Corporate Governance

Corporate Governance

Audit Committee – Terms of Reference

Constitution

1.   The board hereby resolves to establish a Committee of the board to be known as the Audit Committee. This constitution replaces all previous constitutions of the Committee.

Membership

1.   The Committee shall be appointed by the board on the recommendation of the Nominations Committee. The Committee shall comprise of the non executive directors and the Chairman of the Board. A quorum shall be two members;
2.   The chairman of the Committee shall be appointed by the board from amongst the independent non executive directors. In the absence of the chairman, the remaining members present shall elect one of themselves to chair the meeting;

Secretary

1.   The secretary of the Committee shall be nominated by the members of the Committee.

Attendance at meetings

1.   No one other than the Audit Committee members shall be entitled to attend Audit Committee meetings;
2.   The CEO, finance director, a representative of the external auditors, or other persons shall attend meetings at the invitation of the Committee;
3.   There should be at least one meeting a year, or part thereof, where the Audit Committee meets the external auditors without executive board members present.

Frequency of meetings

1.   Meetings shall be held not less than twice a year to coincide with key dates in the company’s financial reporting cycle;
2.   External auditors or the Chairman of the Audit Committee may request a meeting if they consider that one is necessary.

Authority

The Committee is authorised by the board to:
1.   Investigate any activity within its terms of reference;
2.   Seek any information that it requires from any employee of the company and all the employees are directed to cooperate with any request made by the Committee;
3.   Obtain outside legal or independent professional advice and secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

Duties

The duties of the Committee shall be:
1.   Internal financial control and risk management
2.   To monitor the integrity of the company’s internal financial controls;
3.   To assess the scope and effectiveness of the systems established by the Executive and management to identify, assess, manage and monitor financial and non financial risks;
4.   To review management’s report on the effectiveness of the systems for internal financial control, financial reporting and risk management.

Internal audit

1.   To monitor and assess the requirement for an internal audit function in the overall context of the company’s risk management system.

External audit – process

1.   To consider, and make recommendations on the appointment, reappointment and removal of the external auditor;
2.   To recommend to the Board the terms of engagement and the remuneration to be paid to the external auditor in respect of audit services provided;
3.   To assess the qualification, expertise and resources, effectiveness and independence of the external auditor every five years;
4.  To devise procedures to ensure the independence and objectivity of the external auditor annually, taking into consideration relevant professional and regulatory requirements;
5.   To seek reassurance that the auditors and their staff have no family, financial, employment, investment or business relationship with the company other than in the normal course of business;
6.   To seek from the audit firm, on an annual basis, information about policies and processes for maintaining independence and monitoring compliance with relevant requirements, including current requirements regarding the rotation of partners and staff;
7.   To monitor the external audit firm’s compliance with applicable ethical guidance relating to the rotation of the audit partners, the level of fees that the company pays in proportion to the overall fee income of the firm, office and partner and other relation regulatory requirements;
8.   To agree with the board and monitor the company’s policy for the employment of former employees of the external auditor;
9.   To consider the criteria which govern the compensation of the individuals performing the audit;
10.  Following a briefing with the Executive, the Audit Committee will discuss with the external auditor, before the audit commences, the nature and scope of the audit;
11.  To review with the external auditors, the findings of their work including any major issues that arose during the course of the audit and have subsequently been resolved and those issues that have been left unresolved;
12.  Key accounting and audit judgements; levels of errors identified during the audit, obtaining explanations from management and, where necessary the external auditors, as to why certain errors might remain unadjusted;
13.  To review the audit representation letters before signature by management and give particular consideration to matters where representation has been requested that relate to non-standard issues;
14.  To assess, at the end of the audit cycle, the effectiveness of the audit process by:
15. Review whether the auditor has met the agreed audit plan and understand the reasons for any changes, including changes in perceived audit risks and the work undertaken by the external auditors to address those risks;
16. Consideration of the robustness and perceptiveness of the auditors in their handling of the key accounting and audit judgements identified and in responding to questions from the Audit Committees, and in their commentary, where appropriate, on the systems of internal control;
17. Obtaining feedback about the conduct of the audit from key people involved;
18. To review and monitor the content of the external auditor’s management letter, in order to assess whether it is based on a good understanding of the company’s business and establish whether recommendations have been acted upon and, if not, the reasons why they have not been acted upon.

