Corporate Governance

Description of the Board

Chaarat Gold Holdings Limited (the “Company” or “Chaarat”) has three executive directors and four non-executive directors. All major decisions relating to the Company and its subsidiaries (the “Group”) are made by the board of directors of the Company (the “Board”) as a whole. Operations of the Group are conducted by the subsidiaries of the Company (principally Chaarat Zaav CJSC, “CZ”) under the direction of the directors of each of the subsidiary companies.

The Board aims to meet at least quarterly and as required from time to time to consider specific issues required for decision by the Board. The Board is responsible for setting the Company strategy, ensuring corporate governance is of an appropriate standard, approves the short and long-term business plans and appoints the Chief Executive Officer. The Board reviews key business risks regularly, including the financial and non-financial risks facing the Group in the operation of its business.

The individual directors of the Board have a wealth of experience from diverse professional and personal backgrounds. The Chairman is responsible for leading the Board, including ensuring that an appropriate level of diversity is maintained to promote distinct perspectives on Group and Company matters, and for implementing a robust governance framework. The Chief Executive Officer is responsible for leading the Company in its strategic pursuits and for ensuring that the Company’s business model is implemented effectively and in line with the Company’s values.

The Group operates a share dealing code for directors on the basis set out in the AIM Rules for Companies (the “AIM Rules”), and will review its share dealing code from time to time to ensure it remains as effective as possible.

Approach to Corporate Governance

As a Company whose shares are admitted to trading on the AIM Market of the London Stock Exchange plc, the Company is not required to comply with the UK Corporate Governance Code (the ‘Code’) issued by the Financial Reporting Council.

However, the Group aims to comply with best practice in the industry and as such elects to follow the main principles of the Quoted Companies Alliance’s Corporate Governance Code 2018 (the “QCA Corporate Governance Code”).

The QCA Corporate Governance Code identifies ten principles that focus on the pursuit of medium to long-term value for shareholders without stifling the entrepreneurial spirit in which the company was created. The sections below set out the ways in which the Group applies the ten principles of the QCA Corporate Governance Code in support of the Group’s medium to long-term success.

1. Establish a strategy and business model which promote long-term value for shareholders
The Board seeks to maximise value for all our shareholders whilst ensuring continuity and consistency through sustainable and responsible exploration and mining.

The Group’s strategy is to become a leading mid-tier gold producer focused in Central Asia and the Former Soviet Union through a mixture of organic growth and selective acquisitions.

The CIS region has a highly fragmented gold industry comprising both world class assets and smaller, profitable producers. Due to perceived risk, most of the assets in this region trade at a significant discount compared to equivalent assets in other emerging market locations. This presents an opportunity for industry consolidation, which Chaarat intends to lead

Ultimately, a diversified portfolio of producing and developing mines will generate the cashflow to fund ongoing organic growth and deliver a strong equity return to investors.  By maintaining a focus on active engagement with host communities, the benefits of this strategy will flow to all stakeholders, helping to manage ongoing risks.

The Group intends to unlock the long term potential of its primary asset, the Chaarat Gold Project in the Kyrgyz Republic (the “Chaarat Project”). The Chaarat Project comprises two distinct mineralised zones: the Tulkubash ore body (“Tulkubash”) and the neighbouring Kyzyltash sulphide ore body (“Kyzyltash”).  The mining licence granted to CZ in respect of the Chaarat Project is valid until 25 June 2032 (the “Mining Licence”).

The first stage of development of the Chaarat Project is the development of Tulkubash as a heap leach project. Tulkubash forms part of the prolific Tien Shan Gold Belt and located in the Kyrgyz Republic, and has the capacity to generate US$40-60 million of free cash flow per annum through approximately 100,000 ounces of gold production per annum.

The Group expects that organic growth will follow from Kyzyltash, which is capable of producing 200,000-300,000 ounces of gold per annum, and the ongoing exploration of Chaarat’s licence area in the Kyrgyz Republic, which comprises an emerging gold district. The Group’s intention is that this will be supplemented by selective mergers and acquisitions.

Future M&A will be judged on its ability to deliver accretive value to Chaarat shareholders in both the short term and through longer term exploration potential to extend and enhance production profiles.

 

2. Seek to understand and meet shareholder needs and expectations
The Board is aware of the needs and expectations of shareholders. The Company engages with its shareholders through its Annual General Meeting (the “AGM”).

