Corporate Governance

The Company’s corporate governance is founded on the Board having good quality people in place with relevant skills and experience, working as a team, to achieve the Comapny’s investment strategy and deliver value for shareholders as a whole over the medium to long-term. Appropriate organisational structures and processes provide a framework supporting such teamwork, but are no substitute either for teamwork, or the skills or experience needed to achieve objectives.

As the Company’s Ordinary Shares are traded on the NEX Exchange Growth Market, (formerly ISDX Growth Market), the Company is not required to comply with the UK Corporate Governance Code. Nevertheless, the Board is committed to maintaining high standards of corporate governance and subscribes to the principles of the QCAs Corporate Governance Code (“the QCA Code”). In applying the QCA Code, companies must show how they have applied the ten principles of the QCA Code (the “Principles”) to its governance.

RIDER

The Board has reviewed the Company’s corporate governance in the light of the Principles and how it complies with the Principles is explained in this Corporate Governance Statement together with the disclosures required by the Code.

The Company’s application of the QCA Code and its Principles are as follows:

  1. Establish a strategy and business model which promote long-term value for shareholders
    The Company’s strategy and business model
    The Board has for a number of years pursued a particular investment strategy which it reviews on a regular basis. The strategy and business model are set out in the Strategic Report on page 4 of the Company’s 2019 Annual Report. A table of the Company’s Key Performance Indicators is set out in the Strategic Report on pages 7 to 8 of the Company’s 2019 Annual Report.

    Key challenges
    The key challenges for the Company are in identifying suitable opportunities for investment in new Core Holdings, and in there being sufficient liquidity to allow for the disposal of such investments at a time of the Company’s choosing. In the light of these challenges, the Board remains confident that the Company’s current strategy will continue to deliver shareholder value and provide stable dividend income in the medium to long-term.

  2. Seek to understand and meet shareholder needs and expectations
    Shareholder communication
    The Company’s principal communication with Shareholders is the Company’s Annual Report & Accounts for each year ended 30th June. Copies of the Company’s Annual Report & Accounts which includes Notice of the Annual General Meeting (“AGM”) are sent to all our Shareholders usually in September/October prior to the AGM being held in November or December.

    Shareholders can also obtain copies of the Annual Report and the Company’s Interim Results for the six-month period ended 31st December by downloading them from the ‘Investors’ Section of the Company’s website – www.westernselection.co.uk. In addition, copies of the reports can be provided on request by writing to the Company Secretary, City Group PLC, at 1 Ely Place, London EC1N 6RY.

    The Board seeks to present a fair and balanced assessment of the Company’s financial position and prospects in its financial reports. Comments from Shareholders on the quality and content of the reports and areas for improvement are always welcomed.

    In addition to providing Shareholders with the Annual Report and Interim Results, further communication is provided in the form of announcements, which are released to the NEX Exchange Growth Market and posted to the News page within the Investors Section of the Company’s website, and through the Company’s AGMs.

    The AGM provides a forum for discussion between the Board and Shareholders. The Board welcomes the participation of Shareholders in AGMs which gives Shareholders the opportunity to vote on resolutions and put questions to the Board in the formal part of the Meeting.

    All Shareholders have the opportunity, if they are unable to attend AGMs, to vote on resolutions through the use of proxy forms. Shareholders who attend AGMs also have the opportunity to have informal discussions with the Board following the formal part of these Meetings.

    Immediately following the holding of an AGM, an announcement of the result of the AGM is released to the NEX Exchange Growth Market and a copy of the announcement is posted on the News page within the Investors Section of the Company’s website. The announcement also provides, for information, details of the number of the proxy votes that had been cast in respect of each resolution on a poll or which would have been cast if a poll had been called. A table is included showing the number of votes for and against each resolution and also the number of votes withheld.

    At last year’s AGM, all resolutions put to the Meeting were passed by the required majority. Proxy vote received were overwhelmingly in favour of the resolutions. There were no proxy votes against the resolutions and no proxy votes were withheld.

    Shareholder liaison
    Outside of AGMs, the Chairman is available, by arrangement, for discussions with Shareholders. The Company’s Senior Independent director, Andrew Hall, is also available for meetings and discussions and the Company Secretary, City Group PLC, can also be contacted on shareholder and investor relations issues and matters of governance.

