Corporate Governance
1. Governance of Ncondezi Coal Company Limited
Ncondezi Coal Company Limited (the “Company”) is committed to maintaining high standards of corporate governance.
The Company has adopted a common approach to corporate governance to comply with regulatory obligations associated with its listing on the AIM market of the London Stock Exchange (“AIM”).
Whilst not a mandatory requirement of the Company’s listing on AIM, the Directors have chosen to apply the Combined Code on Corporate Governance published by the UK Financial Reporting Council in June 2008 (the “Combined Code”) to promote good corporate governance, where considered practical for a company of its size and development stage of the mining cycle.
Adherence to the Combined Code is based on a “comply or explain” principle, whereby companies are expected to comply with the recommendations or explain why they have chosen an alternative approach. Below is a summary of the departures from the Combined Code with an explanation of how the Company’s actual practices contribute to good corporate governance.
2. The Board of Directors
2.1 Membership
The Board consists of six Directors: one executive Director and five non-executive Directors including the Chairman. The names, skills, experience and expertise of each Director are shown in the Board of Directors section of the Company’s website.
2.2 Roles and responsibilities
The main responsibilities of the Board include but are not limited to:
- providing strategic direction for the Company;
- overseeing the Company’s systems of internal control, governance and risk management;
- evaluating the performance of executive management; and
- monitoring and facilitating the operation of the audit and remuneration committees.
The Board is also responsible for the approval of the Company’s annual business plan and budget, major changes to the Company’s corporate structure, approval of the Company’s annual report and treasury policy and the approval of major capital expenditure. Responsibility for the day-to-day management of the Company rests with the executive team.
Directors receive timely, regular and appropriate management information to enable them to fulfil their duties and have access to the advice of the Company Secretary. The Board has agreed guidelines for Directors to obtain independent professional advice if they seek it at the Company’s expense.
2.3 Board independence
The Combined Code requires that small companies should have at least two independent non-executive Directors. All five of the non-executive Directors, (Richard Stuart, Estevao Pale, Nigel Sutherland, Colin Harris and Mark Trevan) are not considered independent by definition of the Combined Code as they hold share awards under a long term incentive plan (‘LTIP’) in the Company, which are deemed to affect their independence. These share awards are not considered material in amount and therefore are not considered by the Company to affect their independence.
2.4 Election and re-election of Board members
Directors are elected by shareholders at the first annual general meeting after their appointment. At each annual general meeting of the Company one-third (or the nearest number to one-third) of the Directors shall retire from office by rotation. The Directors to retire in every year shall be those who have been the longest in office since their last election. In addition, any Director who would not otherwise be required to retire shall retire by rotation at every third Annual General Meeting after his last appointment or re-appointment.
2.5 Chairman and chief executive officer
The roles of the Chairman and chief executive officer are separate and the division of their responsibilities has been formally approved by the Board.
The Combined Code recommends that the Chairman should be independent on appointment. The Chairman was not deemed independent on appointment. However the Board is satisfied that the current composition still contributes to good corporate governance for reasons discussed in the section ‘Board independence’.
3. Committees of the Board
The Company has the following Board committees in operation: the audit committee and remuneration committee. These committees are governed by terms of reference which are agreed by the Board and can be viewed in the corporate governance section of the Company’s website. All Board committees are required to report to the Board of Directors.
3.1 Audit committee
The Audit Committee is chaired by Mark Trevan and also includes Richard Stuart. The Audit Committee provides a forum for reporting by the Group’s external auditors. The Committee is responsible for reviewing a wide range of matters, including half-year and annual results before their submission to the Board, and for monitoring the controls that are in force to ensure the integrity of information reported to shareholders. The Committee advises the Board on the appointment of external auditors and on their remuneration for both audit and non-audit work, and discusses the nature, scope and results of the audit with the external auditors. The Committee keeps under review the cost effectiveness and the independence and objectivity of the external auditors.
The Audit Committee is responsible for ensuring the “right tone at the top” and that the ethical and compliance commitments of management and employees are understood throughout the Company. The tone at the top is reinforced by management which is committed to leading by example. Further information on of the Audit Committee can be found on the Group’s website.
3.2 Remuneration Committee
The Remuneration Committee is chaired by Nigel Sutherland and includes Richard Stuart. The committee is responsible for making recommendations to the Board, within agreed terms of reference, on the Company’s framework of executive remuneration and its cost. The Remuneration Committee determines the contract terms, remuneration and other benefits for the executive directors, including performance related bonus schemes and compensation payments. The executive directors will determine the remuneration of the non-executive directors.
4. Internal controls & risk management
The Board is responsible for establishing and maintaining adequate internal controls and risk management systems to safeguard shareholders’ investment and Company assets.
Internal controls are designed and maintained to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of the Company’s published financial statements in accordance with IFRS. Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance, and may not detect all misstatements whether caused by error or fraud.
The Board have established a process for identifying, evaluating and managing financial, operational and compliance risks that the Company is exposed to. The Board will continue to embed and formalise the Group’s risk management systems and processes during 2010. This process is also managed in conjunction with the Chief Executive Officer and Chief Financial Officer. Details of the Company’s approach to financial risk can be found in note 18 to the consolidated financial statements in the Company’s 2009 annual report. Operational risk is managed at business unit level using a flexible approach to ensure risk management processes can be tailored to meet specific circumstances.
Where appropriate, necessary action has been or is being taken to remedy any weaknesses identified from review of the effectiveness of the Company’s internal control systems.
5. Relations with shareholders
The Company is committed to maintaining the highest standards of disclosure ensuring that all investors and potential investors have the same access to high quality, relevant information in an accessible and timely manner to assist them in making informed decisions. The executive management team manages the flow of information to all investors and potential investors and regular presentations take place at the time of the half year and final results as well as during the rest of the year.
Any concerns raised by a shareholder in relation to the Company and its affairs are communicated to the Board.
During the first half of 2010, executive management made presentations to potential investors in relation to the Company’s listing on AIM and through its continuous disclosure to investors. The Chairman and other non-executive Directors are available to shareholders to discuss any matter they wish to raise.
Copies of announcements to the stock exchanges on which the Company is listed, investor presentations, interim financial reports, the annual report and other relevant information are posted to the Company’s website.
Shareholders will have the opportunity at the forthcoming AGM to put questions to the Board, including the Chairmen of the various committees.