Corporate Governance Statement - October 2011
The Australian Securities Exchange (ASX) Corporate Governance Council has published Corporate Governance Principles and Recommendations (2nd Edition) (Recommendations). Entities listed on the ASX are required to disclose the extent to which they have followed the ASX Recommendations and to identify any recommendations that have not been followed, and the reasons for not following them. The section below includes details on the Company's corporate governance arrangements and the Company's compliance with the recommendations. Orpheus Energy has chosen not to early adopt the 2010 changes to the Recommendations, and will report in its annual report, against the revised Recommendations for the financial year ended 30 June 2012.
Principle 1: Lay Solid Foundations for Management and Oversight
Role of the Board
The Board of Directors of Orpheus Energy is collectively experienced in coal and mineral exploration, mine development, finance and the management of listed public companies, and the requirements of, and compliance with, the law and ASX and ASIC rules and policies.
As the Company will use contractors for its exploration and mine development work, the Board generally will be responsible for over-seeing the work of those contractors and their performance against contract. Four of the Directors, including the Company's Chief Executive Officer, are qualified and experienced in mineral exploration and mine development.
The Board approves and monitors corporate strategy and performance objectives. Under the oversight of the Board's Audit and Risk Committee, the Board monitors systems of risk management, compliance and financial reporting. The Board is responsible for approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures of Company assets.
Responsibility for the day-to-day management of the Company is delegated by the Board to the Executive Chairman, who is accountable to the Board. The Executive Chairman manages the Company in accordance with the strategy, plans and policies approved by the Board. The Board has determined that the managing director is appropriately qualified and experienced to discharge the required responsibilities. A performance review was conducted for senior executives in accordance with the process disclosed in the remuneration report.
Principle 2: Strucutre the Board to Add Value
Composition of the Board
As at 30 June the Board comprised 2 executive directors and 1 non-executive director. Mr David Smith was appointed to the board on 18 August 2011 as an additional executive director.
The Board supports the appointment of directors who bring a wide range of business and professional skills and experience to the Company. Directors are appointed in accordance with the constitution of Orpheus Energy and are appointed for a period of three years or until the third annual general meeting following his or her appointment (whichever is longer). The board currently has no formal procedure for evaluation of its board, committee and directors. The board considers that it is functioning effectively given its composition and a formal procedure is not required at this present time.
The Company has elected to depart from the adoption of the ASX Corporate Governance Guidelines in that it will not be forming a nomination committee or a remuneration committee nor will it appoint independent directors for the reason that these requirements are more appropriate for larger public companies and would unduly add to the cost structure of the Company. The Company will review its position on these requirements bi-annually. The board currently evaluates periodically the need for additional directors, the re-election of existing directors and where required appoints additional directors.
The Company currently only considers one of its directors independent out of 4 directors, Mr Anthony King, which does not comply with Recommendation 2.1, in that the majority of the board should be independent directors. The Board is satisfied however that the Board has an effective composition, size and commitment to adequately discharge its responsibilities and duties.
Principle 3: Actively Promote Ethical and Responsible Decision Making
Code of Conduct
The Company does not yet have a formal Code of Conduct setting out its core values. In general though, the Company requires that each director and officer of the Company must comply with all laws and regulations. This includes understanding the laws and regulations relevant to their work and complying with the legal requirements of the jurisdiction in which the Company operates.
Contractors and others employed by the Company should not engage in activities or hold or trade assets that involve, or could appear to involve, a conflict between their personal interests and the interests of the Company. The practices of the Board are aimed at promoting ethical and responsible decision making.
The Board strives for good corporate governance and industry best practice. It specifically requires directors and employees to:
- avoid situations which may give rise to a conflict of interest;
- avoid situations where they may gain any benefit which competes with Company's business;
- read and confirm that they understand the Company's policies;
- comply with laws and regulations;
- properly use Company's assets for legitimate business purposes; and
- maintain confidentiality in both Company's business and the information of its clients and shareholders.
Conflicts of Interest
The Board is committed to good corporate governance and aims for continuous improvement in these practices. It embraces high ethical standards and requires both personal and corporate responsibility. Directors, officers and employees are required to safeguard the integrity of the Company and to act in the best interests of its stakeholders.
Each director is required to disclose any interest which might create a potential conflict of interest with his or her duties as a director or which might affect their independence.
There must be no conflict, or perception of a conflict, between the interests of any Company director, officer or employee and the responsibility of that person to the stakeholders. All directors, officers and employees may never improperly use their position for personal or private gain to themselves, a family member, or other associated person. Where a potential conflict exists, this should be disclosed to the Chairman prior to any dealings taking place.
Trading Policy
The Company's trading policy (available by clicking on the link at the end of this page), ensures that unpublished price sensitive information about the Company is not used in an unlawful manner.
The main provisions of this policy are:
- compliance with the specific requirements of the Corporations Act 2001;
- prohibition of short term trading by directors, officers, employees and contractors in the Company's securities;
- prior notification by directors, officers, employees and contractors of their intention to deal in the Company's securities.
Trading is not permitted (unless exception circumstances) in the following periods:
- the period commencing two weeks prior to the release of the Company's quarterly, half yearly and full year financial reports, results to ASX and ending 24 hours after such release;
- two weeks before lodgement and during the period that a disclosure document is open for applications except to the extent that a Designated Officer is applying for securities pursuant to the document; such other periods advised from time to time by the Chairman and/or Company Secretary (such as prior to the announcement to ASX of a significant matter or event); and
- the Company's Share trading policy prohibits the entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity based remuneration scheme.
