Matters Reserved for the Board
In general, the full Board of Directors of the Company (the “Board”) should consider all important management and policy matters. In particular, the Board has specifically resolved that the following matters should be reserved for decision by the Board:
1. Strategy and Management
1.1 Responsibility for the overall direction of the SDL Group of Companies (‘the Group’).
1.2 Approval of the Group’s long term objectives and strategy, policies and annual budgets.
1.3 Oversight of the Group’s operations and management.
1.4 Review of performance in the light of the Group’s strategy, objectives, business plans and budgets and ensuring that any necessary corrective action is taken.
1.5 Extension of the Group’s activities into new business or geographic areas.
1.6 Any decision to cease to operate all or any material part of the Group’s business.
2. Structure and capital
2.1 Changes relating to the Group’s capital structure.
2.2 Major changes to the Group’s corporate structure, management and control structure.
2.3 Any changes to the Company’s listings or its status as a plc.
3. Financial reporting and controls
3.1 Approval of preliminary announcements of interim and final results.
3.2 Approval of the Annual Report and Accounts, including the Corporate Governance statement and Remuneration Report.
3.3 Approval of the dividend policy.
3.4 Declaration and recommendation of dividends.
3.5 Approval of any significant changes in accounting policies or practices.
3.6 Approval of treasury policies.
3.7 Approval of material unbudgeted capital or operating expenditures.
4. Risk Management and Internal controls
4.1 Responsible for:
- a sound system of risk management and internal control;
- oversight and review of risk management and internal control; and
- determining the appropriate level of risk exposure for the Group
5. Contracts
5.1 Approval of major capital projects, investments or contracts which are materially strategic or sensitive or by reason of size, entered into by the Company or any subsidiary in the ordinary course of business.
5.2 Contracts, lending or borrowing by the Company/Group made outside the normal course of business of the Company/Group.
5.4 Material acquisitions and disposals either by reason of size or strategically, entered into by the Company or any subsidiary.
5.3 Agreement to PLC guarantees exceeding £100,000.
6. Communication
6.1 Approval of resolutions and related documentation to be put forward to shareholders at a general meeting.
6.2 Approval of press releases concerning matters decided by the Board.
7. Board membership and other appointments
7.1 Board appointments and removals; selection of the Chairman, Senior Independent Director and Chief Executive Officer; membership and chairmanship of board committees, following recommendations from the Nomination Committee.
7.2 Succession planning.
7.3 Appointment or removal of the company secretary.
7.4 Appointment, reappointment or removal of the external auditor to be put to shareholders for approval, following the recommendation of the Audit Committee.
8. Remuneration
8.1 Determining the remuneration policy for the Chairman, the Chief Executive Officer and the Executive Directors following recommendations from the Remuneration Committee.
8.2 Determining the remuneration of the Non-Executive Directors, subject to the Articles of Association and shareholder approval as appropriate.
8.3 The introduction of new share schemes or new long-term incentive schemes or major changes to existing schemes, which require shareholders’ approval.
9. Delegation of Authority
9.1 The division of responsibilities between the Chairman and the Chief Executive Officer.
9.2 Approval of terms of reference of board committees.
10. Corporate governance matters
10.1 Conduct an adequate annual evaluation of its own performance, that of its committees, and individual directors, and the division of responsibilities.
10.2 Determining the independence of directors.
10.3 Receiving reports on the views of the Company’s shareholders.
10.4 Authorising conflicts of interest where permitted by the Company’s articles of association.
11. Other
11.1 The making of political donations.
11.2 Approval of the appointment of the Group’s principal professional advisers.
11.3. Prosecution, defence or settlement of litigation, or an alternative dispute resolution mechanism involving an amount above £100,000 or being otherwise material to the interests of the Group.
11.2 This schedule of matters reserved for board decisions.
11.3 Any decision likely to have a material impact on the Company or Group from any perspective, including, but not limited to, financial, operational, strategic or reputational.
Audit committee
1. Membership
1.1 The committee shall comprise at least two members. Members of the committee shall be appointed by the board, on the recommendation of the nomination committee in consultation with the chairman of the audit committee.