External audit – non audit

1.   To ensure compliance of the board’s policy in relation to the provision of non-audit services by the auditor and ensure that the provision of such services does not impair the external auditor’s independence or objectivity;
2.   To consider whether the skills and experience of the audit firm make it a suitable supplier of the non-audit services;
3.  To consider whether there are safeguards in place to ensure that there is no threat to objectivity and independence in the conduct of the audit resulting from the provision of such services by the external auditor;
4.   To consider the nature of the non-audit services, the related fee levels and the fee levels individually and in aggregate relative to the audit fee;
5.   To set and apply a formal policy specifying the types of non-audit work: from which the external auditors are excluded, for which the external auditors can be engaged without referral to the audit Committee, and for which a case-by-case decision is necessary.

Relationship with the Board

1.   To review, and challenge where necessary, the actions and judgements of management, in relation to the company’s financial statements, operating and financial review, interim reports, preliminary announcements and related formal statements before submission to the auditors and board, paying particular attention to:

  • critical accounting policies and practices, and any changes in them;
  • decisions requiring a significant element of judgement;
  • the extent to which the financial statements are affected by any unusual transactions in the year and how they are disclosed;
  • the clarity of disclosures;
  • significant adjustments resulting from the audit;
  • the going concern assumption;
  • compliance with the accounting standards;
  • compliance with stock exchange and other legal requirements;
  • reviewing the company’s statements on internal control and risk management;

2.  To consider other topics, as defined by the board

Whistle blowing

1.   To review the company’s procedures for whistle blowing and ensure that arrangements are in place by which staff may, in confidence, raise concerns about possible improprieties in matters of financial reporting, financial control or any other matters.

Reporting

1.   The Secretary shall circulate the minutes of meetings of the Committee to all members of the board, and the chairman of the Committee shall, as a minimum, attend the board meeting at which the accounts are approved.
2.   The Audit Committee shall annually review its performance and terms of reference and recommend any necessary changes to the board.
3.   The role and responsibilities of the Audit Committee and the actions taken by the Audit Committee to discharge those responsibilities shall be disclosed in the annual report and accounts. Such a report should specifically include:

  • a summary of the role of the Audit Committee
  • the names and qualifications of all members of the Audit Committee during the period
  • the number of Audit Committee meetings, and
  • the way the Audit Committee has discharged its responsibilities.

4.   Where disagreements between the Audit Committee and the board cannot be resolved, the Audit Committee shall report the issue to the shareholders as part of the report on its activities in the company’s annual report.
5.   If the board does not accept the Audit Committee’s recommendation regarding the appointment, reappointment and removal of the external auditors, the Audit Committee shall include a statement explaining its recommendation and reasons why the board has taken a different stance in the annual report.
6.   The Audit Committee chairman shall attend the AGM and shall answer questions, through the chairman of the board, on the Audit Committee’s activities and their responsibilities.

Appendix A

Audit Committee meeting timetable

March

  • Review of preliminary announcement
  • Review of annual report and accounts
  • Review of external audit findings
  • Meeting with external auditors without management

August

  • Review of half year results
  • Agreement of external audit strategy and scope
  • Requirement for an internal audit function
  • Standing agenda items
  • Minutes from previous meeting
  • Relevant updates on corporate governance, financial reporting and auditing
  • Progress on actions taken by management in response to Audit Committee recommendations as well as those from external auditors.
  • Discussions with external auditors without the presence of executive management if needed.
  • These schedules assume that the Group’s year end remains as 31 December.

Introduction and Chairman’s Statement

Following changes to AIM rules on 30 March 2018, AIM companies are required to apply a recognised corporate governance code by 28 September 2018.

