Corporate Governance Statement 2020

The Board is responsible for the overall corporate governance of the consolidated entity (AD1 or Group) consisting of AD1 Holdings Limited and its controlled entities. The Board monitors the operational and financial position and performance of AD1 and oversees its business strategy, including approving the strategic goals of the Group and considering and approving a business plan and an annual budget.

The Board is committed to maximising performance, generating appropriate levels of Shareholder value and financial return, and sustaining the growth and success of AD1. In conducting AD1’s business, the Board will seek to ensure that the Grou[ is properly managed to protect and enhance Shareholder interests, and that AD1 and its Directors, officers and personnel operate in an appropriate environment of corporate governance. Accordingly, the Board has created a framework for managing AD1, including adopting relevant internal controls, risk management processes and corporate governance policies and practices which it believes are appropriate for AD1’s business and which are designed to promote the responsible management and conduct of AD1.

The ASX Recommendations articulate a number of core principles and associated recommendations that the ASX Corporate Governance Council believes underlie good corporate governance.

The Board endorses generally the ASX Recommendations and has considered the ASX Recommendations in determining an appropriate system of control and accountability, commensurate with these guidelines, to best fit its business and operations.

The Group will seek to follow the ASX Recommendations and, as required under the ASX Listing Rules, where the Group determines it would be inappropriate to follow the ASX Recommendations because of its circumstances (including as identified below), the Group will provide reasons for not doing so.

The Board intends to regularly review its corporate governance procedures and their appropriateness. The Group’s corporate governance policies and procedures are available on the Group’s website.

 

Principle 1: Lay solid foundations for management and oversight

 

Board Charter

The Board has adopted a written charter to clarify the roles and responsibilities of Board members. This charter addresses:

  • the Board’s composition;
  • the Board’s role and responsibilities;
  • the relationship and interaction between the Board and Management; and
  • the manner in which the Board monitors its own performance.

The role of the Board is to identify the expectations of Shareholders and the ethical and regulatory obligations of the Group.

The Board Charter formalises the functions and responsibilities of the Board. The Board is ultimately responsible for all matters relating to the running of the Group.

The responsibilities of the Board include:

  1. formulation, review and approval of the objectives and strategic direction of the Group;
  2. reviewing, monitoring and approving any related party transaction;
  3. monitoring the financial performance of the Group by reviewing and approving budgets and results;
  4. approving all significant business transactions including acquisitions, divestments and capital expenditure;
  5. ensuring that adequate internal control systems and procedures exist and that compliance with these systems and procedures is maintained;
  6. review of performance and remuneration of Directors;
  7. review of performance and remuneration of the CEO; and
  8. the establishment and maintenance of appropriate corporate governance and ethical standards.

The Board has procedures to allow Directors, in the furtherance of their duties, to seek independent professional advice at the Group’s expense.

Responsibility for the operation and administration of the Group is delegated by the Board to the CEO and the Senior Executives. The Board must ensure that the CEO and Senior Executives are appropriately qualified and experienced to discharge their responsibilities. The performance of the CEO and Senior Executives is assessed annually with reference to agreed milestones.

The Board intends to perform a strategic review of the Group and its business at regular intervals, considering the performance of both itself and individual Directors. This review will be carried out by the Board as a whole, with reference to Group strategy and previously agreed milestones.

Board Appointments

The Group undertakes comprehensive reference checks prior to appointing a Director, or putting that person forward as a candidate to ensure that person is competent, experienced, and would not be impaired in any way from undertaking the duties of director. The Group will provide relevant information to shareholders for their consideration about the attributes of candidates together with whether the Board supports the appointment or re-election.

The terms of the appointment of a Non-Executive Director, Executive Directors and senior executives are agreed upon and set out in writing at the time of appointment.

The Company Secretary

The company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board, including agendas, Board papers and minutes, advising the Board and its Committees (as applicable) on governance matters, monitoring that the Board and Committee policies and procedures are followed, communication with regulatory bodies and the ASX and statutory and other filings.

Diversity

The Group is committed to increasing diversity amongst its employees, not just gender diversity. Our workforce is employed based on the right person for the right job regardless of their gender, age, nationality, race, religious beliefs, cultural background, sexuality or physical ability.

Executive and board positions are filled by the best candidates available without discrimination.  The Group is committed to increasing gender diversity within these positions when practical and appropriate to do so.

The Group has not set any gender specific diversity objectives as it believes that all categories of diversity are equally as important within its organisation.   