The board supports the use of the AGM to communicate with both institutional and private investors. All shareholders in attendance are given the opportunity to ask questions and raise issues; this can be done formally during the meeting or informally with the directors afterwards.

At the AGM, separate resolutions are proposed on each substantially separate issue. For each resolution, proxy appointment forms are issued alongside the release of the Annual Report for that year, which provide voting shareholders with the option to vote in advance of the AGM if they are unable to attend in person. All valid proxy votes received for the AGM are properly recorded and counted by Link Market Services (Guernsey) Limited, our registrars.

As soon as practicable after the AGM has finished, the results of the meeting are released via RNS and a copy of the announcement is posted on the Company News page at www. https://www.chaarat.com/investors/rns/. At last year’s AGM, all resolutions were duly passed.

The Executive Chairman, Martin Andersson can be contacted by shareholders on matters of governance, as can the Company’s nominated adviser, Numis Securities Limited (“Numis”). Contact details are provided within every Company announcement.

The Board is mindful of the need to protect the interests of minority shareholders. Certain Board members are also significant, long-term investors in the Company, and their interests are closely aligned with those of other shareholders.

One of the Company’s Significant Shareholders (as defined in the AIM Rules) is Labro Investments Limited (“Labro”). The Executive Chairman of the Company, Martin Andersson, is indirectly beneficially interested in the majority of the shares in Labro.  As at 14 December 2018, Labro holds:

·        132,421,925 ordinary shares in the capital of the Company (“Ordinary Shares”) representing approximately 33.51% of the Company’s share capital;

·        US$1,000,000 of secured 2021 convertible notes with a conversion price of £0.37 / share (the “2021 Notes”); and

·        21,367,521 warrants to subscribe for Ordinary Shares (“Labro Warrants”).

Labro is a member of a concert party (as referred to and defined in the Company’s announcement on 14 December 2018) (the “Concert Party”).

Martin Wiwen-Nilsson, a non-executive director of the Company is also a member of the Concert Party. As at 28 September 2018, Martin Wiwen-Nilsson holds:

·        9,998,237 Ordinary Shares representing 2.53% of the Company’s share capital;

·        US$425,000 of 2021 Notes; and

·        200,000 options to subscribe for Ordinary Shares (“MWN Options”).

If all Labro Warrants and MWN Options were exercised and all 2021 Notes issued to Labro and Martin Wiwen-Nilsson were converted (but no other warrants or options to subscribe for Ordinary Shares were exercised, no other 2021 Notes were converted and no other Ordinary Shares were issued), the Concert Party would hold 175,343,275 Ordinary Shares representing 41.68% of the resulting enlarged share capital.

As the Company is incorporated in the British Virgin Islands, it is not subject to the UK City Code on Takeovers and Mergers. The Articles of Association of the Company (the “Articles”) contain a regulation which provides that where any person (i) acquires interests in shares which (taken together with interests in shares held or acquired by persons acting in concert with him) carry 20% or more of the voting rights of the Company; or (ii) holds (together with persons acting in concert with him) interests in shares representing not less than 20% but not more than 50% of the voting rights and such person (or any person acting in concert with him) acquires an interest in additional shares which increases his percentage of voting rights, the Board shall be entitled, but not obliged, to require that person to extend a mandatory offer to all of the Company’s shareholders to acquire their Ordinary Shares.

To date, the Board has exercised its discretion under the Articles so as not to require a mandatory offer to be made in connection with the issue of securities (including any conversion of such securities) to Labro, Martin Andersson, Martin Wiwen-Nilsson or any other member of the Concert Party, or as a result of any redemption or purchase by the Company of its own voting shares at any time in the future, but not in respect of any other purchase of Ordinary Shares or any interest therein by any member of the Concert Party or any other person acting in concert with them.

The Company entered into a relationship agreement (the “Relationship Agreement”) with Labro on 27 September 2016. The principal terms of the Relationship Agreement are as follows:

·        Labro has agreed that it shall (and, to the extent that it is able, shall procure that its associates/any nominee shall) permit the Company to carry on its business independently of Labro and its associates, including so that: (a) a majority of the revenue generated by the Company’s business is not attributable to business conducted directly or indirectly with Labro or its associates; (b) Labro and its associates are not able to influence the operations of the Company outside of its legal governance structure; and (c) save with the requisite approval of the Company’s shareholders in accordance with the AIM Rules and/or applicable company law, Labro and its associates do not hold or acquire a material shareholding in one or more significant subsidiaries of the Company.  For these purposes “Associates” shall have the meaning given to that term in the Listing Rules.

