This statement outlines the main corporate governance practices in place throughout the financial year unless otherwise noted.
A review of the Group’s Corporate Governance Framework is performed on a periodic basis to ensure that it is relevant and effective in light of the changing legal and regulatory requirements. The Board of Directors continues to adopt a set of Corporate Governance Practices and a Code of Conduct appropriate for the size, complexity and operations of the Company. The Company has based its Corporate Governance statement on the ASX Corporate Governance Best Practice Recommendations.
Board of Directors
The Directors’ objective is to increase long-term shareholder value within an appropriate framework, which protects the Company and enhances the interests of shareholders and ensures the Company is properly managed. The function of the Board of Directors is clearly defined and includes responsibility for:
A description of the Company’s main corporate governance practices is set out below. The Directors are committed to the principles underpinning best practice in corporate governance, applied in a manner which is best suited to the Company and to address best the Directors’ accountability to shareholders and other stakeholders.
The structure of the Board is fundamental to achieving these objectives. It is the role of management to propose strategies and to carry out agreed plans. The Board, which ultimately has the responsibility for the direction and performance of the Company, is composed of directors able to consider the issues with independence and objectivity. It currently comprises four non-executive directors and one executive director. A majority of directors have extensive knowledge of the Company’s industry both locally and overseas.
By definition, independent directors are those directors who are not a member of management; who hold less than five percent of the voting shares and are not associated directly or indirectly with a shareholder who holds more than five percent of the voting shares; have not within the last three years been employed in an executive capacity by the Company; and have not been an employee in the last three years or a consultant or advisor to the Company; are not a material supplier or customer of the Company and have no material contract with the Company other than as a director of the Company; who are free from any interest and any business relationship which could or could reasonably be perceived to materially interfere with the directors’ ability to act in the best interest of the Company.
The full Board is responsible for establishing criteria for Board membership, reviewing Board membership and identifying and nominating directors. New appointments to the Board must have well-established scientific and business credentials in order to be able to demonstrate the required range of skills, knowledge and experience.
Performance is monitored by monthly analysis of financial statements and critical evaluation of research progress against key benchmarks. In addition, on a regular basis the Board reviews Company progress against the long-term goals set out in the strategic plan. Where directors are associated with organisations with which the Company might have ongoing commercial relationships, the director involved will withdraw from all deliberations where a potential conflict of interest may arise.
The Company has a process to educate new directors about the nature of the business, current issues, the corporate strategy and the expectations of the Company concerning performance of directors. Directors also have the opportunity to visit Company facilities and meet with management to gain a better understanding of business operations. Directors are given access to continuing education opportunities to update and enhance their skills and knowledge.
Each director has the right of access to all relevant Company information and to the Company’s executives and subject to prior consultation with the Chairman may seek independent professional advice at the Company’s expense. A copy of the advice received by the director will be made available to all members of the Board.
Remuneration & Nomination Committee
The Committee reviews and makes recommendations to the Board on the remuneration packages and policies applicable to the executive officers and directors of the Group. It is also responsible for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies.
The members of the Committee are:
Mr H Morgan, Non-Executive Chairman
Prof L Rudenko, Non-Executive
The Board policy is for the Committee to comprise independent non-executive directors. Currently, only one director is independent because other directors are either associated with substantial shareholders or have related party transactions. The Chief Executive Officer is invited to Committee meetings, as required.
Remuneration and other terms of employment are reviewed annually by the Committee having regard to performance against goals set at the start of the year and relevant comparative information. The Group did not subscribe to any external remuneration expert advice during the course of the year. Remuneration packages include superannuation as well as base salary.
Remuneration of non-executive directors is determined by the Board within the maximum amount approved by the shareholders from time to time. Non-executive directors also receive superannuation payments in accordance with statutory levels.
The Committee meets twice a year or as required. During the 2014 financial year the Committee held two formal meetings in August 2013 and March 2014.
The Audit Committee has a documented charter approved by the Board. All members should be non-executive directors with a majority being independent. Currently, only one director is independent because other directors are either associated with substantial shareholders or have related party transactions. It is recommended that the Chairman should not also be the Chairman of the Board. Currently, the Audit Committee is chaired by the Chairman of the Board, as the Board believes that it is impractical at this stage to comply with this recommendation.