The K3 board supports the principles of good governance. In fulfilling their responsibilities, the directors believe that they govern the company in the best interests of the shareholders, whilst having due regard to the interests of the stakeholders in the group including, in particular, customers, employees and suppliers.

K3 has previously sought to apply certain provisions of the UK Corporate Governance Code, in so far as the directors considered it appropriate having regard to the size and nature of the group. As a result of the recent changes to AIM Rules, the directors have considered and re-assessed the most appropriate recognised corporate governance code having regard to the size and nature of the K3 group, and, with effect on and from 28 September 2018, have decided to seek to adhere to the Quoted Companies Alliance’s (QCA) Corporate Governance Code (“the Code”) for small and mid-size quoted companies (which was recently revised in April 2018 to meet the new requirements of the updated AIM Rule 26).

The QCA Code is constructed around the following ten broad principles (and a set of disclosures):

1.   Establish a strategy and business model which promote long-term value for shareholders
2.   Seek to understand and meet shareholder needs and expectations
3.   Take into account wider stakeholder and social responsibilities and their implications for long-term success
4.   Embed effective risk management, considering both opportunities and threats, throughout the organisation
5.   Maintain the board as a well-functioning, balanced team led by the chair
6.   Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
7.   Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
8.   Promote a corporate culture that is based on ethical values and behaviours
9.   Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
10.  Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

K3 has reviewed and considered where and how we apply each of the principles of the Code, and we set out below an explanation of this, and the circumstances where we believe we depart from the principles of the Code. Our key area of departure from the Code is in relation to principle 7 (evaluating board performance based on clear and relevant objectives), where a clear process of board evaluation has not previously been operated by the company. This is an area we will be assessing for future improvements.

As Chairman of the board, I am responsible for implementing corporate governance at the K3 group, working with the other members of the board and the company secretary.

I am a passionate believer in robust corporate governance, and some recent changes at K3, both in respect of our corporate governance practices, shareholder engagement and our wider business hopefully indicate our commitment to this. Our corporate governance practices will not remain static, and we will be regularly reviewing practices to seek improvement, and to keep pace with our business change. Our disclosures will be subject to update on our web-site, and our annual report will continue to provide detailed governance updates.

Stuart Darling, Chairman
K3 Business Technology Group plc (K3)

 

1. Establish a strategy and business model which promote long-term value for shareholders

The Board of Directors of K3 is responsible for determining the main aims of the company and agreeing a strategy to achieve those aims. The Board is also responsible for monitoring progress against K3’s strategic and financial goals and for initiating any corrective measures.

We report on our strategy annually in our annual report, and also from time to time if any changes which are price sensitive require us to make public disclosures. Because we operate in a sector (IT) that evolves rapidly, the board of directors regularly assesses the group’s strategy and strategic objectives in light of the industry landscape, and with the aim of promoting long-term value for shareholders.

Market Positioning

We reported on our general market positioning in our most recent annual report (for the period to 30 November 2017) and we remain a leading provider of mission-critical Enterprise Resource Planning (“ERP”) and other business solutions to customers across the supply chain, including retailers, manufacturers and distributors. We support c.3,700 customers predominantly based in the UK, but also in Europe, the Far East and the USA. We deploy our business solutions, which are mainly built on Microsoft, Sage and SYSPRO solutions, both directly to customers and through channel partners. Once installed, our solutions generate high levels of recurring revenues through annual software maintenance renewals, support contracts and hosting.

Strategic Refocusing and Organisational Changes

K3 has recently undergone significant change. We have reshaped the group including the leadership team, creating a simpler, more integrated and streamlined structure, and have removed substantial costs. We have also redefined our growth strategy, IP development roadmap, and are improving our customer delivery capability. In addition, in July 2017 we completed a share placing and open offer to qualifying shareholders. While these initiatives have involved substantial one-off costs, as well as internal cultural change, we are encouraged by the progress made to date and the opportunities ahead.

We see scope for further operational improvements but believe that K3 is now substantially better positioned for long-term revenue growth, higher quality earnings and improved cash generation.

