STATEMENT OF COMPLIANCE WITH THE 2018 CORPORATE GOVERNANCE CODE
The Board recognise that high standards of corporate governance underpin our continuing success and as a Board we acknowledge our responsibility in leading this process.
We continually review the framework within which we operate and the processes implemented to ensure that they reflect the complexities of our business and, whilst acknowledging our size, are also capable of adding value as the business grows. In line with the London Stock Exchange’s recent changes to the AIM Rules requiring all AIM-listed companies to adopt and comply with a recognised corporate governance code, the Board has adopted the 2018 Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) as the basis of the Group’s governance framework.
We are not fully compliant with the requirements of the QCA Code; the posts of Chairman and Chief Executive Office are presently held by the same individual as this currently suits the Company’s strategic plans and while we considers our non-executive directors to be independent in character and judgement; neither are technically independent as defined by the QCA Code because both participate in share option schemes.
Within Image Scan, we promote a culture of good governance in dealing with all key stakeholders: our employees, our customers, our suppliers and our shareholders. This section of the website describes our corporate governance structures and processes and how they have been applied throughout the year ended 30th September 2018.
Bill Mawer
Chairman, Image Scan Holdings plc
CORPORATE GOVERNANCE STATEMENT
The Board ensures that the Group adopts proper standards of corporate governance and that the principles of best practice as set out in the QCA Code are followed so far as is practicable and appropriate to the size and nature of the Group and the constitution of the Board. Set out below is a summary of how, the Group is applying the key requirements of the QCA Code and an explanation of where it has chosen not to comply.
- Establish a strategy and business model which promote long-term value for shareholders
The strategy and business operations of the Group are set out in the Strategic Report on pages 4 to 8 of the Group’s 2017 Annual Report. The Group’s strategy and business model are developed and approved by the Board. The management team is responsible for implementing the strategy and managing the business at an operational level. The Group’s overall strategic objective is to is focused on the development and commercialisation of market leading X-ray solutions for use in the global security and industrial inspection markets
- Seek to understand and meet shareholder needs and expectations
The Board recognises that Image Scan communicates with its shareholders principally through its website and the Annual Report. Shareholders can also sign up to receive news releases directly from the Company by email. The Chairman makes himself available to major shareholders on request and periodically attends meetings and gives presentations to shareholders. The Annual General Meeting of the Company, normally attended by all directors, gives the directors the opportunity to report to shareholders on current and proposed operations and enables the shareholders to express their views of the Group’s business activities. Shareholders are invited to ask questions during the meeting and to meet with directors after the formal proceedings have ended.
- Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board believes that, in addition to its shareholders, its main stakeholder groups are its employees, customers, suppliers and relevant Statutory Authorities in its areas of operation.
The Group’s operations and working methodologies take account of the need to balance the needs of all of these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Group for the benefit of its members as a whole. The Group endeavours to take account of feedback received from stakeholders, making amendments to working arrangements and operational plans where appropriate and where such amendments are is consistent with the Group’s longer term strategy.
Through the various procedures and systems it operates, the Group ensures full compliance with health and safety and environmental legislation relevant to its activities.
- Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board is responsible for the Group’s system internal control and risk management systems and for monitoring their effectiveness. The Board maintains a system of internal controls to safeguard shareholders’ investment and the Group’s assets, and has established a continuous process for identifying, evaluating and managing the significant risks the Group faces.
Details of the principal risks and how they are mitigated are set out on page 8 of the Group’s 2017 Annual Report. The Company’s internal control and risk management process are contained within the Statement of Corporate Governance of the Group’s 2017 Annual Report.
The Board considers risk to the business on an ongoing basis and the Group formally reviews and documents the principal risks at least annually. The Board is responsible for reviewing and evaluating risk.
- Maintain the Board as a well-functioning, balanced team led by the Chair
Throughout the year the Board of Image Scan comprised a combined Chairman / CEO, one further Executive Director and two Non-Executive Directors. At every AGM one-third of the Directors must retire by rotation. The Board’s role is to establish the strategic objectives and policies; oversee all aspects of the finances; continuously review performance and controls; manage risk; decide on key business transactions and manage the interests of stakeholder groups.
The Board reserves for itself a range of key decisions such as strategy, acquisitions, significant contracts and internal controls, to ensure it retains proper direction and control of the Group, whilst delegating authority to individual Directors who are responsible for the executive management of the business.
The QCA Code recommends that the role of Chairman and Chief Executive should not be exercised by the same individual. The role of Executive Chairman is held by Bill Mawer. In light of Bill’s significant, unique and proven expertise, knowledge and industry relationships the Board continues to believe that combining the roles of Chairman and Chief Executive remains the right approach at this stage in the Group’s development. Under the UK Corporate Governance Code the Group is not compliant with the requirement for companies below the FTSE 350 to separate these roles.