    Whilst the AGM is a good opportunity for discussion between the Board and its Shareholders, shareholder attendance at such meetings in recent years has been low. The Board seeks to encourage more Shareholders to attend the AGMs in the future and encourages Shareholders to contact the Company Secretary with their questions and issues prior to the holding of AGMs.

  3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
    Key resources and relationships
    The Company’s strategy and business model is set out in the Strategic Report on page 4 of the Company’s 2019 Annual Report.

    The Company’s key resources in meeting its strategy are the management and funding availability.

    The Company, given its size and the nature of its business, does not have an extensive range of stakeholders.  The Company’s key stakeholders are the Shareholders but other stakeholders who take an active interest in our success and who the Board is responsible to are the management teams of the Company’s Core Holdings, the Company’s regulators, its professional advisers and its bankers.

    Communication with Stakeholders
    The Board’s communication with the Shareholders and how it seeks their feed-back is explained under Principle 2 above. The Board will respond promptly to such feedback.

    The Board is in regular contact with the management teams of the Company’s Core Holdings in which the Company is invested, details of which are set out in the Strategic Report on pages 5 and 6 of the Company’s 2019 Annual Report. Feedback and commentary from these teams is always welcome and is responded to promptly.

    There is contact from time to time with the Company’s regulator, NEX Exchange Growth Market, and with our professional advisers and our bankers, Coutts & Co, with whom the Company has a revolving credit facility. When we have the opportunity to meet with or call these groups, to provide updates or for discussions on other matters, feedback is welcomed.

    Another potential key stakeholder group for companies are employees.  However, other than its directors, the Company has no employees and no staff.

    Given the size of the Company and the nature of its business, there are no significant social and environmental considerations that might impact on the Company’s strategy and business model and ultimately affect the Company’s stakeholders.

 

  1. Embed effective risk management, considering both opportunities and threats, throughout the organisation
    Key Risks and Uncertainties
    The Company’s key risks and uncertainties are set out in the Strategic Report on page 8 of the Company’s 2019 Annual Report and the main risks arising from the Company’s financial instruments and how these are managed by the Board are set out in Note 15 to the Financial Statements on pages 33 to 35 of the Company’s 2019 Annual Report. The Company’s strategy and business model and the Company’s risks and uncertainties are reviewed annually.

    The Board regularly considers potential risks to its strategy and the Company’s business and concluded its annual risks assessment prior to the preparation of the Company’s 2019 Annual Report and the impact of these risks on the interests of suppliers and end-customers were also considered. As a result, the assessment of risk by the Board, which has been discussed with the Company’s Auditors, was that the policies for managing these risks should remain unchanged.

 

  1. Maintain the Board as a well-functioning, balanced team led by the chair
    The Board
    The Company operates an effective Board, which comprises non-executive directors and is chaired by David Marshall supported by an experienced Company Secretary.  Director biographies for the current directors are given on page 1 of the Company’s 2019 Annual Report.

    The Board as a whole manages the business of the Company on behalf of the Shareholders and in accordance with the Articles of Association. This is achieved through its decision making and where appropriate through the delegation of certain responsibilities to committees.

    The Board’s primary tasks are to enhance the Shareholders’ long-term interests by reviewing and approving the Company’s business strategy, approving investment decisions and material agreements, maintaining and overseeing the Company’s systems and controls, audit processes and risk management policies, preparing and approving the Company’s financial statements as well as revenue and capital budgets and plans.

    Controls and systems
    The Board is aware of the need for appropriate controls and systems to safeguard the Company’s assets. Risks are regularly reviewed and appropriate controls have been established and are monitored by the Board. Other than investment risk, the main risks are around misappropriation of assets, diversion of income, and improper expenditure. Controls include authorisation limits, segregation of duties and prompt reviews of transactions.

    Independence of the Directors
    The independent non-executive directors of the Company are Andrew Hall, Jane Dumeresque and Nick Stagg.  Jane Dumeresque and Nick Stagg were both appointed to the Board on 31st May 2018. Andrew Hall is considered by the Board to be independent, despite the length of time that he has been a member of the Board, taking into account his experience, skills and personal qualities (including independence of character and judgement) and the Company’s remuneration and ownership structures.

