Principles of corporate governance

The Board appreciates the value of good corporate governance not only in the areas of accountability and risk management but also as a positive contribution to business prosperity. It believes that corporate governance involves more than a simple "box ticking" approach to establish whether a company has met the requirements of a number of specific rules and regulations. Rather the issue is one of applying corporate governance principles (including those set out in the Corporate Governance Code for Small and Mid-Size Quoted Companies published by the Quoted Companies Alliance) in a sensible and pragmatic fashion having regard to the individual circumstances of a particular company's business. The key objective is to enhance and protect shareholder value.

Board structure

The Board is responsible to shareholders for the proper management of the Group. A statement of directors' responsibilities in respect of the financial statements is set out on in the Annual Report.

The non-executive directors have a particular responsibility to ensure that the strategies proposed by the executive directors are fully considered. All non-executive directors receive a fixed fee for their services.

To enable the Board to discharge its duties, all directors have full and timely access to all relevant information and there is a procedure for all directors, in furtherance of their duties, to take independent professional advice, if necessary, at the expense of the Group. The Board is responsible for overall Group strategy, approval of major capital expenditure projects and consideration of significant financing matters.

The following Committees, which have written terms of reference deal with specific aspects of the Group's affairs:

Remuneration Committee

The Remuneration Committee is responsible for making recommendations to the Board on the Group and Company's framework of executive remuneration and its cost. The Committee determines the contract terms, remuneration and other benefits for each of the executive directors, including performance-related bonus schemes, pension rights and compensation payments. The board itself determines the remuneration of the non-executive directors. The Committee comprises two non-executive directors (David Evans and Malcolm Gillies). It is chaired by Malcolm Gillies.

Nomination Committee

The Nomination Committee is responsible for making recommendations to the Board on the Group and Company's succession planning for both executive and non-executive directors, identifying suitable candidates for key roles, advising on membership of Board Committees, and reviewing the leadership needs of the organisation and taking into account the challenges and opportunities facing the company and the skills and expertise needed on the Board in the future.

The Committee comprises two non-executive directors (David Evans and Malcolm Gillies). It is chaired by Malcolm Gillies and shall meet at least once a year.

Audit and Risk Committee

The Audit Committee comprises two non-executive directors (David Evans and Malcolm Gillies), and is chaired by David Evans.

Its prime tasks are to review the scope of external audit, to receive regular reports from RSM UK Audit LLP, and to review the half yearly and annual accounts before they are presented to the Board, focusing in particular on accounting policies and areas of management judgement and estimation.

The Committee is responsible for monitoring the controls which are in force to ensure the integrity of the information reported to shareholders.

The Committee acts as a forum for discussion of internal control issues and contributes to the Board's review of the effectiveness of the Group's internal control and risk management systems and processes. It advises the Board on the appointment of external auditors and on their remuneration for both audit and non-audit work, and discusses the nature and scope of the audit with the external auditors. It reviews and monitors the independence of the auditors, especially with regard to non-audit work.

The Audit Committee met to consider the reports of the auditors prior to the submission of the annual financial statements to the Board.

Internal control

The directors are responsible for the Group's system of internal control and reviewing its effectiveness. The Board has designed the Group's system of internal control in order to provide the directors with reasonable assurance that its assets are safeguarded, that transactions are authorised and properly recorded and that material errors and irregularities are either prevented or would be detected within a timely period.

However, no system of internal control can eliminate the risk of failure to achieve business objectives or provide absolute assurance against material misstatement or loss.

The key elements of the control system in operation are

  • the Board meets regularly with a formal schedule of matters for decision and has put in place an organisational structure with clear lines of responsibility defined and with appropriate delegation of authority; and
  • the subsidiaries boards also meet regularly with a formal schedule of matters for decision; and
  • there are procedures for planning, approval and monitoring of capital expenditure and information systems for monitoring the Group's financial performance against approved budgets and forecasts.

The Audit Committee receive reports from the external auditors on a regular basis and from executive directors of the Group. The Board receives periodic reports from all Committees.

There are no significant issues disclosed in the report and financial statements for the period ended 31 March 2015 and up to the date of approval of the report and financial statements that have required the Board to deal with any related material internal control issues.

The Board has considered whether the Group's internal controls processes would be significantly enhanced by an internal audit function and has taken the view that, at the Group's current stage of development, this is not a necessity. The Board will continue to review this matter.

The Group is compliant with industry standard quality assurance measures and undergoes regular external audits to ensure that accreditation is maintained.

Relations with shareholders

The Group values its dialogue with both institutional and private investors. Effective two-way communication with the investment community is actively pursued and this encompasses issues such as performance, policy and strategy.

The directors have had meetings with actual and potential investors and they will continue to do so on a regular basis. The Group maintains an informative website containing information likely to be of interest to existing and new investors. In addition, the Group retains the services of financial PR consultants, providing an additional contact point for investors.

There is also an opportunity, at the Company's annual general meeting, for individual shareholders to raise general business matters with the full Board, and notice of the Company's annual general meeting is circulated to all shareholders before such meeting.

Going concern

The directors believe that the use of the going concern basis of accounting is appropriate because they consider that the Group has considerable financial resources, together with a robust sales pipeline and commitments from a number of customers. As such the directors believe that the Group is well placed to manage its business risks successfully. The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

UK City Code on Takeovers and Mergers

As an AIM traded UK registered company, Collagen Solutions Plc is subject to the UK City Code on Takeovers and Mergers legislation.

 

Page last updated: 27 April 2016