The members of the Audit Committee are:
Mr H Morgan, Non-Executive Chairman
Prof L Rudenko, Non-Executive
The external auditor, the Chief Executive Officer and the Chief Financial Officer, are invited to attend Audit Committee meetings at the discretion of the Committee. The responsibilities of the Audit Committee include:
The Audit Committee will meet with the external auditors during the year to discuss the external audit and address any issues arising, such as but not limited to changes in operations, structure, controls or accounting policies, and to review the proposed fee for the audit work.
Oversight of the risk management system
The Board oversees the establishment, implementation and annual review of the Group’s Risk Management Systems. Management has established and implemented the risk management system for assessing monitoring and managing operational financial reporting and compliance risks for the entity. The Chief Executive Officer and the Chief Financial Officer have declared in writing to the Board that the financial reporting risk management and associated compliance and controls have been assessed and found to be operating efficiently and effectively. All risk assessments cover the whole financial year and the period up to the signing of the annual financial report.
Protection of intellectual property is at the core of the Group’s activities and the Group engages one of Australia’s leading patent attorney firms for such advice. The attorneys carry out due diligence and report in writing on any intellectual property to be acquired. Future patenting strategy is discussed and agreed in the light of any proposed development plan. Upon acquisition, BioDiem takes over control of the patent applications together with the attorneys. New inventions reported to BioDiem by its contract research organizations are passed to its attorneys for advice on patentability. Management then decides whether or not to proceed with new patent application(s). The patent attorneys write to the Company each time there is a significant activity in the patenting process. Meetings and teleconferences with the firm take place when required to discuss patenting issues and any changes in strategy.
The Company’s business strategies and activities involve a degree of risk. Development of new therapies historically has been shown to have high risk because of the complexity of proving safety and efficacy of new compounds. Risk is minimised to the extent it does not inhibit the Company from pursuing business opportunities with a considered and balanced view of risk. Risk management is a managerial responsibility of the senior management and is monitored by the Board. Comprehensive practices have been established to ensure:
The Chief Executive Officer and the Chief Financial Officer declare in writing to the Board that the Company’s financial reports are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board. Monthly results are reported against budgets approved by the Directors and revised forecasts are prepared regularly.
Key business risks
Below are some of the key business risks identified and managed by the Company.
Risks specific to the Company:
The Company has policies and procedures on information disclosure that requires focus on the continuous disclosure of any information concerning the Company that a reasonable person would expect to have a material effect on the price of the Company’s securities.
All Directors, managers and employees are expected to act with the utmost integrity and objectivity, trying at all times to enhance the reputation and performance of the Company. Directors must keep the Board advised on an ongoing basis of any interest that could potentially conflict with those of the Company. The Board has procedures in place to assist Directors in disclosing any potential conflict of interest. Where the Board believes that a significant conflict exists for a director on a Board matter, the director concerned does not receive the relevant Board papers and is not present at the meeting whilst that item is considered.
A policy regarding the trading in general of Company securities by Directors and employees is in place. The policy details the insider trading provisions of the Corporations Act and provides for Directors, management and employees to be able to acquire shares in the Company at any time except when there is a “black-out”. Company wide black-outs occur in the four weeks prior to the release of the Company’s full year financial results, half year financial results and quarterly reports and for two business days after their release. Black-outs might occur at any other time for the Company or for certain individuals prior to any major announcement or when they are in the possession of price sensitive information. The Company’s guidelines for dealing in securities also prohibit any employee who holds shares in the Company acquired pursuant to the terms of the Company’s employee share plans from entering into a transaction to limit the economic risk of such shares, whether through a derivative, hedge or other similar arrangement, without the prior written approval of the Chief Executive Officer or the Board.
To view BioDiem’s Securities Dealing Policy click Security Dealing Policy
Communication with shareholders
The Board provides shareholders with information using a comprehensive Continuous Disclosure Policy which includes the identification of matters that may have a material effect on the price of the Company’s securities, posting them to the Company’s website. The Chief Executive Officer and the Company Secretary are responsible for interpreting the Company’s policy and informing the Board. A continuous disclosure review process, which involves monitoring all areas of the entity’s internal and external environment, is in place. Announcements made to the market and related information, including information provided to analysts or the media are placed on the Company’s website.