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Corporate Governance

The key objective of corporate governance is to enhance and protect shareholder value. The Board of Directors of Chaarat is committed to maintaining high standards of corporate governance by applying good corporate governance principles pragmatically whilst having regard to the business profile and size of the Group.

The UK Corporate Governance Code and Code of Best Practice for listed companies are incorporated within the Listing Rules of the Financial Conduct Authority. As an AIM quoted company, Chaarat is not required to comply with the UK Corporate Governance Code but has due regard to the principles set out in the Code. The Board seeks as far as possible to apply the guidance provided by the Quoted Companies Alliance in its Corporate Governance Code for Small and Mid-Size Quoted Companies (2013).

Independence

On 1 October 2016 Martin Andersson was appointed to lead the Board of Chaarat as Chairman. He is the largest shareholder of Chaarat as he is indirectly beneficially interested in the majority of the shares in Labro Investments Limited (Labro).

The Board considers that the appointment of Martin as Chairman is in the best interests of all shareholders. His interests are fully aligned with shareholders and he seeks to maintain the highest standards of corporate governance to allay any concerns regarding independence.

A Relationship Agreement has been put in place between the Chaarat and Labro which provides, inter alia, that for so long as Labro beneficially owns or is interested in 20% or more of the issued share capital of the Company, Labro shall have the right to nominate one director to the Board. It also stipulates that Labro will not take any action to circumvent the proper application of the AIM Rules or enter into any transactions with the Company or the Group on any other than on normal commercial terms.

The Relationship Agreement will terminate on the date that Labro ceases to beneficially own or be interested in at least 20% of the issued share capital of the Company or if the ordinary shares cease to be admitted to trading on AIM.

Chaarat’s Articles of Association provide that the Board has the right to require any holder of more than 20% of the Company’s shares, who acquires an additional interest in shares, must make a mandatory offer to acquire the shares of all the other Company’s shareholders. The Board has previously exercised its discretion to waive the requirement for a mandatory offer when Labro acquired shares in excess of a 20% holding.

As a result of the placing in September 2016 a number of associates of the incoming Chairman became shareholders in the Company. Whilst acting independently, solely in their own interests and having no direct involvement with the Company, the Chairman, taking a conservative view, deemed it appropriate that these associates should be considered as forming a concert party with Labro. Additional share purchases by any member of the concert party must be notified to the Board so that the Directors not associated with Labro can decide whether to exercise their discretion to waive the requirement to make a mandatory offer to all shareholders.

The Board believes this is best practice for corporate governance purposes so that there is no perception that shares are being accumulated with the objective of acquiring the company at a potentially depressed valuation. Accordingly, Martin Wiwen-Nilsson, Willem De Geer, Deer Invest AB and Sarastro Group Limited (or in each case his or its nominee), comprise the concert party with Labro for the purposes of the Articles.

The non-executive Directors are usually free from any material business or other relationship with the Group. Any such interest would be disclosed and relate to their particular skill and expertise for the benefit of the Group. Richard Rae is the senior non-executive Director and is considered independent by the rest of the Board.

Board meetings

The members of the Board meet regularly to review progress, approve strategy and budgets, major capital expenditure and the financial statements.

All directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that all Board procedures are followed. Any director may take independent professional advice at the company’s expense in the furtherance of their duties.

Remuneration committee

The remuneration committee comprises Richard Rae as Chairman and Martin Wiwen-Nilsson. The committee meets as required during each financial year. It is responsible for reviewing the performance of the executive Directors and for setting the scale and structure of their remuneration, having due regard to the interests of shareholders as a whole and the performance of the Group. The remuneration committee also administers the company’s share option arrangements. The remuneration of the non-executive directors is reviewed by the whole Board.

Audit committee

The audit committee comprises Richard Rae as Chairman and Martin Andersson. The committee meets formally on at least two occasions each financial year. It reviews the Company’s interim and annual financial statements before submission to the Board for approval, as well as regular reports from management and the external auditors on audit, accounting and internal control matters. Where appropriate, the audit committee monitors the progress of action taken in relation to such matters. The audit committee also recommends the appointment of, and reviews the fees of, the external auditors. It also reviews the independence of the external auditors and any non-audit services provided.

Nominations committee

The nominations committee is comprised of the whole Board of Directors. The Chairman reviews all proposed changes to the Board with regard to the balance of skills necessary to achieve Chaarat’s strategic objectives. Recommendations for nomination to the Board have been based to date on the personal contacts of the existing Board.

Health, Safety, Environment and Community committee

A Health, Safety, Environment and Community committee is responsible for the overall health, safety and environmental performance of the Company and its operations and its relationship with the local community in the Kyrgyz Republic. The Committee is comprised of the entire Board of Directors.

Business Development committee

The Business Development Committee meets on an ad hoc basis to review new opportunities for Chaarat, which may include acquisitions within regions where the Board has knowledge, contacts and experience, such as Russia, the CIS and the Far East. The Committee comprises the entire Board of Directors.

Relations with shareholders

The Board recognises the importance of maintaining a dialogue with its shareholders (whether institutional or private) and values the views expressed. Dialogue can take the form of individual meetings or presentations to retail investors. Members of the Board meet with shareholders, analysts and other institutions regularly throughout the year to keep them updated. The AGM and website encourage engagement with the Board.

The Share Dealing Code

The Company has adopted a share dealing code for the Directors and its employees, which is appropriate for the company whose shares are admitted to trading on AIM (in order to, among other things, ensure compliance with Rule 21 of the AIM Rules). The Company takes all reasonable steps to ensure compliance with the terms of the share dealing code by the Directors and their connected persons and employees.