A core element of our growth and long-term strategy is to increase revenues from own intellectual property (“IP”). Our IP is embedded within specific third party ERP solutions, including Microsoft and SYSPRO’s, to provide sector specific functionality. It differentiates our solutions, underpins stronger customer relationships, and generates higher margins and recurring revenues. While we will continue to build on this model, an important part of extending our software roadmap is the growth of our own stand-alone ‘point’ solutions, and in particular, our cloud-native delivery platform, ‘ K3|imagine’, and our cloud-native applications, which have been specifically developed to perform in the cloud.

As we previously reported, ‘K3|imagine’ is an exciting ‘next generation’ delivery platform, which enables us to embrace fully the opportunities that the increasing shift to the cloud brings, and places us at the forefront of cloud-native development. What is especially relevant is that it is system agnostic, capable of swift integration with any IT infrastructure a customer may already have. Customers therefore do not need to replace core systems, unlike traditional models. We have developed a cloud-native suite of solutions that is built for our platform and provides highly advanced functionality. The whole offering therefore enables customers to adopt innovative solutions and applications rapidly and flexibly. It also offers them a faster return-on-investment and extends the life of their previous IT investments. We intend to develop additional applications for K3|imagine in order to broaden the scope and target market of our existing solutions set, and view its growth potential very positively.

We regard this initiative, as part of our strategy of increasing revenues from own IP, of as one of our key steps in promoting long-term value for shareholders.

The board believes that K3 has the potential to build on its current position as a leading supplier of SME and mid-tier business system solutions, with a particular emphasis on our own Intellectual Property of ERP add-ons and point solutions. The board’s main objectives are to:

  • achieve growth in our own IP;
  • create shareholder value through increases in adjusted earnings per share;
  • grow recurring income levels; and
  • achieve progressive increases in the dividend.

 

2.   Seek to understand and meet shareholder needs and expectations
10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

K3 seeks to maintain good communication with shareholders. The CEO and CFO together with members of the Senior Management Team make presentations to institutional shareholders covering the interim and full year results. Whilst most shareholder contact (and responsibility for investor relations) is with CEO and CFO, the Chairman and the non-executive directors are available to meet major shareholders if requested to do so. The views of major shareholders are obtained through direct face-to-face contact and analysts’ or brokers’ briefings.

The board considers the AGM to be an important opportunity to communicate with shareholders and encourages their participation. The company dispatches the notice of AGM, with explanatory notes describing items of special business, at least 21 working days before the meeting. All shareholders have the opportunity, formally or informally, to put questions to the company’s AGMs. All directors attend the AGM and the Chairmen of the Audit, Remuneration and Nominations Committees are available to answer questions from shareholders.

In June 2018, K3 held its first capital markets day for shareholders and potential investors. The event was planned to enable the K3 management team to further explain the strategy and activities of the K3 Group, with contributions from key stakeholders in the business, including customer representatives. The event was also designed to enhance investor engagement with management. Investor feedback was sought by the company’s nomad, and reported to the board. This format of event is likely to be repeated in future.

The Company maintains RNS details on its web-site at: https://www.k3btg.com/investor-centre/regulatory-news/

These include notices of as well as results of AGM, together with prior years’ annual reports. Whilst the Chairman announces detailed proxy voting results during each AGM for resolutions passed on a show of hands, these detailed results are not separately published by RNS. The Company intends to publish on its web-site these detailed proxy results in respect of future AGMs.

 

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

K3 recognises the importance of its relationships with key stakeholders. As well as shareholders, other key relationships include employees, customers and suppliers (including our software partners and bankers).
Monitoring and enhancing the strength of those stakeholder relationships is part of K3‘s day-to-day goals and constitutes a critical focus for the group.

Employees

K3 recognises the importance of a talented and motived workforce, and has recently sought to increase engagement with its workforce with encouraging results, including:

  • A “temperature check” with all employees in February 2018, involving a short anonymous questionnaire enabling K3 to gauge employee engagement and seek suggestions for improvement;
  • In May 2018, the first groupwide K3 employee virtual conference was held, where employees were given the opportunity to learn more about (and provide feedback on) activities across the group;
  • A regular all-employee newsletter has been commenced, together with the release of a regular CEO ‘inform’, where the K3 CEO provides a video update with recent news and initiatives from across the group.

