Corporate Governance Statement
The Kibo board (the “Board”) aims to conform to its statutory responsibilities and industry good practise in relation to corporate governance of Kibo Energy PLC (the “Company”) and its subsidiaries (together with Kibo, the “Group”). The Board has adopted the latest version of the QCA Corporate Governance Code (2018) (“QCA Code”) and strives to follow its ten principles (“the Principles”) with due regard to the stage of development of the Company. The Company also seeks guidance from its Nomad on recommended best corporate governance practise for AIM companies.
In addition, my role as non-executive chairman of the Board, I am also the chairman of the Company’s Governance Committee and retain primary responsibility for the design, implementation, articulation, review and updates of the Company’s corporate governance policy. The Governance Committee meets at least once a year and makes recommendations to the Board to ensure the Company’s corporate governance policy remains aligned with the Principles as it grows.
The following are the principal ways in which the Company meets these requirements.
1. Establish a strategy and business model which promotes long-term value for shareholders
The Company has established a strategy and business model which it believes will promote long term value for shareholders. These have recently been updated following the Company’s decision to change its business model from being predominantly a mining exploration company operating exclusively on Tanzania to be an energy development company with energy projects in different countries but primarily focussed on sub-Sharan Africa. This updated business model presents new challenges to the Group across financial, technical and operational areas as its project portfolio expands across different jurisdictions. In response to these challenges, the Company is updating its corporate governance policies and procedures to support recently completed re-assignment of director duties and appointment of new management and staff. The Company believes its new business model will deliver long term value to shareholders by providing diverse exposure to the growing demand-led energy markets in sub-Saharan Africa. It further believes that this business model is appropriate to protect the Company from unnecessary risk and secure its long-term future.
2. Seek to understand and meet shareholder needs and expectations
The Company seeks to understand and meet shareholder needs and expectations by engaging with them across a range of platforms including regular investor presentations, Q&A forums, investor relations company services, social media sites and at its Annual General Meeting where the Board encourages the active participation of shareholders on important and relevant matters, including the Group’s strategy, financial performance, and operational and commercial developments. The Company provides phone numbers on its RNS and SENS announcements where shareholders can contact the appropriate senior Company representatives or advisors directly with their queries together with a dedicated email address for shareholder feedback. The Board receives regular shareholder feedback and provides prompt responses through all these communication channels and therefor believes it adequately meets its shareholders expectations in this regard.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Company firmly believes that the energy development projects that form the basis of its business model will substantially benefit the countries and regions in which it operates. It fosters a culture of open communication with all stakeholders who may be impacted by its activities. Its strategy and business model are designed to minimise any negative impact of its activities on the communities where it operates and on the environment.
The Company’s project areas until recently have been exclusively in Tanzania where it maintains a permanent administrative and operations office in Dar es Salaam and regional operations offices when field operations are in progress. Staff at these offices provide a first point of contact for stakeholders to receive information on the Company’s activities and provide feedback on any issues or concerns they may have. The Company has appointed dedicated liaison officers to communicate with stakeholder groups e.g. local & regional government officials, central government departments, community groups and local suppliers to keep them continuously updated on project activities and plans. Management conveys to the Board in a timely manner through formal reporting channels and at operational review meetings any substantive concerns of stakeholders and where necessary, the Board mandates appropriate action be taken to address these concerns.
In support of the Company’s social responsibility towards the local communities among which it works, it has implemented a Corporate Social Responsibility Plan (“CSR Plan”). The first phase of this plan is already completed through the building and refurbishment of school buildings in two local villages close to where its flagship MCPP project is in southern Tanzania. Successive phases of this CSR Plan will be implemented in conjunction with the construction and commissioning of the MCPP that will in addition to education include support of health care, employment opportunities, local business development and public infrastructure development.
The Company has now commenced replicating its stakeholder liaison model and CSR commitment in Tanzania on its other African projects in Botswana and Mozambique.
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board has considered mechanisms by which the business and the financial risks facing the Group are managed and reported to the Board. The principal business and financial risks have been identified and control procedures implemented. The Board acknowledges its responsibility for reviewing the effectiveness of the systems that are in place to manage risk and to provide reasonable but not absolute assurance on the safeguarding of the Group’s assets against misstatement or loss.
The major risks facing the Company are clearly identified in its Annual Report and Accounts (Directors’ Report). The Company relies on internal and external assessments of its systems for managing risk and it believes the continuous implementation of recommendations from these reviews provide the Board with adequate assurance that its systems for managing risks are effective.