The Group’s diversity gender as at 30 June 2020 is detailed below:

  • Women on the board and senior executive positions: 0 of 4 (0%)
  • Women in the organisation: 11 of 23 (48%)

Encourage Enhanced Performance

The performance of the Board, individual Directors and Executive Officers of the Group is monitored and evaluated by the Board. The Board is responsible for conducting evaluations on a regular basis in line with these policy guidelines.

During the year 2020, the Board has conducted evaluations of the management teams and other members of the organisation at the monthly Director meetings.

During the year, all Directors have full access to all AD1’s records and receive Financial and Operational Reports at each Board Meeting.

 

Principle 2: Structure the Board to add value

 

Board Structure

The Board has been formed so that it has an effective mix of personnel who are committed to discharging their responsibilities and duties and being of value to the Group.

The names of the Directors, their independence, qualifications and experience are stated in the Group’s Annual Report along with the term of office held by each.

Having regard to the indicators of independence set out in Principle 2.3 of the ASX Recommendations, the Board considers an independent Director to be a non-executive Director who is not a member of the Group’s management and who is free of any business or other relationship that could materially interfere with or reasonably be perceived to interfere with the independent exercise of their judgment. The Board reviews the independence of each Director in light of interests disclosed to the Board from time to time.  The Board currently consists of four members of which one is considered to meet the independence guidelines set out in the ASX recommendations.

The Board considers that Mr Andrew Henderson is an Independent Director for the purpose of the ASX Recommendations as he is free from any interest, position, association or relationship that could materially interfere with or reasonably be perceived to materially interfere with, the independent exercise of their judgement.

According to the ASX’s recommendations, neither Mr Michael Norster (Non-Executive Director), Mr Bryan Petereit (Managing Director up to 22 October 2019), Mr Prashant Chandra (Managing Director from 22 October 2019), nor Mr Nicholas Smedley (Non-Executive Director from 6 March 2020) is considered as Independent Director by virtue of (i) their recent or current executive roles in the Group or (ii) their involvement in advising the Group on its strategic direction and fund raising.

Induction of New Directors and Ongoing Development

New Directors are issued with a formal Letter of Appointment that sets out the key terms and conditions of their appointment, including Director's duties, rights and responsibilities, the time commitment envisaged, and the Board's expectations regarding involvement with any Committee work.

A new director induction program is in place and Directors are encouraged to engage in professional development activities to develop and maintain the skills and knowledge needed to perform their role as Directors effectively.

 

Principle 3: Act ethically and responsibly

 

Code of Conduct

The Group’s Code of Conduct addresses matters relevant to the Group’s legal and ethical obligations to its stakeholders. The policy outlines its requirements with respect to:

  • relationships;
  • compliance with laws and ethics;
  • conflicts of interest;
  • confidentiality; and
  • use of group assets.

 

Principle 4: Safeguard integrity in corporate reporting

 

Audit and Risk Committee

The Board has established an Audit and Risk Committee, which operates under a Charter approved by the Board.   The Audit and Risk Committee comprises all Board members (other than the Managing Director).  The Board has determined that the most appropriate director to Chair the Audit and Risk Committee is Mr. Norster, who is not an Independent Director.

As members of the Board act on Board Commitees, the size and the current composition of the Group’s Board preclude the Group from complying with all ASX recommndations relating to Board committee composition.

It is the Board’s responsibility to ensure that an effective internal control framework exists within the Group. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-financial considerations such as the benchmarking of operational key performance indicators. The Board has delegated responsibility for establishing and maintaining a framework of internal control and ethical standards to the Audit and Risk Committee.

The Committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports.

The members of the Audit Committee during the year are set out in this statement and in the Directors’ Report.

For details on the number of meetings of the Audit Committee held during the year and the attendees at those meetings, refer to the Directors' report.

CEO and CFO Declarations

The CEO and CFO have provided the Board with a declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

External Auditor

The Group's external auditor attends each annual general meeting and is available to answer any questions with regard to the conduct of the audit and their report.

Prior approval of the Board must be gained for non-audit work to be performed by the external auditor. There are qualitative limits on this non-audit work to ensure that the independence of the auditor is maintained.

There is also a requirement that the audit partner responsible for the audit not perform in that role for more than five years.

 

Principle 5: Making timely and balanced disclosure

 

Disclosure Policy

The Group’s Disclosure Policy has been adopted with a view to ensuring that the Group complies with the continuous disclosure requirements of the Corporations Act and the ASX Listing Rules. The policy highlights the requirements for immediate notification, the procedure for disclosing material information, the persons responsible for disclosing information and for ensuring compliance generally by the Group with its disclosure obligations.