The success of these steps has meant that they are likely to be repeated in future, to continue to maintain and enhance positive relations within the workforce and to obtain feedback.

Customers

Customer satisfaction is of critical importance to K3, and is one of the principal focuses of the business. The majority of customers have a designated K3 account manager, to manage the relationship, and to whom feedback can be directed. The feedback can then be acted upon and/or escalated as and when necessary by the account manager.

Many customer projects also have executive sponsors within the group, where senior managers are appointed to oversee and ensure appropriate dialogue in relation to key customer projects. This ensures there is sufficient customer engagement at the correct level within the K3 group.

Customer days and seminars are also used within the K3 group to encourage positive relations and elicit feedback to drive improvements for long-term success.

Suppliers

As a reseller of software, including Microsoft, Sage and SYSPRO, K3’s relationships with software partners are important to the success of the business, and are an area of continued focus for the group. Many of these relationships are long-term.

Regular engagement is also sought and encouraged with our bankers, through regular meetings with our CFO and other members of the finance team.

 

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The board recognises its ultimate ongoing accountability for maintaining an effective system of internal control which is appropriate in relation to both the scope and nature of the group’s activities. The system covers all controls including:

  • financial;
  • operational;
  • compliance; and
  • risk management.

The responsibility for managing risks on a day to day basis lies with the CEO and Senior Management Team. Risk mitigation is also supported by the work of the K3 audit committee, and the transparency of our internal K3 whistleblowing policy. K3 also maintains insurances against normal business risk, and takes advice from our broker accordingly.

The principle business risks and the actions to mitigate those risks were reported on pages 19 and 20 of the most recent annual report. Details of operational risks were also reported on pages 24 and 25 of that report.

Whilst the board recognises that risk cannot be entirely eliminated, it believes there are sufficient controls in place to seek to mitigate potential impact.

5. Maintain the board as a well-functioning, balanced team led by the chair
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The K3 board is made up of two executive directors and four non-executive directors. The roles of the Chairman and Chief Executive are distinct. The board does not presently include a senior independent director. The company has a separate company secretary, who is also the group general counsel.

The board meets no fewer than 6 times a year, with such additional meetings called as and when necessary. Board meetings are expected to be attended by all directors and the company secretary. Board meeting attendance is recorded, and reported in the annual report.

The board is supplied in a timely manner with information of a quality to enable it to discharge its duties, which includes a regular monthly board back including updates from the executive management team, detailed financial information relating to the financial period to date, including measurement against pre-defined KPI’s.

The board has determined those matters which are retained for board sanction and those matters which are delegated to the executive management of the business. Day to day management of the business is dealt with by the CEO who has a Senior Management Team reporting to him which includes senior management from each of the divisions together with the CFO. The types of decisions which are to be taken by the board are:

  • approval of the financial statements and financial budgets and plans for the group;
  • approval of all shareholders’ circulars and key announcements;
  • the purchase or sale of any business or subsidiary;
  • any new borrowings, facilities and related guarantees;
  • any asset purchase or lease, hire purchase facility or rental agreement over prescribed authority limits.

The board has established four standing sub-committees to assist in the discharge of corporate governance responsibilities. They are the nominations committee, remuneration committee, product committee and audit committee. The roles of the nominations committee, remuneration committee and audit committee and their activities are available at https://www.k3btg.com/investor-centre/corporate-governance/

Presently the four non-executive directors are the members of each committee.

The composition of the board is designed to provide an appropriate balance of group, industry and general commercial experience and is reviewed as required to ensure that it remains appropriate to the nature of the group’s activities.

Appointments to the board are the responsibility of the nominations committee. All non-executive directors have written terms of appointment, and are paid a fixed fee for their office which is not performance or incentive based.
The Company has three independent non-executive directors (Paul Morland, Stuart Darling and Jonathan Manley), as recommended by the QCA Code. Jonathan Manley has provided consultancy services for the company for which he is paid a fee, in addition to his role as non-executive director, but this is not regarded as compromising his independence.