The Company’s Audit Committee is the primary body that is tasked with identifying, assessing and managing risk. The principal risks identified cross all aspects of the Company’s operation and include, inter alia, risks associated with foreign exchange, strategy, funding, staffing, political stability and commercial activities. The Audit Committee regularly reviews reports from Management across all financial and operational activities enabling it to identify and assess risks and make recommendations to the Board where appropriate for mitigation. Similarly, it also informs the Board where it identifies business opportunities that may be beneficial to the Company. The Audit Committee’s other core function is to review and, if in order, recommend the annual financial statement to the Board for approval. Where the Company’s auditors have identified risks or any shortcomings in accounting procedures, the Audit Committee brings these to the Board’s attention for mitigation and/or rectification.
To better assess and manage risks in line with the Company’s recent change in its strategy and business development model, it has commenced compiling a Risk Register which will be updated quarterly. Henceforth, this document will be the cornerstone of the its Risk Management Policy and will be the key tool in monitoring the effectiveness of remedial action proposed by the Audit Committee on an on-going basis.
5. Maintain the board as a well-functioning, balanced team led by the chair
The Board regularly meets to monitor and approve the strategy and business model for the Group.
The Board comprises a non-executive chairman, two executive directors and three non-executive directors. Two of the non-executive directors, including the Chairman are considered by the Board to be independent directors. The Board considers non-executive directors to be independent when they are independent of Management and free from any business or relationship that would materially interfere with the exercise of independent judgment as a Board member.
The executive directors comprise the Company’s CEO who dedicates 100% of his time to the Group and one other director who dedicates 50% of his time. The non-executive directors dedicate as much time as is required for them to fully carry out their duties for the Group including overseeing corporate governance arrangements and serving on board committees. One of the non-executive directors, Noel O’Keeffe, also serves as the Company secretary. The functions and composition of the various Board sub-committees are outlined in Section 9.
The Board alone is responsible for:
• Formulating, reviewing and approving the Group’s budgets and major items of capital expenditure;
• Formulating the Group’s major policies and strategy;
• Monitoring and reviewing the Group’s performance and achievement of goals;
• Approval of Financial Statements and Annual Report;
• Major contracts and transactions;
• Board and management structure and appointments (the whole Board acts as the Nominations Committee);
• Effectiveness and integrity of internal control and management information systems; and
• Overall corporate governance of the Group.
An agenda and all supporting documentation is circulated to the directors before each Board meeting. Open and timely access to all information is provided to directors to enable them to bring independent judgement on issues affecting the Group and facilitate them in discharging their duties. The Board met 14 times during the last financial year to 31 December 2017 with no individual director absent for more than one board meeting during this period.
In accordance with the Articles of Association of the Company, one third of the Board is required to retire each year at the Company’s AGM but directors so resigning can put their name forward for re-election.
The Board sets the Group’s strategy and monitors its implementation through management and financial performance reviews. It also works to ensure that adequate resources are available to implement strategy in a timely manner.
The Board is accountable to the shareholders for delivery of sustained value growth. In order to support its duties and responsibilities the Board implements control procedures, such as quarterly operational review meetings, that assess and manage risk and ensure robust financial and operational management within the Group.
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
The Board considers that there is an appropriate balance between the executives and non-executive directors and that no individual or small group dominates the Board’s decision making. The Board’s members have a wide range of expertise and experience which the Board considers to be conducive to the effective leadership of the Group and to the optimisation of shareholder value.
The Board members’ diverse range of skills and experience span technical, financial, operational and legal areas relevant to the management of the Company. Summary biographies of each Board member are shown on the Company’s website. Directors keep their skill sets up to date by attendance at, and participation in, various events organised by their respective industry sectors and/or by participation in continuing professional development courses.
As the Company evolves, the Board composition will be reviewed to ensure appropriate expertise is always in place to support its business activities. It has recently undertaken a re-organisation of director responsibilities to better align skill sets with its new strategy and business model. While the Board has not yet adopted any formal policy on gender balance, ethnicity or age group it is committed to fair and equal opportunity and fostering diversity subject to ensuring appointees are appropriately qualified and experienced for their roles. The Company acknowledges that as it expands its operations across different countries, it will be to its benefit to align its Board composition to reflect balance in the ethnicity and gender of its members.
The Company retains the services of independent advisors across, financial, legal, investor relations, technical/engineering and IT fields that are always available to the Board These advisors provide support and guidance to the Board and complement the Company’s internal expertise.
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The performance of the Board and Management of the Company is evaluated on an on-going basis by the Remuneration Committee (“Remcom”). The results of these evaluations are reflected in changes in the executive remuneration levels recommended by the Remcom from time to time and in awards under the Company’s Share Option and Management Incentive Schemes where it considers such awards are warranted. Remuneration levels are benchmarked against peer companies while performance awards are based on meeting pre-defined milestones such as successful project acquisitions or completion of significant project development phases. As the Company grows, the Board will develop more comprehensive human resource policies to provide both internal and external performance evaluations of its Board, senior management and staff including the provision for upskilling where necessary and to provide for Board member succession planning.