The Chief Executive Officer and the Company Secretary are responsible for communicating with the Australian Securities Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirement in the ASX Listing Rules and overseeing and coordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

The information disclosed will be factual and presented in a clear and balanced way. The Group has prepared and issued to all senior staff a written policy document on this matter and requires strict adherence to this policy.

The Group’s Continuous Disclosure Policy can be viewed on the AD1’s website.

 

Principle 6: Respect the rights of shareholders.

 

Shareholder Communication

The Group is committed to providing current and relevant information to its shareholders.

The Board aims to ensure that Shareholders are informed of all major developments. The shareholder Communication Policy outlines the processes and responsibilities for reports issued to shareholders, ASX announcements, annual general meetings and the maintenance of group specific information on the AD1’s website.

The Group respects the rights of its shareholders and to facilitate the effective exercise of those rights the Group is committed to:

  • communicating effectively with shareholders through releases to the market via ASX, the AD1 website, information mailed to shareholders and the general meetings of the Group;
  • giving shareholders ready access to clear and understandable information about the Group; and
  • making it easy for shareholders to participate in general meetings of the Group.

The Group also makes available a telephone number and email address for shareholders to make enquiries of the Group.  These contact details are available on the “contact us” page of the AD1 website.

Shareholders may elect to, and are encouraged to, receive communications from the Group and its securities registry electronically.

 

Principle 7: Recognise and manage risk

 

Audit and Risk Management Policy

The Audit and Risk Management Policy outlines the composition of the Audit & Risk Committee, its responsibilities (in respect of the financial management, reporting, audit and the risk management systems of the Group), authorities, meeting requirements and reporting procedures.

The Board is committed to the identification, assessment and management of risk throughout the Group’s business activities.

The Audit & Risk Committee operates pursuant to a charter which provides for risk oversight and management within the Group.  This is periodically reviewed and updated.  Management reports risks identified to the Committee on a periodic basis.

The Group’s Risk Management Policy recognises that risk management is an essential element of good corporate governance and fundamental in achieving its strategic and operational objectives. Risk management improves decision making, defines opportunities and mitigates material events that may impact security holder value.

The Board review’s the entity’s risk management framework at least annually to satisfy itself that it continues to be sound.  The Board reviewed the relevant risks to the business throughout the 2020 financial year at each board meeting.

Management reports risks identified to the Board through regular operations reports, and via direct and timely communication to the Board where and when applicable.  During the reporting period, Management has reported to the Board as to the effectiveness of the Group’s management of its material business risks. The Group does not have an internal audit function.

The Group faces risks inherent to its business, including economic risks, which may materially impact the Group’s ability to create or preserve value for security holders over the short-, medium- or long-term. The Group has in place policies and procedures, including a risk management framework (as described in the Group’s Risk Management Policy), which is developed and updated to help manage these risks. The Board does not consider that the Group currently has any material exposure to environmental or social sustainability risks.

The CEO and CFO have given a statement to the Board that the integrity of the financial statements is founded on a sound system of risk management and internal compliance and controls based on the Group's Risk Management policies. 

 

Principle 8: Remunerate fairly and responsibly

 

Remuneration policy

The Remuneration Policy outlines the composition of the Nomination & Remuneration Committee (consisting of the full Board of Directors), its responsibilities (in respect of the structure and composition of the Board and the remuneration policies of the Group), authorities, meeting requirements and reporting procedures.

The Nomination and Remuneration Committee comprises of the full Board of the Group.

The Group is committed to remunerating its Senior Executives in a manner that is market-competitive and consistent with “Best Practice” as well as supporting the interests of Shareholders. Senior Executives may receive a remuneration package based on fixed and variable components (if determined appropriate) and determined by their position and experience. Shares and/or Options may also be granted based on an individual’s performance, with those granted to Directors subject to Shareholder approval.

Non-Executive Directors are paid their fees out of the maximum aggregate amount approved by Shareholders for the remuneration of Non-Executive Directors. Non-Executive Directors do not receive performance-based bonuses and do not participate in Equity Schemes of the Group without prior Shareholder approval.

Key Management Personnel remuneration is disclosed in the Remuneration Report.Key Management Personnel or closely related parties of Key Management Personnel are prohibited from entering into hedge arrangements that would have the effect of limiting the risk exposure relating to their remuneration.