Corporate Governance

The Board recognises its responsibility for the proper management of the Company and is committed to maintaining a high standard of corporate governance. The Directors recognise the importance of sound corporate governance commensurate with the size and nature of the Company and the interests of its Shareholders. The Corporate Governance Code does not apply to companies admitted to trading on AIM and there is no formal alternative for AIM companies. The Quoted Companies Alliance has published the QCA Code, which includes a standard of minimum best practice for AIM companies, and recommendations for reporting corporate governance matters. The Directors take into account the Corporate Governance Code (and the QCA Code), to the extent they consider it appropriate and having regard to the size and resources of the Company.

The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and corporate actions. The Company holds Board meetings at least four times each financial year and at other times as and when required.

ANTI-CORRUPTION AND BRIBERY POLICY

The Company has adopted an anti-corruption and bribery policy which applies to the Directors. It generally sets out their responsibilities in observing and upholding a zero tolerance position on bribery and corruption in all the jurisdictions in which the Company operates as well as providing guidance on how to recognise and deal with bribery and corruption issues and the potential consequences. The Company expects all employees, suppliers, contractors and consultants to conduct their day-to-day business activities in a fair, honest and ethical manner, be aware of and refer to this policy in all of their business activities worldwide and to conduct business on the Company’s behalf in compliance with it.

 

The Company has established a remuneration committee and an audit committee with formally delegated duties and responsibilities.

AUDIT COMMITTEE

The Audit Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Company is properly measured and reported on. It receives and reviews reports from the Company’s management and auditors relating to the interim and annual accounts and the accounting and internal control systems in use throughout the Company. The Audit Committee is responsible for keeping under review the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditors. It also has responsibility for public reporting and internal controls. The Audit Committee also monitors the Company’s compliance with the AIM Rules for Companies and ensures that procedures, resources and controls are in place to ensure the Company’s compliance with the AIM Rules for Companies. The members of the Audit Committee are Nicholas Lee and Amanda van Dyke.

RENUMERATION COMMITTEE

The Remuneration Committee reviews the performance of the Directors and makes recommendations to the Board on matters relating to their remuneration and terms of employment. Under its terms of reference, it meets at least once a year and is responsible for ensuring that the Directors are fairly rewarded (which extends to all aspects of remuneration) for their individual contribution to the overall performance of the Company. The members of the Remuneration Committee are Nicholas Lee and Andrew Nesbitt.

SHARE DEALING CODE

The Company has adopted a share dealing policy which sets out the requirements and procedures for the Board in any of its AIM securities in accordance with the provisions of MAR and of the AIM Rules for Companies.

COMPLIANCE WITH CORPORATE GOVERNANCE CODE

Background

All members of the Board believe strongly in the value and importance of good corporate governance and in accountability to all of Paternoster’s stakeholders. The statement below, explains the approach to governance, and how the Board and its Committees operate.

Changes to the AIM Rules on 30 March 2018 require AIM companies to apply a recognised corporate governance code by 28 September 2018.

The corporate governance framework which the Company operates, including board leadership and effectiveness, board remuneration, and internal control is based upon practices which the Board believes are proportional to the size, risks, complexity and operations of the business and is reflective of the group’s values. Of the two widely recognised formal codes, we have therefore decided to adopt the Quoted Companies Alliance’s (QCA) Corporate Governance Code for small and mid-size quoted companies (revised in April 2018 to meet the new requirements of AIM Rule 26).

The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that the Board judges these to be appropriate in the circumstances, and below we provide an explanation of the approach taken in relation to each.

The following paragraphs set out Paternoster’s compliance with the ten principles of the QCA Code and reasons for any non-compliance.

1.                    Establish a strategy and business model which promotes long-term value for shareholders

The Company is an investing company listed on AIM.  Its principal focus is investing in opportunities in the natural resources sector where it believes that it can make an attractive return for shareholders.  This strategy has recently been further developed by entering into a partnership with RiverFort Global Capital Limited, the specialist arranger of funding solutions, primarily to the natural resources sector.  The Company is now focusing on deploying its capital in investments that provide both income and downside protection.  .  Going forward it is expected that the Company will deliver returns to shareholders through a combination of capital growth and dividend income.