·        Labro has undertaken to the Company that it shall not (and, to the extent that it is able, shall procure that none of its associates/nominees shall) exercise any rights which any of them have from time to time as shareholders of the Company to: (a) enter into any transactions and/or relationships between any member of the Company’s group and Labro or its associates, other than at arm’s length and on normal commercial terms and in accordance with the related party transaction rules set out in the AIM Rules and/or applicable provisions of applicable company law; and (b) propose any resolution or take any action which is intended to circumvent the proper application of the AIM Rules.

·        For so long as the Relationship Agreement remains in force, Labro shall not (and, to the extent that it is able, shall procure that none of its associates/nominees shall) take any action (or omit to take any action) that may: (a) prejudice the suitability of the Ordinary Shares for admission to trading on AIM; or (b) have the effect of preventing the Company from complying with its obligations under the AIM Rules or applicable company law.

·        For so long as Labro (together with its associates) beneficially owns or is interested in 20% or more of the issued share capital of the Company carrying voting rights, Labro shall have the right to nominate one director to the Board, and to remove any such nominated director and appoint a replacement director in his/her place.

·        The Relationship Agreement will automatically terminate and cease to have effect on the earlier of: (a) Labro and any of its associates in aggregate ceasing to beneficially own or be interested in at least 20% of the issued share capital of the Company carrying voting rights; or (b) the Ordinary Shares ceasing to be admitted to trading on AIM.

·        The Company and Labro have agreed that nothing in the Relationship Agreement shall prevent: (a) Labro or any of its associates from exercising any of their voting rights as they, in their discretion, see fit except where to do so would result in a breach of the Relationship Agreement; or (b) Labro or any of its associates from acquiring or disposing of securities of the Company (save to the extent otherwise required by law or regulation and subject always to the Articles, including (without limitation) regulation 19 thereof); or (c) the payment of any fees and/or expenses to any nominee director in respect of his or her services as a director in accordance with his/her appointment agreement as such.

 

3. Take into account wider stakeholder needs and social responsibilities, and their implications for long-term success
The Group is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include the Group’s shareholders, employees, suppliers, customers, regulators, industry bodies and creditors. Their feedback is gathered via meetings and conversations.

The Group’s operations and working methodologies take account of the need to balance the needs of all of these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Group for the benefit of its members as a whole. The Group endeavours to take account of feedback received from stakeholders, making amendments to working arrangements and operational plans where appropriate and where such amendments are consistent with the Group’s longer term strategy.

The Group takes due account of any impact that its activities may have on the environment and seeks to minimise this impact wherever possible. Through the various procedures, policies and systems it operates, the Group ensures full compliance with health and safety and environmental legislation relevant to its activities.

As an example, the Group’s behavioural change safety programs are geared toward returning employees to their families unharmed every day. Industry best environmental practices such as the design of the Tulkubash leach facility are bringing new standards and technology to the region.

The Group also works with local communities to ensure that its legacy is positive. Chaarat has provided training and support, for example, to multiple business start-ups in the Chatkal region of the Kyrgyz Republic where it is building the Tulkubash mine. The company employed 139 members of local communities in the Republic and sponsored medical and students in rural communities.

 

4. Embed effective risk management, considering both opportunities and threats throughout the organisation
The non-executive directors are expected to satisfy themselves on the integrity of financial information and that financial controls and risk management systems are robust and defensible.

The Company’s directors oversee a number of committees and are laid out as per the below.

Remuneration Committee

The remuneration committee is a sub-committee of the Board and is established to achieve the Board’s aim to ensure that the Company’s directors and senior executives are fairly rewarded for their individual contributions to the Company’s overall performance by determining their pay and prerequisites. The Board seeks to demonstrate to all shareholders that the remuneration of the senior executive members of the Company is set out by a committee of the Board who will give due regard to the interests of the shareholders and to the financial and commercial health of the Company (the “Remuneration Committee Objectives“).

