Corporate Governance

Corporate Governance

The Directors of Active Energy Group Plc (“AEG”, the “Group” or the “Company”) recognise the importance of sound corporate governance. As a Company whose shares are traded on AIM, the Board has adopted the Quoted Alliance’s Corporate Governance Code (the “QCA Code”).

Simon Melling, in his capacity as non-executive Director and chairman of the audit committee, has assumed responsibility for ensuring that the Group has appropriate corporate governance standards in place and that these requirements are followed and applied within the Group as a whole. The corporate governance arrangements that the Board has adopted are designed to ensure that the Group delivers long term value to its shareholders and that shareholders and other stakeholders have the opportunity to express their views and expectations for the Group in a manner that encourages open dialogue with the Board.

Application of Principles

The QCA Code sets out 10 principles of corporate governance. These are listed below, together with a short explanation as to how the Group applies each of the principles. Where the Group does not fully apply each principle, an explanation as to why the principle has not been fully applied, is provided below.

Principle One: Business Model and Strategy

The Board has adopted a clear and focused strategy.The Group’s fundamental strategy is to develop a profitable international operation founded on CoalswitchTM and PeatSwitch technologies, underpinned by a forestry management business. Further information is provided on the Company's website and the Annual Report for the year ended 31 December 2017 and forms the basis of the Group's financial model and allocation of resources.

The Company's website may be accessed using the following link:

https://www.aegplc.com/

The 2017 Annual Report is available using the following link:

https://www.aegplc.com/investors/corporate-documents

Audit Committee
he audit committee is responsible for ensuring that the financial performance of the Company is properly monitored and reported on and for meeting with the auditors and reviewing reports from the auditors relating to accounts and internal control systems. The Audit Committee is comprised of Michael Rowan and Simon Melling.
Remuneration Committee
The remuneration committee reviews the performance of executive directors, sets the scale and structure of their remuneration and reviews the basis of their service agreements with due regard to the interests of the shareholders. The remuneration committee will also make recommendations to the Directors concerning the allocation of share options to Directors and employees. No Director is permitted to participate in discussions or decisions concerning their own remuneration. The remuneration and terms of appointment of the members of the remuneration committee are set by the Board. The Remuneration Committee is comprised of Michael Rowan and Simon Melling. The Board receives regular management information, whilst also maintaining on-going contact with suppliers and customers. Although all Board members are involved in committee meetings and official Board meetings, the executive directors have an active role in the day-to-day running of the Group’s business.

Principle Two: Understanding Shareholder Needs and Expectations

The Board recognises the need to maintain communication with our shareholders and this is led by the Executive Directors (Michael Rowan and Richard Spinks). Institutional shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company.  In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting and any other General Meetings that are held throughout the year.

All of the Company’s regulatoryannouncements are uploaded to the Regulatory News section of the Company's website to ensure that shareholders receive price-sensitive information as soon as the market does.

In addition, the website has a specific "Contact us" form to enable shareholders to contact the Company directly.

Principle Three: Stakeholder Responsibilities

The Board takes regular account of the significance of social, environmental and ethical matters affecting the Groupin each jurisdiction that it currently operates and communication with key stakeholders is led by the Executive Directors (Michael Rowan and Richard Spinks). Whilst it has not yet adopted a specific set of policies on Corporate Social Responsibility, the Company seeks to protect the interests of all its stakeholders through individual policies and through ethical and transparent actions, and by followingthe guidelines in the QCA Code. The Board is regularly updated on wider stakeholder engagement feedback to stay well informed of stakeholder insights and is always prepared, where practicable, to review and update its policies and actions when the size of the Group or its needs dictate that such revisions or updates are either necessary or advisable.

Principle Four: Risk Management

The Board recognises that effective risk management is essential for the Group to meet its corporate objectives and this forms an important part of both formal and informal Board discussions.

