Corporate Governance

This information on Corporate Governance has been extracted from the 2010 Annual Report published on 28 April 2011.

The company has adopted the Guidance for Smaller Quoted Companies (SQC) published by the Quoted Companies Alliance. The Alliance provides guidance to SQC and their guidance covers the implementation of The UK Corporate Governance Code for SQC. The paragraphs below set out how the company has applied this guidance during the year. The company has complied with the Quoted Companies Alliance guidance throughout the year, except insofar that non-executive directors are not appointed for fixed terms (section A.7.2).

Principals of corporate governance
The group’s 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. The Board endeavours to apply corporate governance principals in a sensible and pragmatic fashion having regard to the circumstances of the group’s business. The key objective is to enhance and protect shareholder value.

Board structure
During the year the Board comprised the executive chairman, the managing director, one other executive director (appointed on 1 June 2010), and two non-executive directors. Their details appear on page 16. The Board is responsible to shareholders for the proper management of the group. A statement of directors’ responsibilities in respect of the accounts is set out on page 27. The non-executive directors have a particular responsibility to ensure that the strategies proposed by the executive directors are fully considered. 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 has a formal schedule of matters reserved to it and meets bi-monthly.

The Board is responsible for overall group strategy, approval of major capital expenditure projects and consideration of significant financing matters.

The following Board committees, which have written terms of reference, deal with specific aspects of the group’s affairs:

  • The nomination committee is chaired by Christopher Joll and comprises the non-executive directors and the executive chairman. The committee is responsible for proposing candidates for appointment to the Board, having regard to the balance and structure of the Board. In appropriate cases recruitment consultants are used to assist the process. Each director is subject to re-election at least every three years.
  • The remuneration committee is responsible for making recommendations to the Board on the company’s framework of executive remuneration and its cost. The committee determines the contractual 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 the non-executive directors. It is chaired by Christopher Joll. The company’s executive chairman is normally invited to attend meetings. The report on directors’ remuneration is set out on pages 24 and 25.
  • The audit committee comprises the two non-executive directors and is chaired by Christopher Joll. Its prime tasks are to review the scope of external audit, to receive regular reports from the Company’s auditors, PKF (UK) 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 judgment and estimation. The committee is responsible for monitoring the controls which are in force to ensure the integrity of the information reported to the 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. The committee also considers annually the need for an internal audit function. 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. The committee, which meets formally at least twice a year, provides a forum for reporting by the group’s external auditors. Meetings are also attended, by invitation, by the company chairman, managing director and finance director.

The audit committee also undertakes a formal assessment of the auditors’ independence each year which includes:

  • a review of non-audit services provided to the group and related fees;
  • discussion with the auditors of a written report detailing all relationships with the company and any other parties that could affect independence or the perception of independence;
  • a review of the auditors’ own procedures for ensuring the independence of the audit firm and partners and staff involved in the audit, including the regular rotation of the audit partner; and
  • obtaining written confirmation from the auditors that, in their professional judgement, they are independent.

The audit committee report is set out on page 26.

An analysis of the fees payable to the external audit firm in respect of both audit and non-audit services during the year is set out in Note 4 to the financial statements.

Performance evaluation – Board, Board committees and directors
The performance of the Board as a whole and of its committees and the non-executive directors is assessed by the chairman and the managing director and is discussed with the senior independent director. Their recommendations are discussed at the nomination committee prior to proposals for re-election being recommended to the Board. The performance of executive directors is discussed and assessed by the remuneration committee. The senior independent director meets regularly with the chairman and both the executive and non-executive directors individually outside of formal meetings. The directors will take outside advice in reviewing performance but have not found this necessary to date.

Independent Directors
The senior independent non-executive director is Christopher Joll. The other independent non-executive director is John Sibbald.

Christopher Joll has been a non-executive director for over ten years. As a consequence he does not fully meet the criteria for independence set out in the UK Corporate Governance Code (The Code).

John Sibbald has been a non-executive director of Bisichi for over twenty years - the maximum set out in The Code criteria for independence is nine years. For this reason he does not fully meet the criteria set out in The Code for independence.

The Board encourages Christopher Joll and John Sibbald to act independently. The criteria for independence on which they fail to meet The Code’s criteria for independence, namely length of service and a connection with the company’s public relations advisers, should not, and has not, resulted in their inability of failure to act independently. In the opinion of the Board, Christopher Joll and John Sibbald continue to fulfil their role as independent non-executive directors.

The independent directors regularly meet prior to Board meetings to discuss corporate governance issues.

Board and Board committee meetings
The number of meetings during 2010 and attendance at regular Board meetings and Board committees was as follows:

    Meetings held Meetings attended
M A Heller Board 5 5
  Nomination Commitee 1 1
A R Heller Board 5 5
  Audit Commitee 2 2
G J Casey Board (since appointment on 1 June 2010) 3 3
R J Grobler Board 5 1
C A Joll Board 5 5
  Audit Commitee 2 2
  Nomination Commitee 1 1
  Remuneration Commitee 4 4
J A Sibbald Board 5 5
  Audit Commitee 2 2
  Nomination Commitee 1 1
  Remuneration Commitee 4 2

The audit committee had two meetings in 2010 with the external auditors present, prior to release of the 2009 annual results. Members of the committee discussed the 30 June 2010 half year results prior to their approval by the full Board. The nomination committee held one meeting during the year.