    Directors’ time commitments
    Each of the directors has entered into a Letter of Appointment with the Company and under the terms of these appointment letters, each director has agreed to devote such time and attention as is necessary to carry out his/her responsibilities and duties as a director but subject thereto each director will not be expected to devote more than 30 days in any period of 6 months to their respective functions as a non-executive director. Each of the directors has confirmed that he/she can give this commitment to the Company.

    Committees
    A separate Audit Committee is established. The Audit Committee is comprised of two of the Company’s independent non-executive directors, Jane Dumeresque and Nick Stagg.  Andrew Hall retired from the Audit Committee in May 2019. The Board is satisfied that the Audit Committee’s composition continues to retain the appropriate mix of knowledge, skills, experience, diversity and independence to ensure its effectiveness.

    The Audit Committee meets on a timely basis, at least twice a year. The Audit Committee is chaired by Jane Dumeresque.  No separate Audit Committee report is presented to shareholders as the Board does not consider at present that this would improve the quality of communication with Shareholders given the simple structure of the Company. The Board will continue to review this approach.

    The main roles of the Audit Committee are to monitor the Company’s internal controls, oversee reporting of risk and risk mitigation processes, manage the relationship with, and review reports from, the Company’s auditors and to review communications with shareholders concerning the Company’s accounts.

    The Company has no Remuneration Committee because the Company has no employees and the remuneration of each director is limited by the Articles of Association and considered and set by the Board as a whole. Details of each director’s remuneration is set out in the statutory accounts which are to be approved by Shareholders at the Company’s AGM.  Each of the directors has a Letter of Appointment with the Company. None of the directors has a service contract with the Company. Share options are not awarded to directors for services provided to the Company.

    As the Board is small there is not a separate Nominations Committee and recommendations for appointments to the Board will be considered by the Board as a whole, after due evaluation. In accordance with the Company’s Articles of Association, the Board, as a whole, makes decisions regarding the appointment and removal of directors. At each AGM of the Company one-third of the directors are subject to retirement by rotation provided that the number of directors retiring does not exceed one-third.

    Board and Committees’ attendance
    The Board met on six occasions and the Audit Committee met on three occasions during the year following formal agendas. Attendance at the scheduled Board and Audit Committee meetings during the year is shown in the following table:

 

Board and Audit Committee attendance

No. of scheduled meetings attended in the year Board Audit Committee
D.C. Marshall 6
A.J. Hall 6   3
E.J. Beale 6
J.G. Dumeresque 6  3
N.S. Stagg 5 2
  1. Ensure that between them the directors have the necessary up to-date experience, skills and capabilities

    The Board and directors’ experience and skills
    The Board as a whole remains confident that it has a strong team which contains the necessary mix and balance of experience, skills, personal qualities and capabilities to deliver the Company’s strategy for the benefit of the shareholders over the medium to long-term. The Board will continue to review the collective resources of its directors and whether further resource and skills may be required to deliver on the Company’s strategic objectives. It is not envisaged at this time that any further appointments will be made to the Board in the short-term.

    The background and experience of the Board is set out on page 1 of the 2019 Annual Report. Each of the directors has capital markets and listed company experience and in addition each has the following skills, capabilities and personal qualities:

    David Marshall, Chairman
    Skills: Extensive business experience over 40 years; developing and growing successful businesses in the UK and South Africa; considerable knowledge and awareness of international economies and markets; financial and analytical skills.

    Capabilities: strong track record in developing trading, financial and property companies; recognised for his investment management capability and insight; strong leadership skills as a director and in particular as a chairman; fosters and promotes positive business cultures and effective management.

    Personal qualities: Excellent inter-personal skills, a good communicator and negotiator, and, as a director and chairman, welcomes engagement and discussion with shareholders.

    Andrew Hall, Senior Independent Director
    Skills: Over 40 years of activity in financial services and investment management; successful record in investment management and in developing business strategies and processes to enhance services and performance where he has held senior investment positions.

    Capabilities: has worked with a number of leading city institutions in his career where, as a senior executive, his leadership skills have created successful investment strategies and platforms; well connected through a professional network built up over the course of his career; as an active investor he has a particular interest in the investment and development of technology companies focused on power generation and storage.