Key risks and associated mitigation plans have been identified and this analysis forms a key part of the development and preparation of theCompany's 5 year business plan. Furthermore, key opportunities and risks are reviewed and assessed on an ongoing basis by the Company's Operating Committee (see Principle Six below). This Committee, which has a specific terms of reference,comprises the two executive Directors, the Chief Operating Officer, Chief Financial Officer, Chief Technical Officer and Head of Manufacturing.

A summary of the key risks and mitigation strategies is below:

Risk Mitigation
1 Insufficient cash resources to meet liabilities, continue as a going concern and finance key projects. Short term and 5 year business plans are prepared and are reviewed on an ongoing basis. This analysis provides the basis for capital raising activity.
2 Loss of key management/staff resulting in failure to secure and meet contractual requirements. Regular review of salaries and benefits including long term incentives. Ongoing communication with key individuals.
3 Project execution risk associated with capital intensive activities. Strategy is to outsource construction projects to established EPC contractorsand to engage suitable engineering counterpartieswhere possible.
4 Health and safety risks to employees, contractors and local communities associated capital intensive operations. Employment of experienced operational managers and contractors. Group wide HSE policies to be introduced on commencement of production.
5 Failure to comply with law and regulations in the jurisdictions in which we operate. Key management are professionally qualified. In addition the Company appoints relevant professional advisers (legal, tax, accounting etc) in the jurisdictions in which we operate.
6 Failure to maintain strong and effective relations with key stakeholders in the areas in which we operate, resulting in loss of contracts. Senior management seeks to establish and maintain an open and transparent dialogue with key stakeholders in the areas in which we operate.
7. Significant changes in the political environment results in loss of resources/market and/or business failure. The Company exited its Ukrainian wood fibre business in 2017, and refocussed its activities in North America and Western Europe, in order to reduce the Group's country, political and trading risk profiles. Management also monitors the wider political environment on an ongoing basis.

 

Principle Five: A Well-Functioning Board of Directors

The primary role of AEG’s Board of Directors is to agree the Group’s long-term strategy and direction; to monitor achievement of its business objectives; to ensure its adherence to relevant social, environmental, ethical, employment and health & safety legislation; and to protect the interests of its shareholders and other stakeholders.

The Board is currently comprised of two executive Directors, Michael Rowan and Richard Spinks and one non-executive Director, Simon Melling. Executive and non-executive Directors are subject to re-election intervals as prescribed in the Company’s Articles of Association. At each Annual General Meeting one-third of the Directors, who are subject to retirement by rotation retire from office.

The Boardholds formal meetings several times per annum, and at least once each quarter.  In-between times, it holds such number of additional meetings as is necessary to transact the Group’s business.  The Board receives management information, whilst also maintaining on-going contact with suppliers and customers. All Board members are involved in committee meetings and official Board meetings and devote sufficient time to fully discharge their responsibilities as Directors of AEG plc.

The principal standing committees appointed by the Board are as follows:

Audit Committee: The audit committee is responsible for ensuring that the financial performance of the Company is properly monitored and reported on and for meeting with the auditors and reviewing reports from the auditors relating to accounts and internal control systems. The Audit Committee is comprised of Simon Mellingand Michael Rowan.

Remuneration Committee: The remuneration committee reviews the performance of executive Directors, sets the scale and structure of their remuneration and reviews the basis of their service agreements with due regard to the interests of the shareholders. The remuneration committee will also make recommendations to the Directors concerning the allocation of share options to Directors and employees. No Director is permitted to participate in discussions or decisions concerning their own remuneration. The remuneration and terms of appointment of the members of the remuneration committee are set by the Board. The remuneration committee is comprised of Simon Melling and has access to external expertise should that be required.

The Board has agreed that appointments to the Board are made by the Board as a whole and so has not created a Nominations Committee.

Principle Six: Appropriate Skills and Experience of the Directors

The Board currently consists of three Directors comprising two executive Directors and one non-executive, who is deemed to be independent. Detailed biographies of theDirectors are provided on the Company's website via the following link: https://www.aegplc.com/about-active-energy/board-management.