 

2.                    Seek to understand and meet shareholder needs and expectations

 The Board is committed to maintaining good communication and having constructive dialogue with its shareholders. Shareholders have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting (“AGM”).  Investors also have access to current information on the Company though its website, www.paternosterresources.com and via Nicholas Lee, Chairman who is available to answer investor relations enquiries and can be contacted on nicholas.lee@paternosterresources or enquiries@paternosterresources.com.

 

3.              Take into account wider stakeholder and social responsibilities and their implications for long-term success

 The Board recognizes that the long-term success of the Company is reliant upon the efforts of its directors and partners, and upon its contractors, suppliers and regulators.  The Board has put in place a range of processes and systems to ensure that there is close Board oversight and contact with its key resources and relationships.

 

4.                    Embed effective risk management, considering both opportunities and threats, throughout the organisation

It is the responsibility of the Board to ensure investments are managed within acceptable margins of risk. The Company’s investments are monitored on a regular basis which includes reviewing corporate developments financial performance.  The Board also ensures that no one investment represents too great a concentration in the investment portfolio.  In addition to its other roles and responsibilities the Audit and Compliance Committee (as set out in the  composition details in the Corporate Governance section of the Company’s website) is responsible to the Board for ensuring that procedures are, being effectively implemented to identify, evaluate and manage the significant risks faced by the Company.  Within the scope of the annual audit, specific financial risks are evaluated in detail, including in relation to foreign currency, interest rates, liquidity and credit. 

The Directors have established procedures, for the purpose of providing a system of internal control. This includes both the procedures referred to above and the preparation of financial information about the Company on a regular basis.  In addition, there are a range of Company policies that are reviewed at least annually by the Board. These policies cover matters such as share dealing and insider legislation. The Board currently takes the view that an internal audit function is not considered necessary or practical due to the size of the Company and the close day to day control exercised by the Directors.  However, the Board will continue to monitor the need for an internal audit function.

 As noted in the Strategic Report in the Annual Report, the Board regularly reviews operating and strategic risks and considers in such reviews financial and non-financial information including:

 

-          a review of the business at each Board meeting, focusing on any new decisions/risks arising;

-          the performance of investments;

-          selection criteria of new investments; and

-          reports prepared by third parties.

 

5.                    Maintain the Board as a well-functioning, balanced team led by the Chair

The QCA Code requires that the boards of AIM companies have an appropriate balance between executive and non-executive directors of which at least two should be independent. Whilst the board composition does not currently comply with QCA guidelines with regard to a separate CEO and Chairman and two independent non-executive directors, the size and activity of the Company is such that the Company believes that the current board composition represents a balance between costs and resources . However, going forward the Company intends to consider appointing further directors in the short term.

The Board comprises, the Executive Chairman Nicholas Lee, and two Non-Executive Directors, Andrew Nesbitt and Amanda van Dyke. The Board is assisted by Miles Nicholson with respect to financial accounting and Company Secretarial matters. The time commitment formally required by the Company is an overriding principal that each director will devote as much time as is required to carry out the roles and responsibilities that the director has agreed to take on. Biographical details of the current directors are set out within Principle Six below. Executive and non-executive directors are subject to re-election intervals as prescribed in the Company’s Articles of Association. At each Annual General Meeting, one-third of the Directors, who are subject to retirement by rotation shall retire from office. They can then offer themselves for re-election. The letters of appointment of all directors are available for inspection at the Company’s registered office during normal business hours.

The Directors’ receive fees for their services as directors which are approved by the Board, being mindful of the time commitment and responsibilities of their roles and of current market rates for comparable organizations and appointments.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Whilst, the Company does not have a specific CFO, the Executive Chairman is a qualified accountant and therefore is able to provide sufficient financial oversight.  Furthermore, financial information is prepared on a regular basis by the Company’s third party accounting services provider thereby separating preparation from review.

The Board meetings are held on  as regularly as necessary given Company’s levels of activity but with at least six meetings held a year. . It has established an Audit Committee and a Remuneration Committee, particulars of which appear hereafter.  The Board agreed that appointments to the Board are made by the Board as a whole and so has not created a Nominations Committee.

The Board retains full control of the Company with day-to-day operational control delegated to the Executive Chairman and other Directors.  The full Board meets on occasions it considers necessary. 

 

6.                    Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

All three members of the board bring relevant sector experience and public markets experience and one member is a chartered accountant. One director is female and two are male. The Board believes that its blend of relevant experience, skills and personal qualities and capabilities is sufficient to enable it to successfully execute its strategy.