    Personal qualities: knowledgeable, informed and a good communicator; appointed as the Company’s Senior Independent director with the opportunity, alongside the Chairman, David Marshall, to meet and communicate with the Company’s shareholders.

    Edward Beale

    Skills: Chartered Accountant with considerable financial and accounting skills developed in both small and large companies operating globally and as a director of a wide range of companies, including the Company and London Finance & Investment Group PLC; he is also currently CFO to JSE listed Marshall Monteagle PLC.

    Capabilities: strong business management capability in a wide range of environments; considerable experience and understanding of accounting standards and financial reporting, expert adviser on practical governance and corporate reporting, regulatory and compliance issues.

    Personal qualities: Informed, capable, committed and a good communicator.

    Jane Dumeresque
    Skills: Chartered Accountant with an MBA from the LSE; strong financial, accounting research and management skills acquired over 30 years and applied to senior roles in the financial services sector including in corporate broking and investment management.

    Capabilities: She has also held senior executive roles as CFO and CEO with listed and private companies. She has led management teams in developing companies and new business strategies and with her financial skills she has achieved business efficiencies and improved financial performances; she has a strong understanding of compliance and regulation and the evaluation of strategy and risk and a particular interest in identifying companies which can benefit from changes in their particular industries either through rapid organic growth or as likely acquisition targets in industry consolidations.

    Personal qualities: gregarious, committed, informed and with strong integrity.

    Nick Stagg

    Skills: Chartered Accountant; strong financial and business skills; over 30 years of specialising in the management of  international people businesses focused on finance, management, legal practices and property consultancies; as CFO, CEO and Executive Chairman successfully managed a number of international businesses with worldwide operations; initiated, negotiated and completed a wide range of acquisitions, mergers and disposals; evaluation and management of business risks including compliance and regulation.

    Capabilities: strong leadership and decision maker capability; HR experience in creating and developing high quality management teams.
    Personal qualities: good communicator and negotiator; well connected through an extensive network of investors and professionals.

    Skills updating and training
    The directors keep abreast of the markets and financial, investment and economic news through the financial press and journals. From time to time, the directors also attend professional and investment industry related conferences and seminars with a view to keeping up to date with professional issues and technical skills and industry developments.

    All directors are encouraged to maintain individual continuing professional education programmes and all have the opportunity, if required, to attend specialist courses which can enhance their skills relative to the Company’s investment business. The Company Secretary, from time to time, provides technical briefings relating to regulatory and compliance issues and corporate governance and Cairn Financial, the Company’s NEX Exchange corporate adviser, from time to time provides briefings on the NEX Exchange Growth Market Rules and other compliance matters.

    Advisers to the Board
    The Company retains the services of City Group as Company Secretary and two external advisers, BDO LLP, its auditors, and Cairn Financial Advisers LLP, the Company’s NEX Exchange corporate adviser.

    The Company Secretary, City Group, assists the Chairman in the effective organisation of the Board and attends all Board and Board Committee meetings and Audit Committee meetings to record the business and proceedings of such meetings. The Company Secretary assists the Board generally in understanding the impact of public market regulation on the Company and its business and is available at all times to provide advice and guidance to the Directors and ensure that each of them is aware of, and that the Company and Directors meet, their statutory and regulatory obligations.

    The Board and Audit Committee did not seek any external advice during the year.

    Subject to certain conditions, the directors are entitled to obtain independent professional advice at the Company’s expense.

    Internal Roles and Responsibilities
    David Marshall, as Chairman, is responsible for leading an effective Board with strategic focus and direction and fostering a good corporate culture.

    Andrew Hall, as Senior Independent Director, provides support and guidance to the Chairman and other directors of the Company. Along with the Chairman he is a key member of the Board in terms of liaising and meeting with the Shareholders and addressing their concerns and enquiries.

    The directors of the Company, as non-executives, are expected to not only play a part in the management of the Company but also to challenge and contribute to the development of strategy and the achievement of the Company’s objectives. They all play their part by being experienced and commercial individuals who bring a wide range of skills and capabilities to the Board.

  1. Evaluate all elements of Board performance based on clear and relevant objectives, seeking continuous improvement

    Performance effectiveness evaluation
    An annual assessment of the effectiveness of the Board and the Audit Committee is carried out through an internal questionnaire process. The outcomes and principal findings are reported to the Board for consideration by the Company Secretary with recommendations as to any action that might be taken and changes that could be made.

