The Directors support the highest standards of corporate governance and aim to observe the main requirements of the Combined Code
The Directors are responsible for the Group’s systems of internal control and for reviewing their effectiveness. The risk management process and systems of internal control are designed to manage rather than eliminate the risk of failure to achieve the Group’s objectives. Any such system of internal financial control can only provide reasonable but not absolute assurance against material misstatement or loss.
The Company’s Board appreciates the value of good corporate governance not only in the areas of accountability and risk management but also as a positive contribution to business prosperity. A key objective is to enhance and protect shareholder value.
The Board currently comprises the Non-executive Chairman, the Chief Executive Officer, the Finance Director and three non-executive directors. Directors have a particular responsibility to ensure that the strategies proposed by the Executive Directors are fully considered. The day-to-day management of the Group is delegated to the Executive Directors. It is the policy of the Group for the Executive Directors to report and refer to the Board at regular intervals on all matters relating to the running of the Group. The Board aims to have at least 6 meetings a year. Prior to each meeting, Directors are sent an agenda and Board information on individual agenda items where applicable. Directors may request additional Board papers on any topic.
All Directors are subject to election by shareholders at the first opportunity after their appointment and thereafter every three years. Non-executive Directors are not subject to specified terms as all Directors are subject to the three year re-election requirement. The Board considers this appropriate and will review the situation at regular intervals.
Under the terms of the Company's Articles of Association, any Director who was not appointed or re-appointed at one of the preceding two annual general meetings shall retire and shall be eligible for re-appointment at the Annual General Meeting
Committees of the Board
The following committees, which have written terms of reference, deal with specific aspects of the Group’s affairs:
The Remuneration Committee, is made up of the non-executive Directors and is responsible for making recommendations to the Board on the Group’s framework of Executive remuneration and its cost. The committee determines the contract terms, remuneration and other benefits for each of the Executive Directors. It is chaired by Charles Davies and has access to recruitment consultants when required. The Board itself determines the remuneration of the Non-Executive Directors.
The Audit Committee is made up of the non-executive Directors. Chaired by Martin Abbott, the committee’s prime tasks are to review the half-yearly and annual accounts before they are presented to the Board, focusing in particular on accounting policies and areas of management judgment, scope of internal control and estimation. The committee is responsible for monitoring the controls which are in force to ensure the integrity of the information reported to the shareholders. The committee acts as a forum for discussion of internal control issues and contributes to the Board’s review of the effectiveness of the Group’s internal control and risk management systems and processes. The committee reviews annually the objectivity and independence of the external auditors. The committee meets at least twice a year, provides a forum for reporting by the Group’s external auditors. Meetings are also attended, by invitation, by the Finance Director.
The Committee has considered the Group’s circumstances and due to the close involvement of the Directors in operational, financial and risk management and control, and in view of the Group’s size, it believes that shareholders would not benefit from the implementation of an internal audit function at this time. This will continue to be reviewed on an adhoc basis.
The Nominations Committee is made up of the non-executive Directors and is Chaired by Charles Davies. The Committee is appointed by the Board to assist the Company and the Board in fulfilling their respective corporate governance responsibilities under applicable securities laws, instruments, rules and policies and regulatory requirements, to promote a culture of integrity throughout the Company and to assist the Company in identifying and recommending new nominees for election to the Board.
Evaluation and Appraisal
The Board does not currently have a formal system in place for evaluating the performance of individual Directors and committees. The presence of an open environment where feedback is continually sought provides an informal process that enables the continual improvement of Directors and committees. The Board believes that this system is effective given the current size of the Board and the increasing executive requirements placed upon the Group’s limited resources. The Board will consider the implementation of a formal evaluation process each year as appropriate.
The Directors are responsible for the Group’s system of internal control and reviewing its effectiveness. The Board has designed the Group’s system of internal control in order to provide the Directors with reasonable assurance that its assets are safeguarded, that transactions are authorised and properly recorded and that material errors and irregularities are either prevented or would be detected within a timely period. However, no system of internal control can eliminate the risk of failure to achieve business objectives or provide absolute assurance against material misstatement or loss.
The key elements of the control system in operation are:
- The Board meets regularly with a formal schedule of matters reserved to it for decision and has put in place an organisational structure with clear lines of responsibility defined and with appropriate delegation of authority;
- There are established procedures for planning, approval and monitoring of capital expenditure and information systems for monitoring the Group’s financial performance against approved budgets and forecasts; and
- The Finance Director is required to undertake a full assessment process to identify and quantify the risks that face the Group’s businesses and functions, and assess the adequacy of the prevention, monitoring and modification practices in place for those risks.
The Audit Committee receives reports from external auditors and from the Executive Directors of the Group. The Board receives periodic reports from all committees.
Relations with Shareholders
The Group values its dialogue with both institutional and private investors. Effective two-way communication with fund managers, institutional investors and analysts is actively pursued and this encompasses issues such as performance, policy and strategy.
Statement by the Directors
The maintenance of effective corporate governance is a key priority of the Board. Under the rules of AIM, the Company is not required to comply with the detailed requirements of the Combined Code. The Board fully supports the principles of openness, integrity and accountability on which the Combined Code is based and has applied those principles that are relevant to the Group’s size and complexity. As the business expands, procedures will be reviewed and considered by the Board.