The remuneration committee is appointed by the Board and comprises at least 2 independent non-executive directors of the Company (so far as possible). Currently, the remuneration committee comprises Gordon Wylie as chair and Hussein Barma and Martin Wiwen-Nilsson, all of whom are non-executive directors with Gordon Wylie and Hussein Barma both being independent (the “Remuneration Committee“). Members of the Remuneration Committee shall serve for periods of up to three years which may be extended for two further three year periods provided the director remains independent. Meetings of the Remuneration Committee shall be held as required but not less than twice a year, at which a quorum is two members. Each member shall have one vote which may be cast only if the member attends the meeting. Members with a direct or indirect personal interest in the matters considered at the meeting shall not be permitted to vote. Save where he has a personal interest, the chairman of the Remuneration Committee will have the casting vote.

In order to achieve the Remuneration Committee Objectives, the Remuneration Committee shall follow certain duties and terms of reference, which include: (A) agreeing the framework for the remuneration of the Company’s executive management; (B) ongoing review of the remuneration policy, and the Company’s arrangements for its employees to raise concerns about possible wrongdoing; (C) approving all service contracts; (D) determining the policy for pension arrangements; (E) establishing the selection criteria, selecting, appointing and setting the terms of reference for any remuneration consultants who advise the Remuneration Committee and to obtain reliable information about remuneration in other companies; and (F) making a report each year to the shareholders on behalf of the Board addressing, inter alia: directors’ remuneration, the Company’s general policy on executive remuneration, details of all elements of the directors’ remuneration package, information on share options, information on grants under executive share options, pension entitlements, information on annual bonuses, any service contracts which provide for, or imply notice periods in excess of one year and shareholdings and other relevant business interests and activities of the directors, which should continue to be disclosed as required in the BCA and the AIM Rules.

Audit Committee

The audit committee is a sub-committee of the Board and is established to increase shareholder confidence and the credibility and objectivity of published financial information, to assist the Board in meeting their financial reporting responsibilities, to strengthen the independent position of the Company’s external auditors by providing channels of communication between them and non-executive directors and to review the performance of the auditors (the “Audit Committee Objectives“).

The audit committee is appointed by the Board and comprises at least two independent non-executive directors of the Company (so far as possible) one of whom shall have recent and relevant financial experience. Currently, the audit committee comprises Hussein Barma as chair and Gordon Wylie and Martin Wiwen-Nilsson, all of whom are non-executive directors with Hussein Barma and Gordon Wylie both being independent, and Hussein Barma brings to the committee his knowledge and experience as a chartered accountant (the “Audit Committee“). Members of the Audit Committee shall serve for periods of up to three years which may be extended for two further three year periods provided the director remains independent. Meetings of the Audit Committee shall be held as required but not less than twice a year, at which a quorum is two members. Each member shall have one vote which may be cast only if the member attends the meeting. Members with a direct or indirect personal interest in the matters considered at the meeting shall not be permitted to vote. Save where he has a personal interest, the chairman of the Audit Committee will have the casting vote.

In order to achieve the Audit Committee Objectives, the Audit Committee shall follow certain duties and terms of reference, which include: (A) monitoring the integrity of and reviewing the financial statements of the Company; (B) reviewing the Company’s interim and annual financial statements before submission to the Board for approval; (C) reviewing and challenging where necessary accounting policies, unusual transactions, disclosure in the Company’s financial reports and material information in financial statements; (D) where requested by the Board, reviewing the annual report and accounts; (E) reviewing internal controls and risk management systems; (F) reviewing arrangements for employees to raise concerns about possible wrongdoing; (G) considering and making recommendations to the Board regarding an internal audit function; (H) considering and making recommendations to the Board regarding the Company’s external auditor; (I) regularly meeting with the external auditor; (J) reviewing and approving the annual audit plan; (K) reviewing the finding of the audit; (L) reviewing any representation letter(s); (M) reviewing the management letter and management’s response to the auditor’s findings and recommendations; (N) developing and implementing a policy of the supply of non-audit services by the external auditor; (O) reporting formally to the Board on its proceedings; (P) making whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed; (Q) compiling a report to shareholders on its activities to be included in the Company’s annual report; and (R) considering such other matters as may be requested by the Board.

