Corporate Governance
Principles of corporate governance
The Board of Directors recognises the importance of good corporate governance to enhance and protect shareholder value. As the Company’s shares are registered on the Alternative Investment Market (‘AIM’) of the London Stock Exchange, the Company is not required to report against the UK Corporate Governance Code published in May 2010 (the ‘Code’). However, the Board supports the principles contained in the Code and is committed to applying them, where they are appropriate, given the Company’s size. The following describes how these principles have been applied.
Board of Directors
The Board comprises the Non-Executive Chairman, the Chief Executive Officer, the Finance Director, the Technology Director, the Senior Independent Non-Executive Director and two other Non-Executive Directors. On 13 June 2011, Dr Peter Bance left the Board as Chief Executive Officer and Dr Brian Count assumed the role of Executive Chairman. On 17 August 2011, David Pummell was appointed as Chief Executive Officer. He took up the post on 5 September 2011. On the same date Dr Brian Count reassumed the role of Non-Executive Chairman. Dr Brian Count was not independent during the short period that he was Executive Chairman. The Board considers that the Non-Executive Directors are independent in character and judgement and meet the criteria for independence set out in the Code.
The Company’s articles of association require that all Directors are subject to election by shareholders at the first Annual General Meeting (‘AGM’) following their initial appointment, and at each AGM one-third of the Directors retire by rotation and offer themselves for re-election.
David Pummell offers himself for election at the AGM following his appointment. Sir David Brown and Rex Vevers retire by rotation and offer themselves for re-election.
The Company maintains directors’ and officers’ liability insurance cover, the level of which is reviewed annually.
The terms of reference of the Board Committees are posted on the Company’s website and are available on request from the Company Secretary.
Audit Committee
The Audit Committee currently comprises Dr Brian Count and Sir David Brown under the Chairmanship of John Nicholas. Meetings of the Committee are attended, at the invitation of the Committee, by the external auditors and the Finance Director. The Committee meets with the external auditors on a regular basis without the Executive Directors being present.
The Committee is authorised to seek any information it requires from any employee of the Group in order to perform its duties, and obtain any outside legal or other independent professional advice it requires at the Company’s expense.
The Audit Committee met three times during the year. During these meetings the Audit Committee considered, amongst other items, the following:
- the integrity of the financial statements and other formal announcements relating to the Group’s financial performance, the going concern status of the Group and judgements that are contained within the financial statements;
- the Group’s internal control and risk management policies and systems, and their effectiveness;
- the Group’s whistle-blowing procedures to ensure that employees are able to raise concerns, in confidence, about possible wrong doing in financial reporting and other matters;
- the requirements for an internal audit function. The Audit Committee is satisfied that the Group does not currently require an internal audit function;
- the relationship with the external auditor, in particular satisfying itself as to the independence and effectiveness of the external auditor; and
- the policy on the engagement of the external auditors to supply non-audit services.
Remuneration Committee
The members of the Committee are Dr Brian Count, Alan Wood and John Nicholas under the chairmanship of Sir David Brown. The Committee met five times during the year. Further details on the roles and responsibilities of the Remuneration Committee and the Company’s policy on Directors’ remuneration are included within the Remuneration Report.
Nomination & Governance Committee
The members of this Committee are Sir David Brown, Alan Wood and John Nicholas, under the Chairmanship of Dr Brian Count. The Committee considers the composition of the Board and is responsible for reviewing the composition and structure of the Board and for identifying and recommending candidates for Executive and Non-Executive Director positions.
Technical & Operational Risk Committee
The members of this Committee are Sir David Brown, Dr Phil Whalen and Jonathan Watkins, under the Chairmanship of Alan Wood. The Committee is responsible for monitoring key technical and operational risks and the development and implementation of strategies to manage and mitigate these risks.
Communication with shareholders
The Board is accountable to the Company’s shareholders and as such it is important for the Board to maintain effective communications with shareholders. The Company maintains an active dialogue with institutional shareholders through regular briefing meetings and formal presentations by the Executive Directors following the interim and preliminary financial results. During the year, the views of major shareholders are communicated to the Board through briefings by the Company’s brokers and face-to-face meetings with the Chairman. Press releases are issued throughout the year and the Company maintains a website (www.cerespower.com) on which press releases, corporate presentations and the Annual Report are available to view.
The AGM provides an opportunity for communication with all shareholders and the Board encourages the shareholders to attend and welcomes their participation. The Directors attend the AGM and are available to answer questions.
Internal controls
The Directors acknowledge their responsibility for establishing and maintaining the Group’s systems of internal control. These are designed to safeguard the assets of the Group and to ensure the reliability of financial information for both internal and external use.
The Group prepares detailed budgets and cash flow projections, which are approved annually by the Board and updated regularly throughout the year. Detailed management accounts and working capital cash flow projections are prepared on a monthly basis and compared to budgets and projections to identify any significant variances. The Board reviews, identifies, evaluates and manages the significant risks that face the Group.
Any system of internal control can only provide reasonable, and not absolute, assurance that material financial irregularities will be detected or that risk of failure to achieve business objectives is eliminated. The Directors, having reviewed the effectiveness of the system of internal financial, operational and compliance controls and risk management, consider that the systems of internal control operated effectively throughout the financial year and up to the date that the financial statements were signed.
Conflicts of interest
The Group has in place procedures for the disclosure and review of any conflicts or potential conflicts of interest which the Directors may have and for the authorisation of such conflicts by the Board. During the year there were no such conflicts of interest.