Under the QCA Code, all Non-Executive Directors are not considered independent by virtue of their participation in a share option scheme; hence, under the UK Corporate Governance Code the Group is not compliant with the requirement for companies below the FTSE 350 to have least two independent directors. At the same time, the Board considers that all Non-Executive Directors act independently of the Executive and are well placed to appropriately police adherence to the Group’s strategy.
The Group does not have a director designated as a Senior Independent Director. In light of the size of the Board, and the Company’s stage of development, the Board does not consider it necessary to appoint a Senior Independent Director at this stage, but will nevertheless keep this under review as part of the Board’s evaluation on Board effectiveness.
- Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities
The skills and experience of the Board are set out in their biographical details. The experience and knowledge of each of the Directors gives them the ability to constructively challenge the strategy and to scrutinise performance. The Board also has access to external advisors where necessary.
The Company has not adopted a policy on succession planning. The Board proposes, to consider succession planning as part of its regular review of Board effectiveness.
- Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board currently runs a self-evaluation process on Board effectiveness. It is intended that the Board will create a more formal process which will focus more closely on objectives and targets for improving performance.
- Promote a corporate culture that is based on ethical values and behaviours
The Group is committed to a culture of equal opportunities for all employees regardless of gender. The Board will be diverse in terms of its range of culture, nationality and international experience. All four directors are currently male. If it is agreed to expand the Board (or if new replacement directors are sought in the future), the Board will, subject to identifying appropriate candidates look to fill at least one of the vacancies with a female director.
- Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board has twelve scheduled meetings a year, but meets more frequently if required, and, together with the Audit, Remuneration and Nominations Committees, deals with all important aspects of the Group’s affairs. The Board receives timely information in a form and of a quality appropriate to enable it to discharge its duties. All Board Committees have their own terms of reference, which are available from the Company Secretary.
The structure of the Board is subject to continual review to ensure that it is appropriate for the Group. The Directors’ varied backgrounds and experience give Image Scan a good mix of the knowledge and expertise necessary to manage the business effectively.
Audit Committee
The Audit Committee comprises Tim Jackson, who acts as the Chairman, Richard Leaver and Bill Mawer. Tim Jackson is considered to have recent and relevant financial and legal knowledge and experience.
The responsibilities of the Audit Committee are; to ensure the good operation of financial practices throughout the Group; to ensure that controls are in place to protect the assets and to ensure the integrity of financial information; to review the interim and annual financial statements; to reviews all aspects of the audit programme and to make recommendations to the Board on the appointment, re-appointment and removal of the external auditor, taking into account the cost effectiveness, independence and objectivity of the external auditor. The Audit Committee also carefully evaluated the use of the external auditor for non-audit work so as to ensure that the external auditor’s independence and objectivity is not impaired.
The Audit Committee meets periodically with the external auditor for the purpose of discussing matters relating to the financial reporting, accounting policies and internal controls of the Group.
The Audit committee has three scheduled meetings per year.
Remuneration Committee
The Remuneration Committee comprises Richard Leaver, who acts as the Chairman, Tim Jackson and Bill Mawer.
It has the responsibility of setting the salaries paid to the executive directors; considering other benefits granted to the executive directors; advising on the terms of the executive directors’ service contracts and overseeing the operation of the Company’s share option scheme and other incentive schemes for all members of staff.
The Remuneration Committee normally meets at least once a year.
Nominations Committee
The Nominations Committee compromises of Bill Mawer, who acts as the Chairman, Tim Jackson and Richard Leaver.
It has the responsibility for reviewing the structure, size and composition (including the skills, knowledge and experience) of the Board and giving full consideration to succession planning. The nomination committee also has responsibility for recommending new appointments to the Board and to the other Board committees. It is responsible for identifying suitable candidates for board membership and monitors the performance and suitability of the current Board on an on-going basis.
The Nominations Committee normally meets at least once a year.
- Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Board recognises that Image Scan communicates with its shareholders principally through its website and the Annual Report. Shareholders can also sign up to receive news releases directly from the Company by email. The Chairman makes himself available to major shareholders on request and periodically attends meetings and gives presentations to shareholders. The Annual General Meeting of the Company, normally attended by all directors, gives the directors the opportunity to report to shareholders on current and proposed operations and enables the shareholders to express their views of the Group’s business activities. Shareholders are invited to ask questions during the meeting and to meet with directors after the formal proceedings have ended.
The results of voting on all resolutions in future general meetings will be posted to the Group’s website.
Share Dealing Code
The Company has adopted a share dealing code for the Directors and certain employees, which is appropriate for a company whose shares are admitted to trading on AIM (including relating to the restrictions on dealings during close periods in accordance with MAR and with Rule 21 of the AIM Rules for Companies) and the Company takes all reasonable steps to ensure compliance with the share dealing code by the Directors and any relevant employees.
Anti-Bribery Policy
The Group believes that it has robust policies and procedures for combating bribery and corruption.