1.2 All members of the committee shall be independent non-executive directors at least one of whom shall have recent and relevant financial experience ideally with a professional qualification from one of the professional accountancy bodies. The chairman of the board shall not be a member of the committee. C.3.1 of the Code provides that in smaller companies the company chairman may be a member of, but not chair, the committee provided (s)he was independent on appointment as chairman.
1.3 Only members of the committee have the right to attend committee meetings. However, the external auditor and finance director will be invited to attend meetings of the committee on a regular basis and other non-members may be invited to attend all or part of any meeting as and when appropriate and necessary.
1.4 Appointments to the committee shall be for a period of up to three years, extendable by no more than two additional three-year periods, so long as members continue to be independent.
1.5 The board shall appoint the committee chairman. In the absence of the committee chairman and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting.
2. Secretary
2.1 The company secretary, or his or her nominee, shall act as the secretary of the committee and will ensure that the committee receives information and papers in a timely manner to enable full and proper consideration to be given to issues.
3. Quorum
3.1 The quorum necessary for the transaction of business shall be two members.
4. Frequency of meetings
4.1 The committee shall meet at least three times a year at appropriate intervals in the financial reporting and audit cycle and otherwise as required.
4.2 Outside of the formal meeting programme, the committee chairman will maintain a dialogue with key individuals involved in the company’s governance, including the board chairman, the chief executive, the finance director, the external audit lead partner and the head of internal audit.
5. Notice of meetings
5.1 Meetings of the committee shall be convened by the secretary of the committee at the request of any of its members or at the request of the external audit lead partner or head of internal auditor if they consider it necessary.
5.2 Unless otherwise agreed, notice of each meeting confirming the venue, time and date together with an agenda of items to be discussed, shall be forwarded to each member of the committee, any other person required to attend and all other non-executive directors, in a timely manner to enable full and proper consideration to be given to the agenda items. Supporting papers shall be sent to committee members and to other attendees as appropriate, at the same time.
6. Minutes of meetings
6.1 The secretary shall minute the proceedings and decisions of all meetings of the committee, including recording the names of those present and in attendance.
6.2 Draft minutes of committee meetings shall be circulated promptly to all members of the committee. Once approved, minutes should be circulated to all other members of the board unless it would be inappropriate to do so in the opinion of the committee chairman.
7. Annual General Meeting
The committee chairman should attend the annual general meeting to answer shareholder questions on the committee’s activities.
8. Duties
The committee should carry out the duties below for the parent company, major subsidiary undertakings and the group as a whole, as appropriate.
8.1 Financial reporting
8.1.1 The committee shall monitor the integrity of the financial statements of the company, including its annual and half-yearly reports, interim management statements, and any other formal announcement relating to its financial performance, reviewing and reporting to the board on significant financial reporting issues and judgments which they contain having regard to matters communicated to it by the auditor.
8.1.2 In particular, the committee shall review and challenge where necessary:
8.1.2.1 the consistency of, and any changes to, significant accounting policies both on a year on year basis and across the company/group
8.1.2.2 the methods used to account for significant or unusual transactions where different approaches are possible
8.1.2.3 whether the company has followed appropriate accounting standards and made appropriate estimates and judgements, taking into account the views of the external auditor;
8.1.2.4 the clarity and completeness of disclosure in the company’s financial reports and the context in which statements are made; and
8.1.2.5 all material information presented with the financial statements, such as the business review and the corporate governance statements relating to the audit and to risk management.
8.1.3 Where the committee is not satisfied with any aspect of the proposed financial reporting by the company, it shall report its views to the board.
8.2 Narrative reporting
Where requested by the board, the committee should review the content of the annual report and accounts and advise the board on whether, taken as a whole, it is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s performance, business model and strategy.
8.3 Internal controls and risk management systems
The committee shall
8.3.1 keep under review the adequacy and effectiveness of the company’s internal financial controls and internal control and risk management systems; and
8.3.2 review and approve the statements to be included in the annual report concerning internal controls and risk management.