Technical Committee

The technical committee is a sub-committee of the Board and is established to, amongst other things, provide advice to the Company’s Board on the Company’s technical functions (the “Technical Committee“). The Technical Committee’s main functions are: (A) to review and approve the Company’s technical disclosures and to ensure technical excellence of the Company’s ongoing technical workstreams; (B) to provide advice to the Board about the scope of the Company’s standards; (C) to make decisions on such technical functions as are delegated by the Board; (D) to provide advice to the Board about further development, modification, and the technical and operational interpretation of the Company standards/sustainability criteria and the application of these interpretations; (E) to review and comment on the KPI reporting of accreditation bodies commissioned by the Company; (F) to address and give views on specific matters on which the Board requests advice; (G) to propose topics for the establishment of subject related the Company’s working groups and working group membership composition; (H) to develop and approve the Company’s working groups’ terms of reference; (I) to review and provide advice and guidance on the work and output from the Company’s working groups; and (J) to be responsible for the content of the certification requirements for mining and exploration, and relevant associated information.

The Technical Committee comprises a maximum of 4 members. Candidates for appointment as a member are identified by a nominations committee and appointed by a two-thirds majority of the votes at a duly convened meeting of the Technical Committee.  Currently, the Technical Committee comprises Robert Benbow (who is an executive director) as chair and Gordon Wylie and Robert Edwards, both of whom are independent non-executive directors.   Members are initially appointed for a 3 year term and are eligible for re-appointment. A member may be removed by the chair or by the Board for certain reasons for example incapacity, resignation, absenteeism, taking up employment with the Company or conflict of interests.

The Board has appointed the chair for a period of 3 years on the expiry of which the chair shall be required to seek re-election. Where the chair has held two consecutive 3 year terms of office, s/he must vacate the position for a period of not less than 1 year. The chair leads the Technical Committee and engages members on issues arising for Board and CEO consideration, reporting to the Board on the work of the Technical Committee. Only members have the right to attend Technical Committee meetings. The chair and the CEO shall be invited to attend for all or part of any meeting as considered appropriate, but have no right to vote. Others such as the chair(s) of any working groups, committees, advisory bodies or similar may be invited to attend for all or part of any meeting, as and when appropriate.

The Technical Committee shall meet 3 times a year. No business shall be discussed at any formal meeting of the Technical Committee unless a quorum is present. 50% + 1 members shall constitute a quorum. Any issue may be determined by a simple majority of the votes cast at a meeting. Meetings shall be summoned by the Company Secretariat at the request of the chair. Members are eligible for reimbursement of reasonable travel and subsistence expenses according to the Company’s travel policy. Invited guests and experts can be eligible for honorarium on a case by case basis and are eligible for reasonable travel and subsistence expenses according to the Company’s travel policy. Refunds will be made against evidence of expenditure according to Company travel cost refunding procedures.

The Technical Committee may create temporary working groups to advance work outside of the regular meetings, which may consist of non-members in addition to members. The Technical Committee shall draft and approve clear terms of reference and member composition for every working group as well as a timeline and a budget. Budget for working groups shall require the approval of the CEO. A working group shall be phased out when it has achieved its goal(s).

If any provision herein is inconsistent with the Articles, the Articles shall govern.

Nominations Committee

The nomination committee is a sub-committee of the Board (the “Nomination Committee“) and is established to, amongst other things, (A) regularly review the requirements of the Board compared to its current position and make recommendations; (B) give full consideration to succession planning for directors and other senior executives; (C) identify and nominate for the approval of the board, candidates to fill Board vacancies; (D) prepare a description of the role and capabilities required for a particular appointment; (E) keep under review the leadership needs of the organisation to compete effectively in the marketplace; (F) keep up to date and fully informed about strategic issues and commercial changes; (G) review annually the time required from non-executive directors; (H) ensure that on appointment to the board, non-executive directors receive a formal letter of appointment setting out clearly what is expected of them; (I) seek advice from the Company’s Nomad at the earliest opportunity about any proposed changes to the board and succession planning; and (J) make various recommendations to the board on the above and also on membership of the other committees and the re-appointment of directors.

The members of the Nomination Committee, the majority of which should be independent non-executive directors, are appointed by the Board. The Board has appointed the chair of the Nomination Committee who should be either the chair of the Company or an independent non-executive director. Currently, the Nomination Committee comprises Martin Andersson (the executive Chairman of the Company) as chair together with all other directors.  Appointments to the Nomination Committee are for a period of up to 3 years, which may be extended for two further periods of three years. The Committee shall have at least two members and a quorum shall be any 2 independent non-executive director members. The members of the Nomination Committee can be varied at any time by a majority resolution of the existing members of the Nomination Committee.

