Corporate Governance

 

The information below is disclosed in accordance with Rule 26 of the AIM Rules for Companies and was last updated on 9 July 2019.

 

Company Information

 

NetScientific plc is incorporated in England and Wales under registered no. 08026888. Its main country of operation is the United Kingdom.

Please click here for a description of the business.

Please click here for a description of the investment strategy.

For a list of the members of the board of directors and their biographies, please visit the Team section.

 

Corporate Governance Statement

 

The Board of Directors of the Company (the “Board”) is responsible for the governance of the Company, governance being the systems and procedures by which the Company is directed and controlled. High standards of Corporate Governance are a key priority of the Board and the Directors believe that they govern the Company in the best interests of the shareholders.

The Board’s view continues to be that sound governance is an essential element of a well-run business and is the responsibility all. We have followed the code published by the Quoted Compliance Alliance (QCA) as our benchmark for governance matters.


My role as chairman of the Board remains separate to, and independent of the Chief Executive and we both have clearly defined responsibilities. I have overall responsibility for ensuring high standards of corporate governance are carried out, but it is also the responsibility of the Board and all members of the Board to ensure that systems and procedures by which the Company is directed and controlled and that they govern the Company in the best interests of the shareholders.


The Board is comprised of three independent non-executive directors (including the Chairman who was independent upon appointment) and one executive director. The Board is satisfied that it has a suitable balance between independence and knowledge of the business to allow it to discharge its duties and responsibilities effectively. The post of Chief Executive and Chief Financial Officer is currently held by a executive director. The Board considers that the size and nature of the Company means that the two roles can be carried out effectively.


The Board maintains a regular dialogue with WH Ireland, the company’s nominated advisor, and obtains other legal and financial advice as necessary to ensure compliance with the AIM Rules and other governance requirements.


We continue to review our approach to governance and how the views of stakeholders are represented in our oversight of the business. To that end, I continue to meet with shareholders as necessary. Feedback on both operational and governance matters from those meetings continue to form part of the Board’s agenda.


Information on the policies and, where appropriate, the performance of the Group is available on the Company’s website.


Sir Richard Sykes

 

 

Board Committees

 

The Board has delegated certain of its functions and responsibilities to the following committees:

  • Audit Committee: Barry W. Wilson (Chair), and Professor Stephen Smith: The audit committee has responsibility for considering all matters relating to financial controls and reporting, internal and external audits, the scope and results of the audits, the independence and objectivity of the auditors and keeping under review the effectiveness of the Company’s internal controls and risk management. For more information, download the audit committee’s terms of reference
  • Remuneration Committee: Sir Richard Sykes (Chair), Barry W. Wilson and Professor Stephen Smith: The Remuneration committee has responsibility for making recommendations to the Board on the Company’s policy for remuneration of senior executives, for reviewing the performance of executive directors and senior management and for determining, within agreed terms of reference, specific remuneration packages for each of the executive directors and members of senior management, including pension rights, any compensation payments and the implementation of executive incentive schemes. For more information, download the remuneration committee’s terms of reference
  • Sir Richard Sykes (Chair), Barry W. Wilson and Professor Stephen Smith: The nomination committee has responsibility for considering the size, structure and composition of the Board of directors, and the retirement and appointment of directors, and will make appropriate recommendations to the Board about these matters. For more information, download the nomination committee’s terms of reference

 

Principles and Approach

 

The corporate governance framework which NetScientific plc has set out, including board leadership and effectiveness, remuneration and internal control, is based upon practices which the Board believes are proportionate to the risks inherent to the size and complexity NetScientific’s operations.

The Board has adopted the principles of the Quoted Companies Alliance Corporate Governance Code (“the QCA Code”) published in April 2018, which is the standard deemed appropriate by independent bodies for small and mid-size quoted companies in the UK,. The extent of compliance with the ten principles that comprise the QCA Code, together with an explanation of any areas of non-compliance, and any steps taken or intended to move towards full compliance, are set out below:

 

QCA PrincipleApplicationCompliance
1. Establish a strategy and business model which promote long-term value for shareholdersThe Board must be able to express a shared view of the Company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the Company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the Company from unnecessary risk and securing its long-term future.The Company’s vision is based on funding and building game changing healthcare technology companies towards value inflection points. Further details of the Company’s business model and strategy can be found in its Annual Report – Business Model section and Risks and Uncertainties section.
2. Seek to understand and meet shareholder needs and expectationsDirectors must develop a good understanding of the needs and expectations of all elements of the Company’s shareholder base.
The Board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.
The Board aims to meet with its shareholders periodically. For those shareholders who cannot meet in person, the Board communicates via various means, including RNS announcements and web-site updates, all of which are published in the Investor section of the Group’s website..
The Board is aware of the need to protect the interests of minority shareholders and balancing these interests with those of any more substantial shareholders.
For further information relating to shareholder relations, see QCA Principle 10 below.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term successLong-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The Board needs to identify the Company’s stakeholders and understand their needs, interests and expectations.
Where matters that relate to the Company’s impact on society, the communities within which it operates or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the Company’s strategy and business model.
Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.
The Board is aware of the impact the business activities have on the communities in which the Group's businesses operate particularly within the medical technology start-up community, research hospitals and patient testing facilities.
The Group's responsibilities to stakeholders including staff, subsidiaries, creditors, patients and wider society are also recognised.
NetScientific engages with its employees informally as well as through periodic formal employee reviews. Employees are updated via regular meetings, emails and internal systems.
NetScientific also maintains continual dialogue with portfolio companies and ensures that the Company is involved in important decisions through having a seat on the Board of our portfolio companies.
4. Embed effective risk management, considering both opportunities and threats, throughout the organisationThe Board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the Company’s supply chain, from key suppliers to end-customers
Setting strategy includes determining the extent of exposure to the identified risks that the Company is able to bear and willing to take (risk tolerance and risk appetite).
The Directors review the principal risks faced by the Company as part of the internal controls process.
The Board maintains a register of risks and publishes an annual summary of the significant risks and uncertainties in the Annual Report.
For information on the Company’s risk management framework, see the following sections of the Company’s Annual Report – Chairman’s and CEO’s Statement, Corporate Governance Report, Risks and Uncertainties and Financial Risk Management.
5. Maintain the Board as a well-functioning, balanced team led by the chairThe Board members have a collective responsibility and legal obligation to promote the interests of the company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the Board.