8.4 Compliance, whistleblowing and fraud
The committee shall
8.4.1 review the adequacy and security of the company’s arrangements for its employees and contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The committee shall ensure that these arrangements allow proportionate and independent investigation of such matters and appropriate follow up action
8.4.2 review the company’s procedures for detecting fraud; and
8.4.3 review the company’s systems and controls for the prevention of bribery and receive reports on non-compliance.
8.5 Internal audit
The committee shall
8.5.1 Review on at least an annual basis the need for an internal audit function in the context of the group’s overall risk and management system;
8.5.2 Where such a function exists, approve the appointment or termination of appointment of the head of internal audit
8.5.3 review and approve the charter of the internal audit function and ensure the function has the necessary resources and access to information to enable it to fulfil its mandate, and is equipped to perform in accordance with appropriate professional standards for internal auditors
8.5.4 ensure the internal auditor has direct access to the board chairman and to the committee chairman, and is accountable to the committee
8.5.5 review and assess the annual internal audit work plan
8.5.6 receive a report on the results of the internal auditor’s work on a periodic basis
8.5.7 review and monitor management’s responsiveness to the internal auditor’s findings and recommendations
8.5.8 meet with the head of internal audit at least once a year without the presence of management; and
8.5.9 monitor and review the effectiveness of the company’s internal audit function, in the context of the company’s overall risk management system.
8.6 External Audit
The committee shall
8.6.1 consider and make recommendations to the board, to be put to shareholders for approval at the AGM, in relation to the appointment, re-appointment and removal of the company’s external auditor;
8.6.2 ensure that at least once every ten years, or as required by applicable rules, the audit services contract is put out to tender to enable the committee to compare the quality and effectiveness of the services provided by the incumbent auditor with those of other audit firms; and in respect of such tender oversee the selection process and ensure that all tendering firms have such access as is necessary to information and individuals during the duration of the tendering process
8.6.3 if an auditor resigns, investigate the issues leading to this and decide whether any action is required
8.6.4 oversee the relationship with the external auditor including (but not limited to):
8.6.4.1 recommendations on their remuneration, including both fees for audit and non-audit services, and that the level of fees is appropriate to enable an effective and high quality audit to be conducted
8.6.4.2 approval of their terms of engagement, including any engagement letter issued at the start of each audit and the scope of the audit
8.6.4.3 assessing annually their independence and objectivity taking into account relevant UK professional and regulatory requirements and the relationship with the auditor as a whole, including the provision of any non-audit services
8.6.4.4 satisfying itself that there are no relationships (such as family, employment, investment, financial or business) between the auditor and the company (other than in the ordinary course of business) which could adversely affect the auditor’s independence and objectivity
8.6.4.5 agreeing with the board a policy on the employment of former employees of the company’s auditor, and monitoring the implementation of this policy
8.6.4.6 monitoring the auditor’s compliance with relevant ethical and professional guidance on the rotation of audit partner, the level of fees paid by the company compared to the overall fee income of the firm, office and partner and other related requirements;
8.6.4.7 assessing annually the qualifications, expertise and resources of the auditor and the effectiveness of the audit process, which shall include a report from the external auditor on their own internal quality procedures
8.6.4.8 seeking to ensure co-ordination with the activities of the internal audit function; and
8.6.4.9 evaluating the risks to the quality and effectiveness of the financial reporting process and consideration of the need to include the risk of the withdrawal of their auditor from the market in that evaluation.
8.6.5 meet regularly with the external auditor (including once at the planning stage before the audit and once after the audit at the reporting stage) and at least once a year, without management being present, to discuss the auditor’s remit and any issues arising from the audit
8.6.6 review and approve the annual audit plan and ensure that it is consistent with the scope of the audit engagement, having regard to the seniority, expertise and experience of the audit team; and
8.6.7 review the findings of the audit with the external auditor. This shall include but not be limited to, the following:
8.6.7.1 a discussion of any major issues which arose during the audit
8.6.7.2 key accounting and audit judgements
8.6.7.3 levels of errors identified during the audit; and
8.6.7.4 the effectiveness of the audit process.