The Board considers that the corporate governance policies it has currently in place for Board performance reviews is commensurate with the size and development stage of the Company.
8. Promote a corporate culture that is based on ethical values and behaviours
The Company operates across several countries including Ireland, UK, Cyprus, South Africa, Tanzania, Botswana and Mozambique. In line with its international reach the Company recognises the cultural diversity both internally and among its business partners, service providers and other stakeholders. The Board promotes corporate values that reflect its commitment to provide equal opportunity to all subject to its core principles that demand the adoption of ethical values and conduct at all times. In this regard it has developed robust whistle-blower and anti-corruption policies that Board, management, staff and service providers have signed up to. The Company’s Anti-Corruption policy requires all Group personnel to declare conflicts of interest in any dealings on behalf of the Group and to excuse themselves from any negotiation on behalf of, or with, the Company in such circumstances.
While the Company has not adopted a formal Code of Conduct at board level, management and staff behaviour is governed by the terms of individual employment (and supplier) contracts whose terms reflect the ethics and values of the Group. Together with other Company policies such as its whistle-blower and anti-corruption policies noted above, these establish a high standard of values and behaviour to which all personnel working for, or on behalf, of the Group are expected to adhere to. The Board monitors compliance with its ethical values through feedback from Management and has disciplinary procedures in place to take corrective action where required.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The Company has a developed and adopted a variety of plans, policies, and procedures as part of its corporate governance framework and to ensure that the Company is run in an efficient, effective and responsible manner. Key policies include:
• Board Governance Plan
The Board Governance Plan is integrated into a Corporate Procedures Manual which sets out, corporate governance structure and includes the terms of reference for the various Board Committees. In addition, the Corporate Procedures Manual outlines:
o High level financial controls;
o Information system environment;
o Forecasting & budget procedures
o Treasury operations
o Accounting policies
o Financial accounting procedures; and
o Management reporting framework
• Securities Trading/Share Dealing Policy
The Company’s Share Dealing Code sets out the Company’s policy, procedures and restrictions for directors, management, staff and insiders in dealings in the Company’s shares. It is compliant with AIM and FCA Rules and with the Company’s obligations under the Market Abuse Directive (2016).
• Continuous Disclosure and Market Communications Policy
The Company’s policy is governed by the AIM Rules and the JSE Rules and all applicable national financial regulation in the UK and South Africa.
• Risk Management Policy
The Company is currently developing a Risk Register which will be reviewed on a quarterly basis. The Risk Register will review the risks around each aspect of management and operations and will be scored by each executive member of the Board in terms of probability and impact to derive an overall risk profile for the Company. The Risk Register will also record the steps that are been taking to mitigate the major risks identified.
• Health and Safety Policy & Procedures
All operating companies within the Group have their own Health and Safety Policy and Procedures (“HSE Policy”) tailored to the particular jurisdiction and environment in which they are active. The Board retains overall responsibility to ensure appropriate HSE Policy is in place at all times and reviews this at its operations review meetings.
• Environmental Policy
Kibo is committed to high standards of environmental protection across our business. Our goal is to protect people, minimize harm to the environment, integrate biodiversity considerations and reduce disruption to our neighbouring communities. We seek to achieve continuous improvement in our environmental protection performance.
• Anti-corruption and bribery Policy
The Company’s Anti-corruption and bribery policy is in place to ensure that all directors, management, staff and suppliers to the Group conduct themselves in an honest and ethical manner at all times. It meets the requirements of the UK Bribery Act 2010.
• Whistleblowing Policy
The Company’s Whistleblowing Policy is informed by Whistleblowing Arrangements Code of Practice issued by the British Standards Institute and Public Concern at Work. Its objectives are:
o To encourage Group personnel to report suspected wrongdoing as soon as possible,
in the knowledge that their concerns will be taken seriously and investigated
as appropriate, and that their confidentiality will be respected;
o To provide Group personnel with guidance as to how to raise those concerns; and
o To reassure Group personnel that they should be able to raise genuine concerns in
good faith without fear of reprisals, even if they turn out to be mistaken.
• IT, communications and systems procedures;
IT, communications and systems procedures are included in the Company’s Corporate Procedures Manual and are designed to ensure a robust, upgradeable and secure IT system, with appropriate back-up to ensure any system failure will not be catastrophic for the continued operations of the Company.
The Chairman is responsible for providing leadership to the Board while the day-to-day management of the Group is delegated to the Executive Committee lead by the CEO. The CEO is primarily responsible for the Group’s business performance and manages the Group in accordance with the strategies and business plan. The independent Non-Executive Directors are responsible for providing independent advice and are considered by the Board to be independent of Management.
The Board/senior officer committees are the Governance Committee, Executive Committee Remuneration Committee Audit Committee and the Nomination Committee.