Internal control
The directors are responsible for the group’s system of internal control and review of its effectiveness annually. 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 reserved to it for decision and has put in place an organisational structure with clearly defined lines of responsibility and with appropriate delegation of authority;
  • There are established procedures for planning, approval and monitoring of capital expenditure and information systems for monitoring the group’s financial performance against approved budgets and forecasts;
  • UK property and financial operations are closely monitored by members of the Board and senior managers to enable them to assess risk and address the adequacy of measures in place for its monitoring and control. The South African operations are closely supervised by the UK based executives through daily, weekly and monthly reports from the directors and senior officers in South Africa. This is supplemented by monthly visits by the UK based finance director to the South African operations which include checking the integrity of information supplied to the UK. The directors are guided by the internal control guidance for directors issued by the Institute of Chartered Accountants in England and Wales.

During the period, the audit committee has reviewed the effectiveness of internal control as described above. The Board receives periodic reports from its committees.

There are no significant issues disclosed in the Annual Report for the year ended 31 December 2010 (and up to the date of approval of the report) concerning material internal control issues. The directors confirm that the Board has reviewed the effectiveness of the system of internal control as described during the period.

Communication with shareholders
Communication with shareholders is a matter of priority. Extensive information about the group and its activities is given in the Annual Report, which are made available to shareholders. Further information is available on the company’s website, www.bisichi.co.uk. There is a regular dialogue with institutional investors. Enquiries from individuals on matters relating to their shareholdings and the business of the group are dealt with informatively and promptly.

Payment of suppliers
The company agrees contract terms with suppliers when orders are placed. Payments to suppliers are made in accordance with those terms, provided that suppliers have complied with all relevant terms and conditions. Trade creditors outstanding at the year-end represented 3.1 days trade purchases (2009 – 12.4 days).

Takeover Directive
The company has one class of share capital, ordinary shares. Each ordinary share carries one vote. All the ordinary shares rank pari passu. There are no securities issued in the company which carry special rights with regard to control of the company. The identity of all substantial direct or indirect holders of securities in the company and the size and nature of their holdings is shown under the “Substantial interests” section of this report above.

A relationship agreement dated 15 September 2005 (the “Relationship Agreement”) was entered into between the company and London & Associated Properties PLC (“LAP”) in regard to the arrangements between them while LAP is a controlling shareholder of the company. The Relationship Agreement includes a provision under which LAP has agreed to exercise the voting rights attached to the ordinary shares in the company owned by LAP to ensure the independence of the Board of directors of the company.

Other than the restrictions contained in the Relationship Agreement, there are no restrictions on voting rights or on the transfer of ordinary shares in the company. The rules governing the appointment and replacement of directors, alteration of the articles of association of the company and the powers of the company’s directors accord with usual English company law provisions. Each director is re-elected every three years or more frequently. The company is not party to any significant agreements that take effect, alter or terminate upon a change of control of the company following a takeover bid. The company is not aware of any agreements between holders of its ordinary shares that may result in restrictions on the transfer of its ordinary shares or on voting rights.

There are no agreements between the company and its directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid.

Annual General Meeting
The annual general meeting will be held at the Company’s offices at 30-35 Pall Mall, London SW1Y 5LP on Tuesday 7 June 2011 at 11.00 a.m. Resolutions 1 to 8 and 9 to 11 will be proposed as ordinary resolutions. More than 50 per cent of shareholders’ votes must be in favour for these resolutions to be passed. Resolutions 12 to 14 will be proposed as special resolutions. At least 75 per cent of shareholders’ votes must be in favour for these resolutions to be passed.

The directors consider that all of the resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a whole. The Board recommends that shareholders vote in favour of all resolutions.

Authorisation of share option grant (Resolution 9)
On the recommendation of the remuneration committee, the board approved the grant of a share option on 31 August 2010 to the company’s new finance director, Garrett Casey. The option was granted subject to authorisation by the members – this resolution, if approved, will give that authorisation. An option agreement relating to the grant of the option to subscribe for up to 80,000 ordinary shares of 10p each in the capital of the company at a price of £2.025p per share was conditionally entered into between the company and Garrett Casey on 31 August 2010. A summary of the principal terms of the agreement is set out on in the explanatory notes to the AGM at pages 61 to 62 of this document.

The issue of scrip dividends (Resolution 10)
Members are to be offered, in accordance with Article 155 of the company’s Articles of Association the right to elect to receive all or part of the recommended final dividend in lieu of cash by way of a new issue of ordinary shares. In accordance with Article 155, an Ordinary Resolution is required form the shareholders in order to permit a Scrip Dividend. In order to enable the directors to effect the issue of new ordinary shares the shareholders are required to give the directors authority to issue and allot the new ordinary shares and permit the directors to capitalise out of such of the sums standing to the credit of reserves equal to the nominal value of the new ordinary shares of the company to be allotted pursuant to any elections made by the shareholders in accordance with their respective entitlements.