The committee shall also, as appropriate
8.6.8 review any representation letter(s) requested by the external auditor before they are signed by management
8.6.9 review the management letter and management’s response to the auditor’s findings and recommendations; and
8.6.10 develop and implement policy on the supply of non-audit services by the external auditor to avoid any threat to auditor objectivity and independence, taking into account any relevant ethical guidance on the matter.
9. Reporting responsibilities
9.1 The committee chairman shall, when requested by the board, report formally to the board on its proceedings on all matters within its duties and responsibilities and shall also formally report to the board on how it has discharged its responsibilities. This report shall include:
9.1.1 the significant issues that it considered in relation to the financial statements (required under paragraph 8.1.1) and how these were addressed
9.1.2 its assessment of the effectiveness of the external audit process (required under paragraph 8.6.4.7) and its recommendation on the appointment or reappointment of the external auditor; and
9.1.3 any other issues on which the board has requested the committee’s opinion.
9.2 The committee shall make whatever recommendations to the board it deems appropriate on any area within its remit where action or improvement is needed.
9.3 The committee shall compile a report on its activities to be included in the company’s annual report. The report should include an explanation of how the committee has addressed the effectiveness of the external audit process; the significant issues that the committee considered in relation to the financial statements and how these issues were addressed, having regard to matters communicated to it by the auditor; and all other information requirements set out in the Code.
9.4 In the compiling the reports referred to in 9.1 and 9.3, the committee should exercise judgement in deciding which of the issues it considers in relation to the financial statements are significant, but should include at least those matters that have informed the board’s assessment of whether the company is a going concern. The report to shareholders need not repeat information disclosed elsewhere in the annual report and accounts, but could provide cross-references to that information.
10. Other matters
The committee shall:
10.1 have access to sufficient resources in order to carry out its duties, including access to the company secretariat for assistance as required;
10.2 be provided with appropriate and timely training, both in the form of an induction programme for new members and on an ongoing basis for all members;
10.3 give due consideration to laws and regulations, the provisions of the Code and the requirements of the UK Listing Authority’s Listing, Prospectus and Disclosure and Transparency Rules and any other applicable rules, as appropriate
10.4 be responsible for co-ordination of the internal and external auditors;
10.5 oversee any investigation of activities which are within its terms of reference
10.6 work and liaise as necessary with all other board committees
10.7 arrange for periodic reviews of its own performance and, at least annually, review its constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the board.
11. Authority
The committee is authorised to:
11.1 seek any information it requires from any employee of the company in order to perform its duties;
11.2 obtain, at the company’s expense, independent legal, accounting or other professional advice on any matter it believes it necessary to do so
11.3 call any employee to be questioned at a meeting of the committee as and when required; and
11.4 have the right to publish in the company’s annual report, details of any issues that cannot be resolved between the committee and the board.
Nomination committee
1. Constitution
The board of directors of the Company (the "Board") has resolved to establish a committee of the Board to be known as the Nomination Committee (the “Committee”).
2. Membership
2.1. The Committee shall be appointed by the Board and shall comprise at least 3 members.
2.2. A majority of members of the Committee shall be independent non-executive directors.
2.3. Appointments to the Committee are made by the Board and shall be for a period of up to three years, which may be extended for further periods of up to three years, provided the director still meets the criteria for membership of the Committee. The Board shall appoint the Committee Chairman who should be either the Chairman of the Board or an independent non-executive director. In the absence of the Committee Chairman and/or an appointed deputy, the remaining members present shall elect one of their number to chair the meeting. When the Committee discuss matters relating to the Board position of individual Committee members, each person that is the subject of such discussion shall absent himself/herself for the duration of the discussion that relates to him/her. (When the Board discuss appointments to/removals from the Committee, each person that is the subject of consideration for appointment/removal shall absent himself/herself for the duration of the discussion that relates to him/her.)
2.4. If a regular member is unable to act due to illness or any other cause, the Chairman of the Committee may appoint another director of the company to serve as an alternate member having due regard to maintaining the required balance of executive and non-executive members.