Nicholas Lee, Executive Chairman

Nicholas read Engineering at St. John's College, Cambridge and began his career at Coopers & Lybrand where he qualified as a chartered accountant. He then joined Dresdner Kleinwort where he worked in their corporate finance department advising a range of companies across a number of different sectors. When he left in 2009, he was a Managing Director and Head of Investment Banking for Dresdner Kleinwort's hedge fund/alternative asset manager clients. Since then, Nicholas has been actively involved with AIM companies and is currently a director of a number of AIM listed companies including MX Oil plc, Pires Investments plc and Immotion Group plc.

Andrew Nesbitt, Non-Executive Director

Andrew is a qualified mining engineer and is a consultant to RiverFort Global Capital Limited, the specialist provider of financing to the natural resources sector. He holds a BSc (Eng) Mining and an MBA and has over 20 years of experience in the natural resources sector. He has held various production and technical roles with both De Beers and Goldfields and has carried out a number of feasibility studies across the world with the leading technical consulting group SRK. In addition, Andrew is also an experienced investor, having previously worked as a partner and portfolio manager for Craton Capital Pty Limited, a global precious metals fund with over US$400 million of assets under management.

Amanda van Dyke, Independent Non-Executive Director

Amanda van Dyke is currently a specialist fund manager at South River Asset Management. Amanda has previously worked for Dundee Securities, Ocean Equities and GMP as a mining specialist in equity sales. She has an MBA and an MA in international economics from SDA Bocconi. Amanda is also the chairman of Women in Mining (UK), sponsored by Rio Tinto, Anglo American and Glencore.

 

7.                    Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

Internal evaluation of the Board, its Committees and individual directors is important and will develop as the Company grows in the future.  The expectation is that Board reviews will be undertaken on an annual basis in the form of peer appraisal, questionnaires and discussions to determine the effectiveness and performance in various areas as well as the directors’ continued independence 

 

8.                    Promote a corporate culture that is based on ethical values and behaviours

The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole. Therefore, the importance of sound ethical values and behaviour is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does.  The Board assessment of the culture within the Company at the present time is one where there is respect for all individuals, open dialogue within the Company and a commitment to best practice.

 

9.                    Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board schedule provides for quarterly meetings and, in addition, meets ad-hoc as required.  Notwithstanding the above, the Board and its Committees receive appropriate and timely information prior to each meeting; a formal agenda is produced for each meeting, and Board and Committee papers are distributed several days before meetings take place. Any Director may challenge Company proposals and decisions are taken democratically after discussion. Any Director who feels that any concern remains unresolved after discussion may ask for that concern to be noted in the minutes of the meeting, which are then circulated to all Directors. Any specific actions arising from such meetings are agreed by the Board or relevant Committee and then followed up by the Company’s management.

The Audit and Compliance Committee monitors the integrity of financial statements, oversees risk management and control, monitors the effectiveness of the internal audit function and reviews external auditor independence.  It also ensures that the Company is compliant with its relevant regulatory requirements. Nicholas Lee and Amanda van Dyke are the members of this committee.

The Remuneration Committee reviews the Board’s remuneration on a regular basis.  Nicholas Lee and Andrew Nesbitt are the members of this committee.

Nominations to the Board are decided on by the Board as a whole and therefore the Company does not believe that there is any need for a separate. Nominations Committee.

The Executive Chairman has overall responsibility for corporate governance and in promoting high standards throughout the group. He leads and chairs the Board, ensuring that committees are properly structured and operate with appropriate terms of reference, ensures that performance of individual directors, the board and its committees are reviewed on a regular basis, leads in the development of strategy and setting objectives, and oversees communication between the group and its shareholders.  He is also responsible for implementing and delivering the strategy and operational decisions agreed by the board, making operational and financial decisions required in the day-to-day operation of the group, providing executive leadership to managers, championing the group’s core values and promoting talent management. 

The Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge, scrutinise the performance of management, provide constructive challenge to the executive directors and ensure that the group is operating within the governance and risk framework approved by the Board.

The Company Secretary is responsible for providing clear and timely information flow to the board and its committees and supports the board on matters of corporate governance and risk.

The Board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as the group evolves.

 

10.                Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Company communicates with shareholders through the Annual Report and Accounts, full-year and half-year announcements, the AGM and one-to-one meetings with large existing or potential new shareholders. A range of corporate information (including all Company announcements and presentations) is also available to shareholders, investors and the public on the Company’s corporate website, www.paternosterresources.com.