Each member of the Nomination Committee has one vote which may be cast on matters considered at the meeting. Votes can only be cast by members attending a meeting of the Nomination Committee. If a matter that is considered by the Nomination Committee is one where a member of the Nomination Committee, either directly or indirectly has a personal interest, that member shall not be permitted to vote at the meeting. Save where he has a personal interest, the chairman will have a casting vote. The Committee will meet at least 3 times a year but may meet at other times during the year as agreed between the members of the Nomination Committee. Other directors and external advisers may be invited to attend all or part of any meeting as and when appropriate. The company secretary shall be the secretary of the Nomination Committee.

The Nomination Committee is authorised by the board of directors to examine any activity within its terms of reference and is authorised to have unrestricted access to the company’s external auditors and to obtain, at the company’s expense, professional advice on any matter within its terms of reference, including from the Company’s Nomad. The Nomination Committee is authorised to seek any information it requires from any employee or director, and all such employees or directors will be directed to co-operate with any request made by the Nomination Committee.

HSE Committee

The health, safety and environment (“HSE“) and community committee is a sub-committee of the Board (the “HSE and Community Committee“) and is established to, amongst other things, provide advice to the Company Board on the Company’s HSE and community functions. The HSE and Community Committee’s main functions are: (A) to ensure that the Company safeguards the health of its employees, contractors and the public; (B) to ensure that the Company maintains safety and respect for the environment; (C) to ensure that the adopted standards and procedures meet relevant requirements; (C) to ensure that health and safety hazards and environmental impacts have been fully assessed and mitigated; (D) to ensure that all personnel are properly trained; (E) to undertake regular monitoring of the Company’s operational activity; (F) to review and approve the Company’s HSE and community plans and procedures; (G) to provide advice to the Board about the scope of the Company’s HSE and community standards; (H) to make decisions on such HSE and community functions; (I) to provide advice to the Board and the CEO about further development of the Company’s HSE and community standards; (J) to review and comment on the KPI reporting of any HSE and community accreditation bodies commissioned by the Company; (K) to address and give views on specific HSE and community matters; (L) to propose topics for the establishment of the Company’s HSE and community working groups; (M) to develop and approve the Company’s HSE and community working groups’ terms of reference; (N) to provide advice and guidance on the Company’s HSE and community working groups; and (O) to maintain responsibility for advising the Board and the CEO on the form and content of meetings.

The HSE and Community Committee comprises a maximum of 4 members all of whom shall be directors of the Company. Currently, this committee comprises Gordon Wylie, as chair, and Robert Benbow and Robert Edwards.  The Board has appointed the chair for a period of 3 years on the expiry of which the chair shall be required to seek re-election. Where the chair has held two consecutive 3 year terms of office, s/he must vacate the position for a period of not less than 1 year. Candidates for appointment as a member are identified by a nominations committee and appointed by a two-thirds majority of the votes at a duly convened meeting of the HSE and Community Committee. Members shall initially be appointed for a 3 year term and are eligible for re-appointment. A member may be removed by the chair or by the Board for certain reasons for example incapacity, resignation, absenteeism, taking up employment with the Company or conflict of interests.

The HSE and Community shall select relevant issues and topics for its focus and discussion in pursuit of its objectives. The chair shall consult with the Board and the CEO to also suggest topics for the HSE and Community Committee’s consideration. Only members have the right to attend HSE and Community Committee meetings. The chair and the CEO shall be invited to attend for all or part of any meeting as considered appropriate, but have no right to vote. Others such as the chair(s) of any working groups, committees, advisory bodies or similar may be invited to attend for all or part of any meeting, as and when appropriate.

The HSE and Community Committee shall meet 3 times a year. No business shall be discussed at any formal meeting of the HSE and Community Committee unless a quorum is present. 50% + 1 members shall constitute a quorum. Any issue may be determined by a simple majority of the votes cast at a meeting. Meetings shall be summoned by the Company Secretariat at the request of the chair. Members are eligible for reimbursement of reasonable travel and subsistence expenses according to the Company’s travel policy. Invited guests and experts can be eligible for honorarium on a case by case basis and are eligible for reasonable travel and subsistence expenses according to the Company’s travel policy. Refunds will be made against evidence of expenditure according to Company travel cost refunding procedures.