3. Attendance
3.1. Only Committee members will have a right of attendance at Committee meetings together with such other person or persons as the Committee may invite to be in attendance.
3.2. The Company Secretary shall act as the secretary of the Committee.
4. Quorum
The quorum necessary for the transaction of business shall be 2 of whom at least 1 must be an independent non-executive director. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested or exercisable by the Committee.
5. Frequency of Meetings
The Committee shall meet not less than once a year and at such other times as the chairman of the Committee shall require.
6. Notice of Meetings
Meetings of the Committee shall be called by the secretary of the Committee at the request of the Committee chairman.
7. Minutes of Meetings
7.1. The secretary shall minute the proceedings and resolutions of all Committee meetings, including the names of those present and in attendance.
7.2. Minutes of the Committee meetings shall be circulated to all members of the Committee and to the Chairman of the Board (if not a member of the Committee) and made available to other members of the Board unless in the opinion of the Committee chairman it would be inappropriate to do so.
8. Annual General Meeting
The Committee chairman shall attend the Annual General Meeting to answer any shareholder questions on the Committee's activities.
9. Duties
9.1. The Committee shall carry out the duties below for the parent company, major subsidiary undertakings and the group as a whole, as appropriate.
- 9.1.1. Regularly review the balance of skills, knowledge and experience on the Board, and the structure, size and composition of the Board and make recommendations to the Board with regard to any adjustments that are deemed necessary.
- 9.1.2. Give full consideration to succession planning for directors and other senior executives in the course of its work, taking into account the challenges and opportunities facing the Company and the skills and expertise needed on the Board in the future.
- 9.1.3. Keep under review the leadership needs of the organisation with a view to ensuring the continued ability to compete effectively in the organisation's marketplace.
- 9.1.4. Keep up to date and fully conversant with strategic issues and commercial changes affecting the company and the market in which it operates.
9.2. The Committee shall also make recommendations to the Board:
- 9.2.1. Identifying and nominating candidates to fill Board vacancies as and when they arise.
- 9.2.2. Before any appointment is made, evaluate the balance of skills, knowledge, experience and diversity on the Board, and prepare a description of the role and capabilities required for a particular appointment.
- 9.2.3. As regards plans for succession for both executive and non-executive directors and in particular for the key roles of chairman (for whom a job specification should be prepared, including an assessment of the time commitment expected) and the chief executive.
- 9.2.4. As regards the re-appointment of any non-executive director at the conclusion of his or her specified term of office.
- 9.2.5. Concerning the re-election by shareholders of any director under the annual re-election provisions of the Code or the retirement by rotation provisions in the Company’s articles of association (particularly in relation to directors being re-elected for a term beyond six years).
- 9.2.6. Concerning any matters relating to the continuation in office as a director of any director at any time.
- 9.2.7. Concerning the appointment of any director to executive or other office.
- 9.2.8. Concerning membership of the audit and remuneration committees, and any other Board committees as appropriate, in consultation with the chairman of those committees.
10. Reporting responsibilities
10.1. The Committee chairman shall report to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.
10.2. The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
10.3. The Committee shall produce a report to be included in the company’s annual report about its activities, the process used to make appointments and explain if external advice or open advertising has not been used. Where an external search agency has been used, it shall be identified in the annual report and a statement made as to whether it has any connection with the company.
11. Other matters
The Committee shall arrange for periodic reviews of its own performance and, at least annually, review its constitution and terms of reference to ensure it is operating at maximum effectiveness and recommend any changes it considers necessary to the Board for approval.
12. Authority
12.1. The Committee is authorised to seek any information it requires from any employee of the company in order to perform its duties.
12.2. The Committee is authorised to obtain, at the company's expense, outside legal or other professional advice on any matters within its terms of reference.
Remuneration committee
1. Constitution
The board of directors of the Company (the “Board”) has resolved to establish a committee of the Board, to be known as the Remuneration Committee (the “Committee”).
2. Membership
2.1 The Committee shall comprise at least two members. Members of the Committee shall be appointed by the Board from amongst the independent non-executive directors of the Company on the recommendation of the nomination Committee in consultation with the chairman of the Remuneration Committee The chairman of the Board may also serve on the Committee as an additional member if he or she was considered independent on appointment as chairman.
