Corporate Governance

Compliance

As an ‘AIM’ listed company, Chelford Group plc are not required to comply with all of The Listing Rules. However, the Company has chosen to disclose the following information on corporate governance.

The Listing Rules of the Financial Services Authority require listed companies to disclose how they have applied the principles set out in Section I of the Combined Code prepared by the Committee on Corporate Governance and whether they have complied with its provisions throughout the period.

The Company has not complied with the Code as regards general Board composition. The Combined Code requires one third of the Board to be non-executive directors and there to be a minimum of three non-executive directors.

The Code also requires the Audit and Remuneration Committees to comprise of only non-executive directors and suggests a minimum membership of three. Given the Board structure, these provisions of the Code have not been complied with during the year.

The Board

Click here for Biographical details of all directors

The Board’s principal task is to set the Company’s strategy, which is devised to deliver optimum value for shareholders. Other matters reserved for decision by the full Board include such issues as the approval of the annual budget, the annual report and accounts, authorisation of all business acquisitions and disposals, sanction of all major capital expenditure, the raising of equity or debt finance, investor relations and environmental policy. A pack of information, including the up to date financial position of the Company, is distributed to all Board members in advance of all Board Meetings which are held monthly.

Procedures are in place to enable directors to take appropriate independent professional advice at the Company’s expense if that is necessary for the furtherance of their duties, and they have access to the advice and services of the Company Secretary. As all of the current directors are experienced directors, there does not currently exist a process for training new directors in their legal and fiduciary duties but the Board is committed to putting such a process in place if and when it is required.

The Articles of Association require one third of the Board to retire by rotation each year and for those directors appointed during the year to stand for re-election at the following Annual General Meeting.

Nomination Committee

During the year, the Board as a whole has undertaken the duties of the nomination committee.

Nominations Committee Terms of Reference

Remuneration Committee

Throughout the year, the remuneration committee consisted of S R Lord (Chair), J W Birkett and T C Lewis. In determining policy for the executive directors, the committee has given due consideration to the Combined Code. The remuneration packages are designed to attract, retain and motivate executive directors of the required calibre. The committee reviews the appropriateness of all aspects of directors’ pay and benefits by taking into account remuneration packages of similar sized companies and having access to relevant remuneration surveys.

Remuneration Report

The executive directors are paid salaries and the non-executive directors are paid fees. In addition, the executive directors participate in the Company bonus scheme.

In addition to these bonus arrangements, the Company operates an EMI share option scheme in which executive directors participate. The Board believes that, in accordance with the best practice provisions, this approach aligns the interests of shareholders and executive directors.

The remuneration of the non-executive directors is determined by the Board as a whole.

For full details of directors' remuneration, shareholdings, share options and the notice period in all the executive directors' service contracts click here .

Remuneration Committee Terms of Reference

Accountability and Audit

Internal Control

The directors are responsible for the Company’s system of internal control and for reviewing its effectiveness whilst the role of management is to implement Board policies on risk management and control. It should be recognised that the Company’s system of internal control is designed to manage rather than eliminate the risk of failure to achieve the Company’s business objectives and can only provide reasonable, and not absolute, assurance against material misstatement or loss.

There is an on-going process for identifying, evaluating and managing the significant risks faced by the Company which has been in place during the year and up to the date of the approval of its annual report. This process is on-going and is regularly reviewed by the Board and accords with the internal control guidance prepared for directors by the Turnbull Committee.

The Company operates a series of controls and the key procedures, which are designed to provide effective internal controls, are as follows:

A clearly defined organisational structure with the appropriate delegation of authority to operational management
A comprehensive annual planning and budgeting process, requiring Executive Committee approval, reviewed and revised on a regular basis
Management information systems to monitor financial performance and other operating statistics, with a monthly review of actual against budget
All aspects of internal control are considered and monitored by the Board. Where circumstances dictate, procedures are instigated with the support of suitably qualified external assistance for subsequent Board review and action.

The Company does not have an internal audit function. However, the Board periodically reviews the need for such a function. The current conclusion of the Board is that this is not necessary, given the scale of activities.

The Board has reviewed the effectiveness of the system of internal control in operation during the year and this process will continue annually.

Audit Committee

The audit committee consists of J W Birkett (Chair), T C Lewis and S R Lord. Its purpose is to consider any matters raised by the external auditors in connection with their work and findings, to review the scope and cost effectiveness of the audit and the independence and objectivity of the external auditors. It meets at least twice a year.

Audit Committee Terms of Reference

Shareholder Relationships

The objective of the Board is to create increased shareholder value by growing the business in a way that delivers sustainable improvement in earnings over the medium and long term.

The Board regards the Annual General Meeting as an important opportunity to communicate with private investors in particular. Directors make themselves available to shareholders, both before and after the Annual General Meeting and on an ad hoc basis, subject to normal disclosure rules.

Directors' Remuneration Report