K3 adopts the Quoted Companies Alliance’s (QCA) Corporate Governance Code (“the Code”) being, in the view of the Board, the most appropriate recognised corporate governance code having regard to the size and nature of the K3 Group.
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 chair meetings of the board and am responsible for ensuring the board agenda appropriately focuses on the Group’s potential, strategy, business model and delivery against its strategic objectives. I am also a member of each board committee.
We have reviewed and considered where and how we apply each of the ten (10) principles of the Code, and we set out an explanation of this below, and in our most recent annual report.
1. Establish a strategy and business model which promote long-term value for shareholders
The Board is responsible for determining the potential and main aims of the Company and agreeing a strategy to achieve those aims. The Board is also responsible for monitoring progress against the Company’s strategic and financial goals and for allocating investment or initiating any corrective measures. The strategic report in our most recent annual report, sets out the Board’s strategy and business model to promote long-term value for shareholders.
2. Seek to understand and meet shareholder needs and expectations
K3 seeks to maintain good communication with shareholders. The executive Directors make presentations to institutional shareholders covering interim and full year results. The views of major shareholders are also obtained through direct face-to-face contact and analysts’ or brokers’ briefings. The Company also arranges investor presentations from time to time, to enhance investor engagement with management, and to elicit feedback.
All shareholders also have the opportunity, formally or informally, to put questions to the Company’s AGM.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
See Section 172 in our most recent annual report.
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board recognises its ultimate accountability for maintaining an effective system of internal control which is appropriate in relation to the scope, size, nature and risk within the Group’s activities.
The responsibility for managing risks on a day-to-day basis lies with the CEO and Senior Leadership Team. The principal business risks and the actions to mitigate the risks are included in our most recent annual report. A description of the risk management adopted by the Board to address the risks highlighted, and in order to deliver on its strategy, is also included.
The key elements which enable the Board to review the effectiveness of the system of internal controls are:
- establishment of a formal management structure, including the specification of matters reserved for decision by the Board
- setting and reviewing the strategic objectives of the Group
- Board involvement in the setting and review of the annual business plan
- the regular review of the Group’s performance compared with plan and forecasts
- pre and post investment appraisal of K3 IP development investment; and
- group reporting instructions and procedures including delegation of authority and authorisation levels, segregation of duties and other control procedures, and standardised accounting policies.
5. Maintain the Board as a well-functioning, balanced team led by the chair
The Board comprises the non-executive Chairman, two executive directors and three non-executive Directors. Biographical details of the Board are included on our website. The roles of the Chairman and Chief Executive are distinct.
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 only exception to this is the Chairman’s participation in the 2020 LTIP, details of which are set out in our most recent annual report, but this is not regarded as compromising his independence.
The Company currently has two independent non-executive directors (Mr T Crawford and Mr J P Manley), as recommended by the QCA Code.
Mr J P Manley has previously provided additional consultancy services for the Company for which he has been paid a fee, in addition to his role as Non-executive Director, but this is not regarded as compromising his independence.
Mr P J Claesson (Non-executive Director) is a significant shareholder 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. Mr O Scott is a founding partner of another significant shareholder, Kestrel Partners LLP, and, accordingly, Mr O Scott would also 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.
All directors are subject to election by shareholders at the first opportunity after their appointment. 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 non-executive director serving over 9 years since first appointment is also subject to re-election at each AGM in accordance with the Company’s articles.
Board Meetings and Effectiveness
The Board is supplied with information to enable it to discharge its duties, which includes a regular monthly Board pack including updates from the executive management team and detailed financial information measured against plan or forecast.
The Board is also provided with ad-hoc operational updates, and non-executive directors regularly communicate with executive directors between formal board meetings.
The Board met on 17 occasions during the most recent financial period. Directors are expected to attend all meetings, and to dedicate sufficient time to the Group’s business and affairs to enable them to discharge their duties. Board (and committee) meeting attendance during the financial period was as set out below.
|Director||Board (17)||Remuneration (5)||Audit (2)||Nomination (3)|
|Mr T Crawford||2||1||n/a||n/a|
|J P Manley||14||5||2||3|
|Mr O Scott||13||4||1||3|
|R D Price||17||n/a||n/a||n/a|
|P J Claesson||11||5||1||3|
|P G Morland||10||2||2||n/a|
The Board has established three standing sub-committees to assist in the discharge of corporate governance responsibilities. They are the nominations committee, remuneration committee and audit committee. The roles of the committees and their activities are available on our Corporate Governance Code Disclosure page.
All four non-executive directors are members of each committee.
6. Ensure that between them the directors have the necessary up-to-date experience, skills, and capabilities
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.
Biographical details of the Board (including relevant skills and experience) are included on our wesbite.
Recommendations for appointments to the Board are the responsibility of the Nominations Committee.
The Directors also have access to the Company’s Nominated Advisor and Company Secretary, for support in the furtherance of their duties.
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The Board has established an annual process of Board performance review, once per calendar year, the first of which was carried out in February 2020. This has superseded what was previously a more informal evaluation approach. The review process assists the board in identifying any structural, procedural and/or individual development needs by reference to clear objectives and the results will inform improvement activities.
8. Promote a corporate culture that is based on ethical values and behaviours
The Group seeks to carry out its business with the highest standards of integrity, based on 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 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 the Group’s staff, underpin some of the ethical elements of the Group’s culture. These include detailed policies addressing health and safety, anti-bribery and corruption, whistleblowing, equal opportunities, and anti-harassment.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The Board 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 Leadership 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.
Shareholder relations are primarily managed by the CEO and CFO.
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 Chief Executive Officer who has a Senior Leadership Team reporting to him. The types of decisions which are to be taken by the Board are:
- approval of the financial statements and plans for the Group
- approval of all shareholders’ circulars and announcements
- the purchase or sale of any business or subsidiary
- any new borrowings, facilities, and related guarantees; and
- any asset purchase or lease hire purchase facility or rental agreement over prescribed authority limits.
10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Company communicates regularly with shareholders, as further described in relation to Code Principle 2 above.
The Company maintains RNS details on its website.
These include notices, as well as results, of the most recent AGM, together with prior years’ annual reports.
Audit Committee – Terms of Reference
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.
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;
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.
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.
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.
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
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.
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.
Audit Committee meeting timetable
- Review of preliminary announcement
- Review of annual report and accounts
- Review of external audit findings
- Meeting with external auditors without management
- 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.
Nominations Committee Terms of Reference
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.
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.
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.
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
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.
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.
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.
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.