planning to prepare for future investment or exit.
• A private equity-backed company may opt to align more closely with public company standards to meet investor expectations.

Conclusion

While many companies claim to observe the ‘highest standards of corporate governance’ or nobly aspire toward ‘best practice’, which is often associated with the UK Corporate Governance Code, we have seen how this is not necessarily the most appropriate approach for the majority of companies. Proportionality means that boards should focus on what governance truly means for their organisation and not blindly adopt the standards designed for listed entities.

In an environment of increasing stakeholder scrutiny, ESG expectations, economic uncertainty and increasing complexity in the business landscape, private companies that invest in effective governance are better positioned to thrive. A governance framework is not about ticking boxes, but it is a strategic enabler that builds a business that is resilient, credible and ready for the future.

How Elemental Can Help You: Tailored Governance Solutions

At Elemental CoSec, we help companies of all sizes implement proportionate, practical governance structures that support growth and compliance. Whether you’re just starting or scaling up, our expert team can guide you every step of the way.

We recognise that every private company is unique. Our governance specialists work with boards and leadership teams to:

• Review: Conduct governance health checks and gap analyses, benchmarking your current practices against relevant codes and sector standards, and facilitate board and committee effectiveness evaluations (internal or external).
• Implement: Develop tailored governance frameworks, including board charters, delegation matrices, and policy templates that fit your size and ambitions.
• Embed: Support you in rolling out new structures, training directors and staff, and integrating governance into daily operations, using digital tools for seamless documentation and workflow.
• Evolve: Provide ongoing support, periodic reviews, and governance “check-ins” to ensure your framework remains fit for purpose as your business grows.

Whether you’re an owner-managed business, a fast-growing scale-up, or a private equity-backed company, Elemental can help you build governance that is practical, proportionate, and future-ready.