Johan Claesson (non-executive director) is a significant shareholders and has been on the board for over 9 years, and would therefore more likely not be regarded as independent in accordance with the Code.

Notwithstanding this, the board believes that the interests of each non-executive director are aligned with those of shareholders and that the board composition is appropriate for the circumstances of the Company.

 

7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

Board and board committee membership was evaluated in 2017, which led to changes to the composition of the board and its committees and the appointment of a new Chairman.

Board performance is presently reviewed regularly but informally, and there is no specific formal evaluation process (whether internal or externally facilitated) as recommended by the QCA Code.

The board intends to review both performance measurement and succession planning in light of the recommendations of the Code during the 2018/2019 financial year, with a view to assessing the implementation of a more formal process.

The Articles of Association of the Company require that no fewer than one-third of directors should be subject to re-election at each AGM. Any director serving over 9 years since first appointment is also subject to re-election at each AGM in accordance with the company’s articles.

 

8. Promote a corporate culture that is based on ethical values and behaviours

The K3 group seeks to carry out its business with the highest standards of integrity, and on the basis of sound ethical values, and its corporate culture seeks to reflect this premise.

The board maintains oversight of this through receipt of regular management reporting, which would, where appropriate, include any material issues relating to corporate culture and integrity and ethics, including any updates to or non-compliance with key internal ethics policies.

The K3 group maintains written policies and procedures concerning a number of areas that impact on its ethical values, and these policies, which are shared with all of the group’s staff, underpin some of the ethical elements of our culture. These include detailed policies addressing health and safety, anti-bribery and corruption, whistleblowing, equal opportunities and anti-harassment.

K3 is currently undergoing a programme to create a more unified organisation, which is expected to drive benefits for customers, partners and employees. As part of this programme, the board expects the group’s relationships with and support of employees and customers in particular to be at the forefront of the groups’ core values and culture, and driven by its ethical approach to business.

 

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

The K3 board as a whole has responsibility for promoting the success of the company and for the strategic leadership of the group, with day-to-day management of the business of the group the responsibility of the executive directors and senior management team.

The Chairman of the board is responsible for running the board, and has overall responsibility for corporate governance, but with the support of the other directors and the company secretary. The Chairman of the board is also chair of the audit committee.

Shareholder relations are primarily managed by the CEO and CFO.
The roles of the nominations committee, remuneration committee and audit committee and their activities are available at: https://www.k3btg.com/investor-centre/corporate-governance/

Audit Committee

The audit committee is responsible for overseeing the group’s internal financial controls and risk management and to consider the appointment of the auditors, audit fees, scope of audit work and any resultant findings. It reviews external audit activities, monitors compliance with statutory requirements for financial reporting and reviews the interim and full year financial statements before they are presented to the board for approval.

Nominations Committee

The nominations committee is responsible for nominating candidates (both executive and non-executive) for the approval of the board to fill vacancies or appoint additional persons to the board. The nominations committee is also expected to review at regular intervals the structure, size and composition (including the skills, knowledge and experience) required of the board compared to its current composition and make recommendations to the board with regard to any changes.

Remuneration Committee

The remuneration committee reviews the remuneration and contractual arrangements of the executive directors, and determines and agrees with the board the framework or broad policy for the remuneration of the company’s CEO and executive directors. The remuneration of the Chairman and the non-executive directors is determined by the board as a whole, based on a review of the current practices in other companies.

Additional information concerning matters reserved for the board, and the functions of the above roles are also set out at section 3 above.

Following adoption of the QCA Code in 2018 as the company’s governance framework, the board expects to continue its focus and assessment of its corporate governance practices, in particular during the 2018/2019 financial year, with the aim of making improvements where reasonably necessary or desirable.

Date Statement Last Updated: 28 September 2018

 

Nominations Committee Terms of Reference

Constitution

1.   The Board hereby resolves to establish a Committee of the Board to be known as the Nominations Committee. This constitution replaces all previous constitutions of the Committee.

