Governance professionals need to pay close attention to the current situation to support their chair, CEO and board and the UK government and industry body the Chartered Governance Institute UK & Ireland (CGIUKI) have issued guidance on what the sanctions mean and the rules around transparency of ownership.

For all those looking for guidance we have summarised the latest from the CGIUKI, including useful links.

A full explainer is available to CGIUKI members and non-members here, while the CGIUKI has also issued a technical explainer for members.

The UK government has announced draft legislation to track who owns property in the UK Economic Crime (Transparency and Enforcement) Bill 2022.

In addition, the white paper on reform of Companies House provides additional powers for verifying and challenging information on the identity of those setting up, running or controlling a company – Corporate transparency and register reform.

The CGIUKI has said that its policy team is currently looking at these in detail.

The role of governance in Russian sanctions

Responsibilities for the company secretary and governance professional include the financial and reputational impact of not responding to sanctions in a timely and effective manner.

Any activity with the list of banks, organisations and proscribed individuals on the UK government sanctions list will need careful investigation, especially as there are indications that Russian companies and individuals, anticipating sanctions, have devised more complex ownership structures.

For a complete list of sanctions, see here.

While a number of sectors are specifically highlighted, all FTSE companies need to check their register of shareholders to ascertain whether there are shareholders who are part of the current and new list of proscribed individuals. They must ensure they do not pay dividends to those individuals and that their assets are frozen.

Specifically, banks will need to ensure no major Russian companies are able to raise finance or borrow money on UK markets.

The CGIUKI checklist

• Check the chair and board are on top of compliance and reputational issues.
• For listed companies – comb through the share register and utilise 793 of the Companies Act 2006 to identify any shareholders who are proscribed individuals, if these are not already known.
• Breaching sanctions carries a potential criminal sentence, and therefore DNO insurance will not cover companies.
• Where there is relevant case law, the importance of board minutes is made clear.
• Companies selling or licensing electronic, telecoms and aerospace technology as well as oil refinery manufacturers will be higher profile regarding not licensing or selling to Russian companies.
• Banks are likely to act as a watchdog on transactions that seem to be in breach and will alert the regulator.
• If companies are slow to comply with sanctions, they will also risk whistleblowing from concerned employees.
• The banking sector must pursue its own diligence to ensure it is not financing entities and individuals subject to sanctions.
• Charities may wish to check whether they have any high-net-worth donors on the sanctions list or are receiving funding from any proscribed companies.