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Rurelec PLC (the “Company”) applies the QCA Corporate Governance Code (the “QCA Code”) published in April 2018 and this Corporate Governance report for the year ended 31 December 2022 is based upon the Code.
The principal means of communicating our application of the QCA Code are this Annual Report (pages) and our Corporate Governance section.
This report sets out the Group’s application of the Code, by the Board, and where appropriate, cross reference to other sections of the Annual Report.
Where our practices depart from the expectations of the Code, the Board has given an explanation as to why, at this time, it is appropriate for the Group to depart from the Code.
The QCA Code is constructed around ten broad principles and a set of disclosures which notes appropriate arrangements for growing companies and requires companies who have adopted the QCA Code to provide an explanation about how they are meeting those principles through the prescribed disclosures. In the paragraphs below, Rurelec PLC explains how it has applied them.
The Board of Directors, Rurelec PLC.
The Board is committed to strengthening the Group’s underlying financial position before seeking opportunities to consolidate or expand its business. The Board sets out to deliver long-term value to shareholders in the following ways:
The execution of this strategy presents key challenges in the maximisation of returns on assets given market conditions. Those challenges are addressed by ensuring that the Company is stable enough to be able to avoid having to offload such assets when to do so would minimise value, instead choosing to seek opportunities to maximise the long term returns that will optimise value for shareholders.
The business model as to how the Company plans to make money for its investors revolves around maximising the long term collection of debts owed in connection with the JV formed to develop the EdS business in Argentina, and the maximisation of dividend payments after those debts are repaid whilst repaying Rurelec’s own creditors and continually assessing the value and saleability of its assets with a view to developing and/or realising those assets in such a way as to maximise the returns to all shareholders.
The Group and the Company are fully compliant with this principle.
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 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 past AGMs can be found in https://www.rurelec.com/investors/circulars
The Board seeks to engage with all shareholders as and when relevant information needs to be disclosed. The Board is cognisant or is aware of the fact that different shareholders may have different priorities regarding when those shareholders wish to realise their shareholdings and are mindful of the need to consider the interests of shareholders as a whole in this regard.
Shareholders can communicate with the Company through the email address in its website. The Board is responsible for reviewing all communications received from members and determining the most appropriate response.
The Group and the Company are fully compliant with this principle.
The contraction of the Group and the focus on stabilisation of the financial position of the Company and Group has led to frequent communication at Board level within the Company and regular communication with suppliers/funders to maintain their confidence in the business model and strategy being pursued by the Board. The long-term success of the Group relies on maintaining open communication and good relationships with its stakeholders.
Communication also extends to the Board receiving regular updates and feedback within the small London-based workforce within the Company and there are also regular communications from the Executive Directors of the Group’s joint venture partner in the British Virgin Islands. The Group’s main trading asset was the joint venture operation in Argentina. This operation is run by a fulltime local management team that maintains good relations with all key stakeholders to the business in Argentina.
When permitted, the Executive Directors travel regularly to Argentina and they meet key stakeholders in person. This year due to COVID-19 restrictions such visits to Argentina have not taken place.
The Group and the Company are fully compliant with this principle.
Given past changes in the Company’s financial position, the current Board consider risk management to be of paramount importance and this has driven its strategy of pursuing financial stability rather than risky expansion in order that shareholder value can be maximised through an orderly realisation of the Group’s assets. The risk position of the Group is considered on a very regular basis by the Board given the cash constraints that the Group has had to work within. The feedback on its strategy of pursuing a low-risk approach is received clearly in terms of reductions in cash outflow as measured by weekly reviews of cash forecasting models, and in terms of reduced exposure to fluctuations in cash inflow.
Although the Company does not undertake specific risk assessments, the Board as a whole undertakes regular views of the principal risks and uncertainties facing the Group as reported in page 5 of the Stategic-Report. The Company is in the process of implementing a risk register which should be under the Audit Committee reporting and therefore it is not compliant with the QCA Code.
The board acknowledges that the Company is not compliant with the QCA Code as the Company currently does not have a Chairman and does not have two independent Non-Executive Directors.
The Board takes collective responsibility for the quality of, and approach to corporate governance by the Company, governance and the systems and procedures by which the Company is directed and controlled. A prescribed set of rules does not itself determine good governance or stewardship of a company and, in fulfilling their responsibilities, the Directors believe that they govern the Company in the best interests of the shareholders, whilst having due regard to the interests of other 'stakeholders' in the Group including, in particular, customers, employees and creditors.
The Board is responsible for running the Company, including all major business and financial risks and taking strategic decisions.
The Directors communicate at least weekly on significant matters, in particular on matters affecting cashflow and on matters concerning the joint venture in Argentina.
Paul Shackleton was considered to be independent since his appointment in July 2021. The board evaluated the independence requirements of the QCA Code and considered that Paul Shackleton was independent during the period.
The number of times the Board met during the year to 31 December 2022 was 19. All directors were present at all the Board meetings.
The three principal standing committees of the Board are the Audit, Nominations and Remuneration Committees. See Board of Directors for details.
The Board acknowledges that the Company is not compliant with the QCA Code terms of reference for these committees as these committees should be made up only of Independent Non-Executive Directors. As Paul Shackleton is the Company’s only Independent Non-Executive Director, matters normally reserved for these committees are currently considered by the whole board. The business of the board committees will resume when further appropriate appointments are made to the board.
Due to the size of the Company, the Board does not comply with the principle that the Board should at least have two independent directors and therefore its committees’ membership is also not compliant with their terms of reference. Given the current level of transactions within the Company, the Board considers that adequate resources are available at Board level, although a further non-executive director is currently being sought.”
The Company has two directors, Paul Shackleton, Senior Independent Non-Executive Director and Andrew Coveney, Executive Director. Biographical details of the Directors can be obtained in Biographies.
The directors up to date experience, skills and capabilities information is described in Page 8 of the 2022 Annual Report and Accounts.
The Board evaluates its own performance on a monthly basis and also regularly considers any feedback from external parties as and when that feedback is received.
Board performance is evaluated in the light of its own strategic objectives and tactical plans, in particular in relation to cash management and other financial forecasts. Any Board appointments are considered closely in relation to the ability of the proposed Director to make an active contribution to delivering value to shareholders though the achievement of the strategies and plans balanced against the cost of such an appointment.
The Company has not previously engaged any external evaluation for the performance of the Board members or external advisors for succession planning. Candidates to the Board have been proposed by the Board members based on their skills and experience and the requirements of the Company at the time of the appointment.
There are currently no formal evaluations of the Board. Therefore, the Group and the Company comply only partly with this principle.
The Group’s corporate culture is based on creating an atmosphere of trust, openness, communication and professionalism. Due to the size of the Company, the Board is in very close contact with its employees and is able to engender professional development through teamwork in its day to day and strategic activities.
The Company currently has 4 employees (including the directors). The Board seeks to ensure that all of its employees are aware of its ethical values communicating on a personal basis with its employees and encourages the adoption of these values through the appraisal and recruitment process.
The Group and the Company comply with this principle.
In addition to the high level of explanation of the application of the QCA Code set out in the Chair’s corporate governance statement:
There are no plans to change the current governance framework.
Disclosure of the outcomes of all votes are Proxy Results.
Historical annual reports and other governance-related material, including notices of all general meetings over the last five years can be obtained in Documents to Shareholders.
Further disclosure required under QCA Principle 10 can be found in Principle 5 and Principle 9 above.
Maria J. Bravo Quiterio, Company Secretary
30 June 2023”