Membership and Chairman

1.   The Committee shall comprise of the non-executive directors and the Chairman of the Board. Only members of the Committee have the right to attend Committee meetings.
2.   Other individuals may be invited to attend for all or part of any meetings, as and when appropriate.
3.   The Chairman of the Committee shall be appointed by the Board.
4.   In the absence of the Chairman, the remaining members present at any meeting shall elect one of their number to chair any duly convened meeting.
5.   The Chairman of the Board shall not chair the Committee when it is considering succession to chairmanship of the Board.
6.   The quorum for meetings of the Committee shall be two members comprising at least two non-executive directors.

Secretary

1.   The secretary of the Committee shall be the Chief Executive.

Frequency of Meetings

1.   The Committee shall meet not less than once a year.

Minutes of Meetings

1.   The Secretary shall minute the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance.
2.   Minutes of the Committee meetings shall be circulated promptly to all members of the Committee and to the Board.

Annual General Meeting

1.   The Chairman shall attend the Annual General Meeting prepared to respond to any shareholder questions on the Committee’s activities.

Duties

The Committee shall:

1.   Review at regular intervals the structure, size and composition (including the skills, knowledge and experience) required of the Board compared to its current composition and make recommendations to the Board with regard to any changes;
2.   Fully consider succession planning for directors and other senior executives in the course of its work, taking into account the challenges and opportunities facing the company, and what skills and expertise are needed on the Board in the future;
3.   Identify and nominate for the approval of the Board candidates to fill Board vacancies as and when they arise;
4.   Evaluate the balance of skills, knowledge and experience on the Board and, in light of that evaluation, prepare a description of the role and capabilities required for a particular appointment. In identifying suitable candidates the Committee shall:

  • use open advertising or the services of external advisers,
  • consider candidates from a wide range of backgrounds,
  • consider candidates on merit and against objective criteria, taking care (in the case of non-executive appointments) that appointees are able to commit enough time to devote to the position.

5.   Keep under review the leadership needs of the organisation, both executive and non-executive, with a view to ensuring the continued ability of the organisation to compete effectively in the marketplace.
6.   Keep up to date and fully informed about strategic issues and commercial changes affecting the company and the market in which it operates;
7.   Recommend to the Board procedures for formal and rigorous annual evaluation of performance of the Board, its committees and individual directors;
8.   Review regularly the time commitments required from non-executive directors. Evaluate the performance of non-executive directors to ensure that they are committing sufficient time to fulfil their duties; and
9.   Ensure that on appointment to the Board, non-executive directors receive a formal letter of appointment setting out clearly what is expected of them in terms of time commitment, committee service and involvement outside board meetings.
10.  The Committee shall also make recommendations to the Board concerning:

  • succession plans for both executive and non-executive directors and in particular for the key roles of Chairman of the Board and Chief Executive;
  • suitable candidates for the role of senior independent director;
  • membership of the Audit and Remuneration Committees, in consultation with the chairmen of those committees;
  • re-appointment of any non-executive director at the conclusion of their specified term of office having given due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge, skills and experience required;
  • continuation (or not) in service of any director who has reached the age of 70;
  • re-election by shareholders of any director under the ‘retirement by rotation’ provisions in the company’s articles of association having due regard to their performance and ability to continue to contribute to the Board in the light of the knowledge, skills and experience required;
  • matters relating to the continuation in office of any director at any time including the suspension or termination of service of an executive director as an employee of the company subject to the provisions of the law and their service contract; and
  • appointment of any director to executive or other office other than to the positions of Chairman of the Board and Chief Executive, the recommendation for which would be considered at a meeting of the full Board.

11.  Review, at least once a year, its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.
12.  Seek any information it requires from any employee of the company in order to perform its duties.
13.  Obtain, at the company’s expense, outside legal or other professional advice on any matters within its terms of reference.

Reporting Responsibilities

1.   The Chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities. The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.

K3 BTG plc Remuneration Committee Terms of Reference

Constitution

1.   The Board hereby resolves to establish a Committee of the Board to be known as the Remuneration Committee. This constitution replaces all previous constitutions of the Committee.