 

5. Maintain the board as a well-functioning, balanced team led by the chair
The Board and the committees regularly receive information regarding the operations of the Group.

The Board comprises three executive directors and four non-executive directors. Three of the non-executive directors – – Gordon Wylie, Robert Edwards and Dr Hussein Barma – are independent, which the Board believes to be an appropriate composition to maintain effective corporate governance.

Each director is expected to commit such time as is necessary to perform his duties as an officer of the Company and is expected to attend all Board meetings.

 

In some cases, directors’ current appointment arrangements are not fully documented in writing. Where this is the case, the Company is in the process of putting in place written agreements.

Pursuant to the Articles, at every AGM, one-third of the director (other than alternate directors and any managing director/chief executive officer) for the time being, or, if their number is not a multiple of 3, then such number as is appropriate to ensure that no director other than alternate directors and any managing director/chief executive officer holds office for more than 3 years, shall retire from office. The directors to retire at an AGM are those who have been longest in office since their last election, but, as between persons who became directors on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by drawing lots. A retiring director is eligible for re-election.

A biography of each of the directors is included on the Company’s website at https://www.chaarat.com/about/directors/

The table below shows the attendance of the directors at Board meetings during the year to 31 December 2017. Each Board and committee meeting must meet quorum requirements.

 

Date of MeetingDirectors Present
10 February 2017·        Richard Rae

·        Martin Wiwen-Nilsson

12 February 2017·        Martin Andersson

·        Dekel Golan

·        Linda Naylor

·        Richard Rae

·        Martin Wiwen-Nilsson

2 April 2017·        Martin Andersson

·        Dekel Golan

·        Alexander Novak

·        Linda Naylor

·        Richard Rae

11 April 2017·        Dekel Golan

·        Alexander Novak

·        Richard Rae

·        Linda Naylor

9 July 2017·        Martin Andersson

·        Richard Rae

·        Martin Wiwen-Nilsson

10 July 2017·        Martin Andersson

·        Dekel Golan

·        Linda Naylor

·        Richard Rae

·        Martin Wiwen-Nilsson

25 October 2017·        Martin Andersson

·        Martin Wiwen-Nilsson

·        Richard Rae

·        Linda Naylor

27 October 2017 (13:05)·        Richard Rae

·        Linda Naylor

27 October 2017 (13:15)·        Richard Rae

·        Linda Naylor

4 December 2017·        Martin Andersson

·        Gordon Wylie

·        Dorian Nicol

·        Linda Naylor

·        Richard Rae

17 December 2017·        Martin Andersson

·        Dorian Nicol

·        Linda Naylor

·        Richard Rae

·        Gordon Wylie

20 December 2017·        Linda Naylor

·        Martin Andersson

·        Gordon Wylie

 

An update will be provided in respect of 2018 Board and Committee meeting attendance in the 2018 Annual Report.

 

6. Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities
The Board of directors has relevant experience across the areas of mining, accounting and banking/finance.

The Board and the committees regularly receive information regarding the operations of the Group.

All directors retire by rotation at regular intervals in accordance with the Articles, as summarised in paragraph 5 above.

The Board regularly reviews the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Group.

The Board ensures that the Group is compliant with relevant legislation and regulatory requirements, and seeks advice where appropriate from its legal advisers as regards its legal responsibilities.

The Company’s head of legal, Sergei Zhukov, also acts as company secretary. This role is likely to be devolved in the near future to a newly-appointed legal director. The Company is currently at the later stages of recruiting for this position. The company secretary is responsible for ensuring the Company discharges its legal and statutory duties, and for ensuring that decisions of the Board are implemented.

Numis advises the Company with regards to its duties and obligations as a company whose Ordinary Shares are admitted to trading on AIM.

 

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
Evaluation of the performance of the Board has historically been implemented in an informal manner.  From 2018 however, the Board will formally review and consider the performance of each director at or around the time of publication of the Company’s annual report. The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning.

