This corporate governance report sets out how the principles identified in the UK Corporate Governance Code have been applied by the Company.
Although, as an AIM listed company, the Company is not required to comply with the UK Corporate Governance Code, the Directors regard compliance as a benchmark of best practice, which they wish to follow wherever relevant and not disproportionate having regard to the size of the Group.
The Board comprises the Directors listed here.
Mr Murray is Executive Chairman. Mr Giniger is not considered to be independent in view of the interest in the Company's shares of Taya Investment Company Ltd, of which he is Chairman. Ms Hoomash is not considered to be independent as she is engaged as a consultant to a subsidiary of Taya Investment Company Ltd.
The Board is scheduled to meet at least four times each year, in addition to which meetings will also be convened on an ad hoc basis if there is urgent or delegated business which cannot wait until the next scheduled meeting of the full Board.
The Board considers the overall strategic direction, development and control of the Group and reviews the financial and operational performance. Various major decisions require Board approval, including the approval of the annual budget, larger capital expenditure proposals, acquisitions and disposals. Board papers, which are sent out in advance of each meeting, include a set agenda although further subjects are added for discussion as the need arises.
The executive Directors meet formally as a management team, usually on a monthly basis. These executive management meetings consider and review the operational and financial management and performance of the Group, receive reports from the key managers in respect of their respective areas of responsibility, discuss significant issues and determine any appropriate action to be taken.
The Executive Chairman chairs the Board and the Audit and Remuneration Committees. The Chairman is responsible for ensuring that the Board is kept properly informed and is consulted on all issues reserved to it. The Chairman consults with the non executive Directors on corporate governance issues and ensures a constructive relationship between the executive and non executive members of the Board. The Chairman is responsible to the Board for the day to day management of the Group and, together with the executive team, for the implementation of the Group’s strategy and business goals.
The Board has access to the advice and services of the Company Secretary and there is a written procedure for obtaining independent legal advice at the Company's expense.
The Chairman and non executive Directors review the performance of the executive Directors. No formal performance evaluation of the non executive Directors or of the Board committees has been conducted.
Appointments to the Board
There is no nomination committee and all nominations to the Board are considered by the Board as a whole. On appointment, new Directors take part in an induction programme when they receive information about the Group, the role of the Board and the Board committees, the Company’s corporate governance practices and procedures, and the latest financial information about the Group. They are also advised of their legal duties as a director of a public company. Visits are arranged to Group locations together with meetings with senior executives.
The Articles of Association of the Company require Directors to submit themselves for re-election at the first Annual General Meeting following appointment and then every three years.
The audit committee comprises Mr Murray and Mr Giniger. Mr Murray is the chairman of the audit committee.
The audit committee reviews the Group’s annual report, financial statements, interim statement and preliminary announcements before recommending their approval to the Board. This process involves meeting with the external auditors to discuss issues relating to the audit and financial control of the Group. The audit committee also reviews the Company's internal financial controls and risk management systems, the scope of the audit and the independence and objectivity of the auditors. The auditors have direct access, should they so require, to the chairman of the audit committee.
The remuneration committee comprises Mr Murray and Mr Giniger.
The remuneration committee makes recommendations to the Board on the executive remuneration policy and determines specific remuneration packages for each of the executive Directors. The aim of the remuneration committee is to provide total remuneration packages which attract, retain and motivate executive Directors of the appropriate calibre. The remuneration policy is to reward excellent performance, to be commercially competitive and to align the interests of employees with those of shareholders to create value. The remuneration of the non-executive Directors is determined by the Board as a whole although no non-executive Director is present when his own fees are under discussion.
The Company has purchased insurance to cover its Directors and officers against the costs of defending themselves in legal proceedings taken against them in that capacity and in respect of any damages resulting from those proceedings. The insurance does not provide cover where the Director has acted fraudulently or dishonestly.
The Company has executed a deed providing a limited indemnity to the Directors of the Company in respect of the costs of defending claims against them and third party liabilities. A copy of the deed of indemnity is available for inspection at the Company’s registered office during normal working hours and will also be available for inspection at the Company’s Annual General Meeting.
The Directors have an overall responsibility for internal control within the Group. The effectiveness of the Group’s internal control system has been reviewed by the Directors. The internal control system provides an ongoing process for identifying, evaluating and managing significant risks faced by the Company.
The internal control system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss.
The controls in place include Group policies and procedures, which are operated in all subsidiaries and which define levels of authority and procedures for regular control and management reporting.
The Group has a comprehensive system of financial reporting and forecasting covering profits, assets, liabilities, cash flow and capital expenditure.
The systems include regular monitoring of cash, monthly reporting of financial results, reviews of forecasts and comparisons with budgets. Budgets and business plans are prepared annually by all operations and reviewed by management and the Board. Regular management meetings are held to monitor performance against budgets, progress in implementing planned changes and the operational efficiency of the businesses.
Operational risks are identified and assessed by management with the identification and monitoring of significant risks being reported to the Board. In addition to those financial and commercial risks associated with the Group’s services, the nature of the services businesses dictates that particular emphasis is given to health and safety. The Group employs a full-time health and safety manager and regular training programmes are provided for operational staff.
The Directors have considered the need for an internal audit function but believe that the size of the Group at present does not justify a dedicated internal audit function. However, Avesco Group finance staff make regular visits to all the operations and perform many of those risk management tasks normally associated with an internal audit function.
The Directors review the decision not to have an internal audit function from time to time, in particular, having regard to material changes in circumstances.
Relations with shareholders
The Board makes considerable efforts to establish relationships with institutions and shareholders and to meet and communicate with them on a regular basis.
Directors make institutional presentations at the time that the interim and full year results are announced. If so requested, the non-executive Directors are available to attend meetings with major shareholders. The Board is keen to communicate with private investors and welcomes the opportunity to meet with them at the Annual General Meeting. The Company counts all proxy votes lodged at general meetings of the Company and indicates the number of proxy votes on each resolution, after it has been dealt with by a show of hands. Shareholders are able to register on the Company’s website to receive notification of press announcements by email.