Directors’ authority to allot shares (Resolution 11)
Paragraph 13.1.1 of Resolution 13 would give the directors the authority to allot shares in the company and grant rights to subscribe for or convert any security into shares in the company up to an aggregate nominal value of £348,384. This represents approximately 33.3 per cent of the ordinary share capital of the company in issue (excluding treasury shares) at 14 April 2011 (being the last practicable date prior to the publication of this Directors’ Report). In line with recent guidance issued by the Association of British Insurers (‘ABI’) paragraph 13.1.2 of Resolution 13 would give the directors the authority to allot shares in the company and grant rights to subscribe for or convert any security into shares in the company up to a further aggregate nominal value of £348,384, in connection with a rights issue. This amount represents approximately 33.3 per cent. of the ordinary share capital of the company in issue (excluding treasury shares) at 14 April 2011 (being the last practicable date prior to the publication of this Directors’ Report). The directors’ authority will expire at the conclusion of the next Annual General Meeting. The directors have no present intention to make use of this authority. However, if they do exercise the authority, the directors intend to follow emerging best practice as regards its use as recommended by the ABI.

Disapplication of pre-emption rights (Resolution 12)
A special resolution will be proposed at the Annual General Meeting in respect of this disapplication of pre-emption rights.

 Shares allotted for cash must normally first be offered to shareholders in proportion to their existing shareholdings. The directors will, at the forthcoming Annual General Meeting of the company seek power to allot shares as if the pre-emption rights contained in Section 561 of the Companies Act 2006 did not apply up to a maximum of 10% of the company’s issued share capital. The authority will expire at the earlier of the conclusion of the company’s next annual general meeting and 15 months from the passing of Resolution 12.

Notice of General Meetings (Resolution 13)
The Shareholder Rights Directive was implemented in the UK in August 2009. One of the requirements of the Directive is that all general meetings must be held on 21 clear days’ notice unless shareholders agree to a shorter notice period. We are proposing a resolution at the AGM so that we are able to call general meetings (other than annual general meetings) on 14 clear days’ notice.

Purchase of own Ordinary Shares (Resolution 14)
The effect of Resolution 14 would be to renew the directors’ current authority to make limited market purchases of the company’s ordinary shares of 10 pence each. The power is limited to a maximum aggregate number of 1,045,150 ordinary shares (representing approximately 10 per cent of the company’s issued share capital as at 14 April 2011 (being the latest practicable date prior to publication of this Directors’ Report)). The minimum price (exclusive of expenses) which the company would be authorised to pay for each ordinary share would be 10 pence (the nominal value of each ordinary share). The maximum price (again exclusive of expenses) which the company would be authorised to pay for an ordinary share is an amount equal to the higher of (i) 105% of the average market price for an ordinary share for the five business days preceding any such purchase and (ii) the higher of the last independent trade for an ordinary share and the highest current independent bid for an ordinary share as derived from the trading venue where the purchase is carried out. The authority conferred by Resolution 14 will expire at the conclusion of the company’s next Annual General Meeting to be held in 2012 or 15 months from the passing of the resolution, whichever is the earlier. Any purchases of ordinary shares would be made by means of market purchase through the London Stock Exchange. If granted, the authority would only be exercised if, in the opinion of the directors, to do so would result in an increase in earnings per share or net asset value per share and would be in the best interests of shareholders generally. In exercising the authority to purchase ordinary shares, the directors may treat the shares that have been bought back as either cancelled or held as treasury shares (shares held by the company itself). No dividends may be paid on shares which are held as treasury shares and no voting rights are attached to them.

As at 14 April 2011 (being the last practicable date prior to the publication of this Directors’ Report) the total number of options to subscribe for new ordinary shares in the company as at 31 December 2010 was 718,000 shares representing 6.9% of the company’s issued share capital as at 31 December 2010. Such number of options to subscribe for new ordinary shares would represent approximately 6.25% of the reduced issued share capital of the company assuming full use of the authority to make market purchases sought under Resolution 14.

Donations
No political or charitable donations were made during the year (2009:Nil).

Going concern
The group’s business activities, together with the factors likely to affect its future development are set out in the Chairman’s Statement on the preceding page 2 and the Mining Review on pages 5 to 10. In addition Note 21 to the financial statements includes the group’s treasury policy, interest rate risk, liquidity risk and hedging profile.

The group has considerable financial resources which, together with the long term leases with the majority of its tenants of its property portfolio. The directors have a reasonable expectation of improved market conditions in 2011 and a return to profitability for Black Wattle Colliery, its direct mining asset. As a consequence, the directors believe that the company is well placed to manage its business risks successfully despite the loss for the year.

The directors have a reasonable expectation that the company 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 annual financial statements. Other matters PKF (UK) LLP has expressed its willingness to continue in office as auditors. A proposal will be made at the annual general meeting for its re-appointment, and for its remuneration to be determined by the directors.