The Board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

The Board should have an appropriate balance between executive and non-executive directors and should have at least two independent non-executive directors. Independence is a Board judgement.

The Board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.

Directors must commit the time necessary to fulfil their roles.
The Board is comprised of one executive Director, and three non-executive Directors.

The Board has established Audit, Remuneration and Nominations committees, a summary of each of which is set out above.
The roles of the Chairman and Chief Executive Officer are clearly separated. The non-executive directors are considered by the Board to be independent of management and free to exercise independence of judgement.
A description of the roles of the Directors and their time commitments is included in the Company’s Annual Report – Board of Directors section and Corporate Governance section.
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilitiesThe Board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The Board should understand and challenge its own diversity, including gender balance, as part of its composition.

The Board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a Board.

As companies evolve, the mix of skills and experience required on the Board will change, and Board composition will need to evolve to reflect this change.
Directors appointed to the Board are chosen because of their skills and experience they offer. Full biographical details of the Directors are included in the Company’s Annual Report – Board of Directors section and Corporate Governance section.
7. Evaluate Board Performance based on a clear and relevant objectives, seeking continuous improvementThe Board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.

The Board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.

It is healthy for membership of the Board to be periodically refreshed. Succession planning is a vital task for Boards. No member of the Board should become indispensable.
Given the strategy of the Company the Board has clear objectives to deliver shareholder value with the existing cash in the Company and has consequently determined that it is not cost effective to evaluate annually Board performance. Director succession planning is not considered appropriate as there is only one executive director.
8. Promote a corporate culture that is based on ethical values and behavioursThe Board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

The policy set by the Board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.

The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.
The Board continually reviews and promotes a corporate culture based on ethical values and behaviours. The Group adopts several policies including anti-bribery, whistleblowing and a share dealing policy for trading in NetScientific shares. Compliance with all policy is monitored and reported on to the Board.
For further information on how the culture is consistent with the Company’s objectives, strategy and business model in the strategic report and with the description of principal risks and uncertainties, see the Annual Report – Corporate Governance and Risks and Uncertainties sections
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the BoardThe Company should maintain governance structures and processes in line with its corporate culture and appropriate to its:
• Size and complexity; and
• Capacity, appetite and tolerance for risk

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the Company.
Details of the Company's corporate governance arrangements are provided in this section Corporate Governance above. See also the Corporate Governance section on page 29 of the Company’s Annual Report.
10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholdersA healthy dialogue should exist between the Board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the Company.
In particular, appropriate communication and reporting structures should exist between the Board and all constituent parts of its shareholder base. This will assist:
• The communication of shareholders’ views to the Board; and
• The shareholders’ understanding of the unique circumstances and constraints faced by the Company.
The Board attaches great importance to providing shareholders with clear and transparent information on the Group's activities, strategy and financial position. Details of all shareholder communications are provided on the Group's website.
The executive members of the Board hold regular meetings with significant institutional shareholders and the Board regards the annual general meeting as a good opportunity to communicate directly with shareholders via an open question and answer session.
The Company lists contact details on its website and on all announcements released via RNS, should shareholders wish to communicate with the Board.
The resolutions put to a vote at the next and past AGMs can be found in the Investors section of this website. The results of votes at AGMs are published via RNS.

 

The Company’s key advisers are set out here:

Nominated Adviser and Broker: WH Ireland Limited 24 Martin Lane London EC4R 0DR
Solicitors: UK:     Ashurst LLP  Broadwalk House  5 Appold Street London EC2A 2HA

 

USA:  DLA Piper LLP  One Liberty Place  1650 Market Street Suite 4900 Philadelphia  Pennsylvania 19103-7300  USA

Independent Auditors: BDO LLP Arcadia House Maritime Walk Ocean Village Southampton Hampshire SO14 3TL
Registrar: Link Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU
Public Relations: MO PR ADVISORY, www.mopradvisory.com

 

Securities Information

The Company’s ordinary shares are admitted to trading on AIM. There are no other exchanges or trading platforms on which the Company has applied or agreed to have any of its securities (including its AIM securities) admitted or traded.

There are no restrictions on the transfer of the Company’s ordinary shares.

The Company is subject to the UK City Code on Takeovers and Mergers.

As at 9 July 2019, the Company’s issued share capital consists of 78,561,866 ordinary shares of 5p and the following interests of shareholders in excess of 3 per cent have been notified to the Company:

 

Shareholder Number of Shares Percentage
Woodford Investment Management 28,787,573 36.64%
AB Group Limited 23,549,386 29.98%
Cyrus Holdings Limited 9,910,453 12.61%
Jupiter Asset Management Limited 7,999,614 10.18%

 

A total of 80% of the issued share capital is not in public hands as defined for Rule 26 purposes being directors, management and those shareholders holding more than 10% of the issued share capital.

There are no shares held in Treasury

 

Documents

 

 

Corporate Governance - NetScientific