CBG Group plc

Corporate Governance

Introduction

The Company's shares are listed on the Alternative Investment Market (AIM) and as such there is no requirement to publish a detailed Corporate Governance statement. However, in accordance with best practice, detailed Corporate Governance statements are included in the Company's Annual Report & Accounts, as follows:

Application of the principles of good governance

The Group is committed to applying the highest principles of corporate governance commensurate with its size.

The Board

The Group is managed by a Board, consisting of a Non-Executive Chairman, five Executive Directors and two Non-Executive Director, who retain responsibility for the formulation of corporate strategy, approval of acquisitions, divestments, capital expenditure and treasury policy. Given the size of the Company, the appointment of new Directors is a matter reserved for the Board as a whole rather than a separate Nomination Committee.

The Board meets regularly and has a schedule of matters specifically referred to it for decision. All Directors have access to advice from the Company Secretary and training is available for Directors as necessary.

The Board considers the Non-Executive Directors to be independent.

Internal control

The Directors have overall responsibility for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance regarding effective and efficient operations, internal financial control and compliance with laws and regulations. The risk management process and systems of internal control are designed to manage rather than eliminate the risks of failure to achieve the Group’s strategic objectives. However, there are inherent limitations in any system of internal control and accordingly even the most effective system can only provide reasonable and not absolute assurance. The Board has reviewed the operation and effectiveness of the system of internal control in operation during the year.

Individual companies are managed with a clearly defined responsibility for the operation of the businesses to meet standards required by both the Group and appropriate regulatory authorities. In addition, annual plans and longer-term overviews of objectives are prepared by each business management team and reviewed at minuted meetings attended by at least one Executive Director.

Individual business management is also responsible for assessing and minimising all business risks, supported by Group personnel able to provide specific assistance in matters relating to regulatory compliance, health and safety, and quality systems.

Monthly accounts, including comparison with planned performance, together with key ratio analysis and working capital information, are prepared in accordance with Group accounting policies and principles. They are reviewed by the Board to monitor overall performance and facilitate appropriate management intervention.

The Board confirms that it has established the procedures necessary to implement the guidance “Internal Control: Guidance for Directors on the Combined Code”. The Board has considered the need for an internal audit function but has concluded the size and complexity of the Group does not justify the expense at present. The need for an internal audit function will continue to be reviewed periodically.

Relations with shareholders

The Board attaches great importance to maintaining good relationships with shareholders. The Board regards the Annual General Meeting as an opportunity to communicate directly with investors, who are encouraged to participate.

Compliance

In the opinion of the Directors, the Company has complied with the provisions of Section 1 of the combined code during the year with the following exceptions:

There are less than three Non-Executive Directors on the Board (A3.2)
There is no separate Nomination Committee (A4.1)
The Non-Executive Directors are not appointed for a specific term (A7.2) but are subject to retirement by rotation in accordance with the Company’s Articles of Association. Their re-election is therefore periodically approved by the shareholders at the Annual general Meeting.

The Company has complied fully with the requirements of provision C1.2 of the Code (review of effectiveness of internal control system) from the date of its flotation on the Alternative Investment Market.

Directors’ responsibilities

Company law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group at the end of the year and of the profit or loss of the Group for the year then ended. In preparing those financial statements, the Directors are required to select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 1985. The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In so far as the directors are aware:

There is no relevant audit information of which the company’s auditors are unware; and
The directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Report on remuneration

The Remuneration Committee comprises at least two Non-Executive Directors. During the period L A Turnbull, D Worsley and R Slinger, prior to his appointment as Chief Executive, served on the Remuneration Committee.

The Committee periodically reviews the Directors’ remuneration packages to ensure that the Company can attract, motivate and retain Directors of the necessary calibre and to reward them appropriately. The Committee meets not less than twice a year.

The Executive Directors have service contracts with the Company which are terminable on 6 months notice by either party. The Non-Executive Directors have an appointment letter with the Company, terminable on 3 months notice by either party. The remuneration of the Non-Executive Directors is determined by the Board.

Full details of Directors’ remuneration and share options are given in note 5 to the financial statements.

Executive Director packages comprise a basic salary and other benefits. The Committee has regard to rates of pay for similar positions in comparable companies as well as internal factors such as performance. The objective of the Company’s remuneration policy is to ensure that members of the executive management are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Company.

The Executive Directors are eligible for share options under the Company’s share option scheme. The exercise of options granted prior to 2006 under the share option scheme is not dependent on performance criteria. The options granted during 2006 are dependent on the achievement of certain earnings per share criteria.

Audit Committee

The Audit Committee is appointed by the Board and must comprise a minimum of two members, including the Non-Executive Directors. During the period D Worsley, L A Turnbull and R Slinger, prior to his appointment as Chief Executive served on the Audit Committee. The Committee meets not less than twice a year.

The Audit Committee may examine any matters relating to the financial affairs of the Group. This includes reviews of the annual accounts and announcements, internal control procedures, accounting policies, compliance with accounting standards, the appointment of external auditors and other such related functions as the Board may require.