    The evaluations for 2019 were conducted in the Summer and the questionnaires were reviewed by the Company Secretary with the feedback being provided to the Board. The evaluations concluded that the Board and the Audit Committee performed well during the year under review and were effective in meeting their objectives and fulfilling their obligations.

  1. Promote a corporate culture that is based on sound ethical values and behaviours

    The Company’s culture
    Given the size of the Board and the fact that the Company has no employees, the Company has a simple, open, collegiate culture, which is promoted by the Board, with the objective of enhancing the shareholders’ long-term interests through prudent, responsible and considered investment. This approach is a reflection of the Company’s objectives, its strategy and its business model and takes into account the Company’s risks and uncertainties, all of which are set out in the Strategic Report on pages 4 to 8 of the 2019 Annual Report.

    The current culture promoted by the Board is considered appropriate and will continue until such time as the Board considers that the Company’s strategy needs to be reviewed and updated.

 

  1. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

    Roles and responsibilities of the Board
    The Board as a whole, the size of which is considered appropriate given the size of the Company, manages the business of the Company on behalf of Shareholders and in accordance with the Company’s Articles of Association. This is achieved through its decision making and where appropriate through the delegation of certain responsibilities to committees.

    The roles of the Chairman, David Marshall, the Senior Independent Director, Andrew Hall, the individual non-executive members of the Board and the Company Secretary are explained above under Principle 6 above.

    The Company’s Committees
    Details in relation to the Company’s Committees are set out under Principle 5 above.

    Matters reserved for the Board
    The matters reserved for the Board and the terms of reference for the Audit Committee are available on the Company’s website.

  1. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
    The Audit Committee’s remit and work undertaken during the year ended 30th June 2019
    The main roles of the Audit Committee are to monitor the Company’s internal controls, oversee reporting of risk and risk mitigation processes, manage the relationship with, and review reports from, the Company’s auditors and to review communications with shareholders concerning the Company’s accounts.

    Audit Committee Report
    No separate Audit Committee report is presented to shareholders as the Board does not consider at present that this would improve the quality of communication with Shareholders given the simple structure of the Company.  The Board will continue to review this approach.

    Remuneration and Nomination Committees
    No separate Remuneration Committee report is presented to Shareholders. As explained under Principle 5 above the Company has no Remuneration Committee because the Company has no employees and the remuneration of each director is limited by the Articles of Association and considered and set by the Board as a whole. Furthermore, given the current size of the Board, there is not a separate Nominations Committee and recommendations for appointments to the Board will be considered by the Board as a whole, after due evaluation and in accordance with the Company’s Articles of Association.

    Voting at AGMs
    The results of voting on resolutions put to Shareholders in the Company’s AGMs are displayed in the News section under Investors on the Company’s website.

    There have been no significant voting (20 per cent or more) against any resolutions put to Shareholders in AGMs over the last 5 years.

    Financial reports and other Shareholder documents
    All financial reports, annual and interim, and all other shareholder documentation including circulars, Notices of AGM and GM sent to Shareholders over the last 5 years are displayed on the Company’s website.

    Regulatory compliance
    The Board strives to remain aware of its and the Company’s responsibilities in respect of all relevant and applicable laws and regulations in the UK and, so far as the Board is aware, it and the Company have complied with all such laws and regulations including the provisions of the Companies Act 2006, the Prospectus Rules, the NEX Exchange Rules, the Financial Services and Markets Act 2000, as amended by the Financial Services Act 2012, the relevant Disclosure and Transparency Rules, the EU Market Abuse Regulation 2014 and any applicable codes of practice relating to takeovers and substantial acquisitions of shares.

    Directors’ and Officers’ Liability Insurance and Third-Party Indemnity Insurance
    During the year, the Company has maintained insurance cover for its directors and officers under a Directors’ and Officers’ liability insurance policy. The Company has not provided any qualifying third-party indemnity cover for the directors although under the Company’s Articles of Association the Company may indemnify any Director or other officer against any such liability.

    Conflicts of interest
    Under the Companies Act 2006, directors must avoid situations where a direct or indirect conflict of interest may occur. The Company has in place procedures to deal with any situation where a conflict may be perceived.