2.2 The chair of the Committee shall be appointed by the Board and shall be an independent non-executive director. In the absence of the Committee chairman and/or an appointed deputy, the remaining members present shall elect one of themselves to chair the meeting who would qualify under these terms of reference to be appointed to that position by the Board. The chairman of the Board shall not be chairman of the Committee.
2.3 Appointments shall be for a period of up to three years, extendable for further periods of up to three years, provided the director still meets the criteria for membership of the Committee.
3. Quorum
The quorum necessary for the transaction of business shall be two members. A duly convened meeting of the Committee at which a quorum is present shall be competent to exercise all or any of the authorities, powers and discretions vested in or exercisable by the Committee.
4. Attendance
4.1 Only Committee members will have a right of attendance at Committee meetings. However, other individuals such as the chief executive officer, the head of human resources and external advisors may be invited to attend for all or part of any meeting, as and when appropriate and necessary.
4.2 The chief executive officer or the head of human resources of the Company will also report to the Committee on significant group-wide changes in salary structure and terms and conditions affecting other employees at senior executive level./p>
4.3 Telephone/virtual meetings are permissible.
4.4 The company secretary or his or her nominee shall act as the secretary of the Committee.
5. Frequency of meetings
Meetings shall be held at least twice per year. Other meetings shall be convened on request by a member of the Committee.
6. Authority
The Committee is authorised by the Board to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise on any matter within its terms of reference.
7. Duties
7.1 The Committee shall recommend and agree with the Board the Company’s framework or broad policy for the remuneration of the Company’s chairman, chief executive, the executive directors, the company secretary and in determining such policy take into account all factors which it deems necessary including relevant market comparisons and practise as well as legal and regulatory requirements.
7.2 When setting remuneration policy for directors, review and have regard to pay and employment conditions across the Company or group, especially when determining annual salary increases.
7.3 Review the on-going appropriateness and relevance of the remuneration policy.
7.4 Within the terms of the agreed policy and in consultation with the chairman and/or chief executive, as appropriate, determine the total individual remuneration package of each executive director and the Company chairman and have an overview of other designated senior executives including pensions, bonuses, incentive payments and share options or other share awards. The remuneration of non-executive directors shall be a matter for the chairman and the executive members of the Board. No director or senior executive shall be involved in any decisions as to their own remuneration.
7.5 The Committee shall have full authority to appoint remuneration consultants and to commission or purchase any reports, surveys or information which it deems necessary, within any budgetary restraints imposed by the Board.
7.6 Approve the design of, and determine targets for, any performance related pay schemes operated by the Company and approve the total annual payments made under such schemes.
7.7 Review the design of all share incentive plans for approval by the Board and shareholders.. For any such plans, determine each year whether awards will be made, and if so, the overall amount of such awards, the individual awards to executive directors, company secretary and other designated senior executives and the performance targets to be used.
7.8 Ensure that contractual terms on termination and any payments made, are fair to the individual and the Company, that failure is not rewarded and that the duty to mitigate loss is fully recognised.
7.9 Oversee any major changes in employee benefits structures throughout the Company or group.
7.10 Agree the policy for authorising claims for expenses from the directors.
8. Reporting Procedures
8.1 The secretary of the Committee shall circulate the minutes of the meetings to all members of the Board, as appropriate.
8.2 The Committee shall produce a report of the Company’s remuneration policy and practices which will form part of the Company’s Annual report and ensure each year it is put to shareholders for approval at the AGM.
8.3 The Committee shall make whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is needed.
8.4 The Committee chairman shall report to the Board on its proceedings after each meeting on all matters within its duties and responsibilities.
9. Annual General Meeting
The chairman of the Committee shall attend the Annual General Meeting to answer shareholder questions on the Committee’s activities.
10. Other Matters
The Committee shall arrange for periodic reviews of its own performance and, at least annually review its constitution and terms of reference and recommend any changes it considers necessary to the Board for approval.