Between them the Directors have a wealth of senior management, entrepreneurial and board level experience as well as specific legal, banking, accounting and financial skills. The Board recognises that it currently has limited diversityand has taken steps to ensure that this consideration will form a part of any future recruitment.

Furthermore, the Board operates in conjunction with an experienced senior management team that complement the Board’s skill set at all times.  The Company's operating committee which comprises the two Executive Directors, the Chief Operating Officer (Antonio Esposito), the Chief Financial Officer (Duncan Nealey), the Chief Technical Officer (Phil Scalzo) and the Head of Manufacturing (Ron Cella).

The biographical profiles of these individuals can be found using the following link:

Board of Directors

The Company acknowledges that the guidance in the QCA Code is for a Company to have at least two independent non-executive Directors.The Directors, therefore acknowledge that there is a need to appoint a further independent non-executive Director and that, if possible, this individual should assume the role of non-executive Chairman [as Michael Rowan is currently performing both the Chairman and the CEO role].

Principle Seven Evaluation of Board Performance

Internal evaluation of the Board, the committees and individual Directors is seen as an important next step in the development of the Board. The Directors are currently reviewing the timing and process through which this evaluation will be undertaken, including peer appraisal, questionnaires and discussions to determine the effectiveness and performance in various areas as well as continued independence.

Succession planning is considered periodically by the Board as a whole, although at present both the current Board along with the Senior Management team are focused on successfully executing the Company’s short to medium term growth strategy.

Principle Eight: Corporate Culture

The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Group as a whole and that this will impact the performance of the Group. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Group as a whole and the way that employees behave. The Board believes that the adoption and maintenance of sound ethical values and behaviours is crucial to the ability of the Group to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Group does. The Board assessment of the culture within the Group at the present time is one where there is respect for all employees, suppliers and the communities in which we operate; that there is open dialogue within the Group, and a strong commitment to compliance with law and regulations and ethical principles. The Company seeks to hire and retain senior managers with professional qualifications and experience, consistent with our ethical beliefs and corporate culture.

Principle Nine: Maintenance of Governance Structures and Processes

The primary role of AEG’s Board of Directors is to agree the Group’s long-term strategy and direction; to monitor achievement of its business objectives; to ensure its adherence to relevant social, environmental, ethical, employment and health & safety legislation; and to protect the interests of its shareholders and other stakeholders. The Board holds formal meetings several times per annum, and at least once each quarter.  In-between times, it holds such number of additional meetings as is necessary to transact the Group’s business.

The principal standing committees appointed by the Board are the Audit Committee and the Remuneration Committee and the responsibilities and composition of these committees are described in Principle Five above.  All Board members are involved in committee meetings and official Board meetings, and the executive Directors have an active role in the day-to-day running of the Group’s business.

Day to day operational activities are conducted via the Company's OperatingCommittee. This Committee, which has specified terms of reference, comprises the two executive Directors, the Chief Operating Officer (Antonio Esposito), theChief Financial Officer (Duncan Nealey), the Chief Technical Officer (Phil Scalzo)and the Head of Manufacturing (Ron Cella).  Key issues are referred to the Board as and when necessary.

In addition,a delegation of authority matrix is in place whereby the Board had delegated certain decision making powers to executive Directors and senior management. The extent of these powers is subject to ongoing review and assessment and will be updated whenever there is a major change in the nature or organisation of the business.

The Company has adopted a code for directors’ and employees’ dealings in securities which is appropriate for a company whose securities are traded on AIM, and is in accordance with rule 21 of the AIM rules and the Market Abuse Regulation.

Principle Ten: Shareholder Communication

The Board recognises the need to maintain regular communication with our shareholders, whilst ensuring adherence to insider trading regulations. All regulatory announcements to the market are uploaded to the Regulatory News section of the website to ensure that shareholders receive price-sensitive information as soon as the market does. Our website has a specific "Contact us" form to enable shareholders to contact the Group.

Finally, the Company has twitter and linked pages which are located at:

https://www.linkedin.com/company/activeenergy

 

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