Principle 4: Safeguard Integrity in Financial Reporting
Audit & Risk Committee
Purpose
The Audit & Risk Committee plays a key role in assisting the Board with its responsibilities relating to accounting, internal control systems, reporting practices and risk management, and ensuring the independence of the company auditor. The terms of reference for the committee incorporates policies and procedures to ensure an effective focus from an independent perspective. The Audit & Risk Committee oversees and appraises the quality of the audits conducted by the auditors and emphasises areas where the Committee believes special attention is required. The external auditors are Hall Chadwick. Hall Chadwick's appointment will be reviewed periodically in line with industry best practice. The Board believes in the ongoing assessment of our audit arrangements and will comply with any regulatory requirements to rotate the Company's external audit partner. The Audit & Risk Committee also reviews the effectiveness of administrative, operating and accounting controls.
Composition
The composition of the Audit & Risk Committee is determined in accordance with the principle that it is desirable that only non executive directors may be members of the Committee. There must be at least 2 directors on the Committee. Other suitable persons may also be appointed to the committee by the directors. The committee currently does not comply with Recommendation 4.2 in that it only comprises two members (Wayne Mitchell and Anthony King) and the Chairman of the Committee is also Chairman of the board. The board currently considers this practice to be adequate, however periodically reviews its composition and the need to appoint additional directors to the Committee.
Terms of Reference
The Audit Committee's terms of reference are available by clicking on the link at the end of this page.
Principle 5: Making Timely and Balanced Disclosure
Continuous Disclosure Policy
ASX defines continuous disclosure in its Listing Rules as the timely advising of information to keep the market informed of events and developments as they occur. The Listing Rules and the Corporations Act require that a listed company disclose to the market matters which a reasonable person would expect to have a material effect on the price or value of the company's securities. A reasonable person is taken to expect information to have a material effect on the price or value of securities if it would, or would be likely to, influence persons who commonly invest in securities in deciding whether or not to subscribe for, buy or sell the securities.
The Company's Continuous Disclosure Policy is designed to meet market best practice, ensuring that all interested parties have an equal opportunity to obtain information which is issued by the Company.
The procedures which have been developed to comply with these rules include immediate reporting of any matter which could potentially have a material effect, via established reporting lines to the Company Secretary.
The Company Secretary is responsible for monitoring information which could be price sensitive, liaising with the CEO and the Chairman to make an initial assessment, and escalating to the Board for disclosure of such information where practicable. The CEO monitors daily activity to ascertain what matters should be considered for disclosure and as soon as a matter is appropriate for disclosure the CEO must immediately notify the Company Secretary. It is noted that the Company must not delay giving this information to the ASX. Therefore, if the Board is not immediately available, the Company Secretary will lodge such information after consultation with the CEO or the Chairman.
Price-sensitive information will be disclosed, in the first instance, to the ASX and disclosures to the market will then be placed on the Company's website. Material information must not be selectively disclosed (i.e. to analysts, the media or shareholders) prior to being announced to the ASX, and all media releases must be referred to the Company Secretary
Principle 6: Respect the Rights of Shareholders
Shareholder Communications Policy
The Board has adopted a communication strategy to promote effective communication with shareholders and encourage effective participation at general meetings. In accordance with our regulatory obligations, certain periodic reporting will also be made to shareholders, including the Annual Report. Our aim is for informed shareholder participation.
The Company maintains a web site and endeavours to publish on the web site all relevant announcements made to the market. In accordance with ASX Principle 6.2, the external auditors are requested to attend the annual general meeting and are available to answer shareholder questions about the conduct of the audit and preparation of the auditor's report.
Principle 7: Recognise and Manage Risk
Risk Management
The Board takes a proactive approach to the Company's risk management and internal compliance and control systems. The Audit & Risk Committee oversee and manage material business risks, with the entire Board a crucial part of this entire process.
The Board is responsible for ensuring that risks, and also opportunities are identified on a timely basis and that the Company's objectives and activities are aligned with the risks and opportunities identified by the Board. The Executive Chairman and the Chief Financial Officer are responsible for establishing, maintaining and reviewing the Company's risk management and internal control system. The Executive Chairman and Chief Financial Officer must provide quarterly reports to the Board declaring that they have evaluated the effectiveness of the internal controls and procedures, and that they have reasonable assurance that all material information is known for filing purposes, the internal control of financial reporting is reliable for purposes of external reporting in accordance with the relevant accounting standards, and that no changes in the controls have occurred that may materially affect their effectiveness.
The Executive Chairman and the Chief Financial Officer have declared in writing to the Board, as required under section 295A of the Corporations Act 2001 that the financial reporting, risk management and associated compliance and controls have been assessed and found to be operating efficiently and effectively in all material respects. All risk assessments cover the whole financial period and the period up to the signing of the annual financial report for all material operations in the Company.
Principle 8: Remunerate Fairly and Responsibly
Increases in remuneration of directors is determined by shareholders and the Board determines individual directors' remuneration. The Company has not formed a Nominations Committee because of the Company's size which is small enough for the whole Board to efficiently address the issue of board competencies.
Non-Executive Director Remuneration
Remuneration of non-executive Directors is determined by the Board with reference to comparable industry levels and, specifically for Directors' fees, within the maximum amount approved by shareholders. Recommendation 8.2 contains guidelines that non-executive directors should not receive options or bonus payments. The Company awards options or bonuses to non-executive Directors if it considers this to be a reasonable and appropriate method of assisting in attracting and retaining suitably skilled Board members. Accordingly the company is not in compliance with ASX Recommendation 8.2. There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive Directors.