The Institute of Chartered Secretaries and Administrators in the UK (ICSA) has this month published an updated version of its guidance paper "Joining the Right Board - Due Diligence for Prospective Directors". The aim of the revised guidance is to advise prospective directors on the due diligence process which it is recommended they should undertake before agreeing to join the board of any company.

The document highlights the importance of carrying out a thorough examination of any proposed directorship and states that "by making the right enquiries, a prospective director can reduce the risk of unwelcome surprises and dramatically increase the likelihood of success".

The guidance contains information on how to undertake a due diligence and sets out a list of questions which the director should ask of the company in relation to the business of the company, its corporate governance policies, board matters including its composition and boardroom behaviours, remuneration, investor relations and risk management. A list of the documents relating to the company which a prospective director should read is also helpfully set out.

In addition, it is recommended that the prospective director arrange meetings with board members, the company secretary and all members of the nomination committee. It may also be advisable perhaps to meet some directors in pairs or in small groups rather than relying on one-to-one meetings, as this can shed more light on boardroom dynamics. Where the prospective director is also potentially taking up the role of chairman of the company, or chairman of the audit or remuneration committee, the guidance recommends that he should meet with the auditors and those in a position of responsibility within the company with regard to audit or remuneration, as appropriate. In all cases, the prospective director should consider whether there are any external advisers to the company, or other persons such as senior management or employees, with whom a meeting could yield valuable insights.

This is one of a series of ICSA guidance notes in the area of corporate governance which were previously appended to the Higgs Guidance and which are currently in the process of being revised by the ICSA following the replacement of the Higgs Guidance by the Financial Reporting Council's "Guidance on Board Effectiveness" published in March 2011. The latter FRC guidance was drafted by ICSA with the help of a Steering Group.

For a link to the guidance, please click here.