Membership and Chairman

1.   Members of the Committee shall be appointed by the Board on the recommendation of the Nominations Committee. The Committee shall comprise of the independent non-executive directors and the Chairman of the Board. The Committee shall consist of not less than 2 members.
2.   Only members of the Committee have the right to attend Committee meetings. Other individuals, and external advisers, may be invited to attend for all or part of any meeting as and when appropriate.
3.   The Board shall appoint the Committee Chairman, who shall be an independent non-executive director. In the absence of the Chairman, the remaining members present shall elect one of themselves to chair any duly convened meeting. The quorum necessary for the transaction of the business shall be two.

Secretary

1.   The secretary of the Committee shall be the Chief Executive.

Frequency of Meetings

1.   The Committee shall meet at least once a year. In order to approve the remuneration report, one of the meetings shall be held immediately before the submission of the Company’s annual report and accounts to the Board for approval. The Chairman shall call a meeting of the Committee if so requested by any Committee member or by the Board.

Notice of Meetings

1.   Meetings of the Committee shall be summoned by the Secretary of the Committee at the request of its members.

Minutes of Meetings

1.   The Secretary shall minute the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance. Minutes of the Committee meetings shall be circulated promptly to all members of the Committee and to the Board.

Annual General Meeting

1.   The Chairman shall attend the Annual General Meeting prepared to respond to any shareholder questions on the Committee’s activities.

Duties

The Committee shall:

1.   Determine and agree with the Board the framework or broad policy for the remuneration of the company’s Chairman, Chief Executive and executive directors. The remuneration of non-executive directors shall be a matter for the Chairman of the Board, the Chief Executive and executive directors. No director or manager shall be involved in any decision as to their own remuneration;
2.   In determining such framework or policy, take into account all factors which it deems necessary. The objective shall be to ensure that members of the executive management of the company are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the company;
3.   Review the ongoing appropriateness and relevant of the remuneration policy;
4.   Approve the design of, and determine targets for, any performance related pay schemes operated by the company and approve the total annual payment made under such schemes; Review the design of all share incentive plans requiring approval by the Board and shareholders. For any such plans, the Committee shall determine each year whether awards will be made and, if so, the amount of such awards, the individual awards to executive directors and the performance targets to be used;
5.   Determine the policy for, and scope of, pension arrangements for each executive director; Ensure that contractual terms on termination and any payments made, are fair to the individual and the company, that failure is not rewarded and that the duty to mitigate loss is recognised;
6.   Within the terms of the agreed policy, and in consultation with the Chairman of the Board and/or Chief Executive as appropriate, determine the total individual remuneration package of each executive director, including bonuses, incentive payments and share options or other share awards;
7.   In determining such remuneration packages and arrangements, give due regard to any relevant legal requirements, the provisions and recommendations in the Combined Code and the UK Listing Authority’s Listing Rules and associated guidance;
8.   Review and note annually remuneration and other benefit structures across the company or group;
9.   Ensure that all provisions regarding disclosure of remuneration (including pensions), as set out in legislation and the Combined Code are fulfilled; and
10.  Be exclusively responsible for:

  • Establishing the selection criteria, for any remuneration consultants to advise the Committee
  • Selecting, appointing and setting the terms of reference for any such remuneration consultants.
  • Obtaining reliable, up-to-date information about remuneration in other companies

11.  The Committee shall have full authority to commission any reports or surveys that it deems necessary to help it fulfil its obligations. The Committee shall, at least once a year, review its own performance, constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.
12.  The Committee is authorised by the Board to seek any information it requires from any employee of the company in order to perform its duties.

Reporting Responsibilities

1.   The Chairman shall report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.
2.   The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
3.   The Committee shall produce an annual report of the company’s remuneration policy and practices for approval by the Board. The report will form part of the company’s Annual Report and be put to shareholders for approval at the AGM.
4.   In connection with its duties the Committee is authorised by the Board to obtain, at the company’s expense, any outside legal or other professional advice.