The remuneration will be determined in accordance with the Articles.  When determining executive director remuneration policy and practices, the Remuneration Committee takes account of the following (inter alia):

  • the Remuneration Committee must provide the packages needed to attract, retain and motivate directors of the quality required but should avoid paying more than is necessary for this purpose;
  • the Remuneration Committee should judge where to position the Company relative to other companies. It should be aware what other comparable companies are paying and should take account of relative performance;
  • the Remuneration Committee should be sensitive to the wider scene, including pay and employment conditions elsewhere in the Company, especially when determining annual salary increases;
  • the performance-related elements of remuneration should be designed to align the interests of directors and shareholders and to give directors keen incentives to perform at the highest levels;
  • the Remuneration Committee should approve the design of, and determine targets for, any performance related pay schemes (including share incentive plans) and approve the total annual payments made under such schemes. In particular:
    • the Remuneration Committee should consider whether the directors should be eligible for annual bonuses. If so, performance conditions should be relevant, stretching and designed to enhance the business. Upper limits should always be considered. There may be a case for part-payment in shares to be held for a significant period;
    • the Remuneration Committee should consider whether the directors should be eligible for benefits under long-term incentive schemes. Traditional share option schemes should be weighed against other kinds of long-term incentive scheme. Directors should be encouraged to hold their shares for a further period after vesting or exercise subject to the need to finance any costs of acquisition and associated tax liability
    • the Remuneration Committee should propose new long-term incentive schemes (including share option schemes), whether payable in cash or shares in which directors or senior executives will participate which potentially commit shareholders’ funds over more than one year or dilute the equity only on the basis that shareholders will approve the schemes prior to their adoption; and
    • any new long-term incentive schemes which are proposed should preferably replace existing schemes or at least form part of a well-considered overall plan, incorporating existing schemes, which should be approved as a whole by shareholders. The total rewards potentially available should not be excessive;
  • executive share options should never be issued at a discount;
  • the Remuneration Committee should consider the pension consequences and associated costs to the Company of basic salary increases, especially for directors close to retirement; and
  • in general, neither annual bonuses nor benefits in kind should be pensionable

 

8. Promote a corporate culture that is based on ethical values and behaviours
The Board believes that the promotion a corporate culture based on sound ethical values and behaviours is essential to maximise shareholder value.

The Company’s culture is consistent with its objectives, strategy and business model and is consistent with the Company’s objectives, strategy and business model.

To achieve this culture, the Board has established the HSE Committee, referred to in paragraph 4 above, and the Group has adopted various health and safety policies. In addition, CZ has in place an anti-bribery and anti-corruption policy.  The Company has also put in place a Group-wide anti-bribery and anti-corruption policy to supplement CZ’s existing anti-bribery and anti-corruption policy.

 

9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board has overall responsibility for promoting the success of the Group. The executive directors have day-to-day responsibility for the operational management of the Group’s activities. The non-executive directors are responsible for bringing independent and objective judgment to Board decisions.

There is a clear separation of the roles of Chief Executive Officer and Executive Chairman. The Executive Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the non-executive directors are properly briefed on matters. The Executive Chairman has overall responsibility for corporate governance matters in the Group. The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group.

Details of the Company’s corporate governance arrangements, including the committees established by the Board, are provided on this page. The Articles do not contain any matters for which unanimous approval of the directors is required (although any matter approved by written resolution of the Board requires the signature of all members of the Board). The Board considers the Group’s governance framework is appropriate and in line with its plans for growth.

 

10. Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other stakeholders
The Board attaches great importance to providing shareholders and other stakeholders with clear and transparent information on the Company’s activities, strategy and financial position. The Group’s website is regularly updated.

As part of the Company’s AGM process, it releases the results of shareholder votes in a transparent fashion to all of the Company’s stakeholders.

In the event that a significant proportion of votes (i.e. 20% and above) have been cast against a resolution at any general meeting of the Company or AGM, the Company will include an explanation as to the actions it intends to take to understand the reasons behind that vote result, and, where appropriate, any different action it has taken, or will take, as a result.

The Group’s financial reports, and notices of General Meetings of the Company, can be found here: https://www.chaarat.com/investors/reports/

The Group’s Annual Report contains information about the Board as well as a Remuneration Report and statement of directors’ financial interests in the Group.

The Company intends to publish an Audit committee report within its next Annual Report.

All correspondence and queries are dealt with promptly by the Company Secretary. During 2017 Chaarat engaged Blytheweigh to increase the effectiveness of communication with all stakeholders.  Separate public relations advice has been taken in relation to M&A activities in 2018.