Governance Committee: Comprises three non-executive directors. The Committee meets at least once a year to review the Company’s ongoing compliance with the QCA Code and to make recommendations to the Board where it judges that there is a requirement to update, replace or expand corporate governance policies and procedures in line with current activities. The Governance Committee is chaired by Christian Schaffalitzky and the other members are Noel O’Keeffe and Wenzel Kerremans.
Executive Committee: Comprises two executive directors and two senior Company officers: The Committee meets at least once a month. The Executive Committee is the core senior management team in the Company responsible for day to day management and operations. Its terms of reference are defined in the Company’s Corporate Procedures Manual. The Governance Committee is chaired by Louis Coetzee and the other members are Tinus Maree, Louis Scheepers (COO) and Pieter Krugel (CFO).
Remuneration Committee: Comprises three non-executive directors. The Committee meets at least once a year to determine Company policy on senior executive remuneration, to make detailed recommendations to the Board regarding the remuneration packages of the executive directors and to consider awards under the Company’s Share Option and Management Incentive Award schemes. The Chief Executive Officer is consulted on remuneration packages and policy but does not attend discussions regarding his own package. The remuneration and terms and conditions of the appointment of non-executive directors are determined by the Board. The Remuneration Committee is chaired by Christian Schaffalitzky with the other members being Andrew Lianos and Wenzel Kerremans.
Audit Committee: Comprises three non-executive directors. The Committee meets at least twice a year to consider the scope of the annual audit and the interim financial statements and to assess the effectiveness of the Group’s system of internal financial controls and risk management systems. It reviews the results of the external audit, its cost effectiveness and the objectives of the auditor. Given the size of the Group, the Audit Committee considers that an internal audit function is not currently justified. The Audit Committee is chaired by Andrew Lianos, CA, ACMA, CIA. who serves as the Company’s non-executive Financial Director. The other members of the Audit Committee are Christian Schaffalitzky and Wenzel Kerremans.
Nomination Committee: Comprises the entire Board. The principal objectives of the Committee are to monitor and review the Board structure, size, composition and the mix of skills and expertise to ensure that these are in line with the Group’s strategies and to consider potential candidates for directorship. The selection criteria for selection and recruitment of the potential candidates for directorship shall include qualifications of the individual, experience, knowledge and achievements, credibility and background and ability of the candidates to contribute effectively to the Board and Group. The Nomination Committee also oversees succession planning of directors, taking into account the relative experience of each Board member in relation to the Company’s requirements given its stage of development and strategies, with the goal of having in place an adequate and sufficiently experienced board at all times.
The Company’s Corporate Procedures Manual includes a schedule of matters that are reserved as the sole responsibility of the Board. These matters, in addition to setting strategy for the Company, include, but are not limited to, Board nominations and appointments, approval of acquisitions and disposals and approval of annual budgets and financings.
10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Board recognises the importance of establishing and maintaining good relationship with Kibo’s shareholders and other stakeholders. The Board is responsible for ensuring satisfactory dialogue with shareholders throughout the year. In order to establish and maintain good relationships with the shareholders of Kibo, and to maintain transparency and accountability to its shareholders, Kibo uses various means to continuously communicate and disseminate timely information to shareholders and stakeholders:
• market announcements on regulatory platforms (RNS and SENS);
• annual and interim reports;
• annual general meetings of shareholders;
• investor presentations and briefings
• Q&A forums and social media sites
• website at www.kibo.energy; and
• via investor relations professionals at St. Brides Partners Ltd (contact person: Hugo de Salis / Gaby Jenner, Tel: +44 (0) 207236 1177)
The Company believes that its governance structures and practises as detailed above comply with the expectations of the QCA Code in all material respects. It also acknowledges its obligations under the Code to continually monitor and further develop the scope and suitability of its governance structures in line with its growth. During 2017/2018, the Company has undertaken a change in strategy from being dominantly a mineral exploration company based in Tanzania to be an energy development company with a project portfolio spanning Tanzania, Botswana, Mozambique and the UK. In line with these developments the Company has implemented key governance changes including a re-assignment of Board responsibilities and the recruitment of a Chief Financial Officer to assist the Finance Director in managing the increased financial responsibilities within the Group. The Company continues to update its Plans, Policies and Procedures itemised at 9 above to ensure it remains in compliance with the QCA Code.
Code on Takeover and Mergers
The Company is incorporated in Ireland, has its head office and place of central management in Ireland and is resident in Ireland. Accordingly, transactions in shares of the Company are not subject to the provisions of the UK Code on Takeover and Mergers (“City Code”). There are, however, provisions under Irish law and regulation applicable to the Company that are similar or analogous to certain provisions of the City Code under Irish Takeover Rules, in relation to mandatory bids, squeeze outs and buy outs. There are also “substantial acquisition rules” and Irish merger control legislation which the Company is subject to.