Corporate Governance Report

Chairman’s Statement

On 30 March 2018 AIM Rule 26 was amended to require all companies listed on AIM to adopt a recognised corporate governance code, with a statement on how that code has been applied to be made available on the corporate website, and to comply with that code from 28 September 2018.

The Board recognises the value of a sound framework of corporate governance, appropriate for the size of the Group and the regulatory framework that applies to AIM listed companies. The Board is committed to the continued review, implementation and development of good corporate governance practices, which will provide the framework the Board needs to follow to deliver its strategic objectives for the benefit of shareholders over the longer term.

As an AIM-listed Company, SmartSpace Software Plc has adopted the principles of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”). The QCA Code identifies ten principles and this document sets out how we have applied those ten principles. The information contained within this report will be updated annually alongside the publication of the Group’s Annual Report or more frequently for any fundamental changes.

 Guy van Zwanenberg

Chairman

27 September 2018

 

Quoted Companies Alliance Code Compliance

The sections below set out the ways in which the Group applies the ten principles of the QCA Code in support of the Group’s medium to long-term success.

1. Establish a strategy and business model which promote long-term value for shareholders

The strategy and business operations of the Group are set out in the Strategic Report on pages 8 to 11 of the Group’s 2018 Annual Report.

The Group’s strategy and business model are developed by the Chief Executive Officer and his senior management team and approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.

As stated in the 2018 Annual Report, the Group’s immediate key strategic priorities to drive future growth are as follows:

  • to focus on developing technology-led intellectual property building on our existing Smart software product suite;
  • to continue with a strategy of both organic and acquisitive growth both in our domestic market and overseas;
  • to develop new sales channels to market for our software solutions, focusing where possible on SaaS arrangement; and
  • to deliver higher quality earnings which, in turn, improve cash generation.

An evaluation of the potential risks and uncertainties of the Group are set out on page 20 of the Group’s 2018 Annual Report.

 

2. Seek to understand and meet shareholder needs and expectations

The Group seeks to maintain a regular dialogue with both existing and potential shareholders in order to communicate the Group’s strategy and progress and to understand the needs and expectations of shareholders.

Beyond the Annual General Meeting, the Chief Executive Officer, Chief Financial Officer and, where appropriate, other members of the board and senior management team meet with investors and analysts to obtain feedback regarding the market’s expectations of the Group.

The Group’s investor relations activities encompass dialogue with both institutional and private investors.

Private Shareholders – the main forum for private shareholders to engage with the Board is at the Company’s AGM where the Board makes itself available for Shareholders to ask questions. The Notice of AGM is sent to Shareholders at least 21 days before the meeting is due to be held. At the meeting, Shareholders vote on each resolution and the meeting is advised of the number of proxy votes for, against and withheld on each resolution. The outcome of the AGM is subsequently announced via RNS and published on the Company’s website.

Institutional Shareholders – the directors consider that it is important that its institutional shareholders understand the business and that their expectations are in accordance with those of the Board. Members of the Board engage with institutional shareholders following the announcement of the annual and interim results explaining the results and the Board’s vision for the future. These meetings are arranged by the Company’s FCA regulated nominated adviser and broker, who will follow up with investors following the meetings and provide anonymised feedback to the Board. Additionally, ad hoc meetings are attended as requested by existing and potential institutional investors.

The Board will consider all feedback received from shareholders whether at the AGM, during face to face meetings with institutional Investors or feedback from its nominated adviser following those meetings. It also reviews analysts’ notes to ensure they accord broadly with the board’s expectations.

The Chairman has visited some of the largest institutional shareholders to discuss corporate plans and any concerns. This has now been made a formal annual responsibility.

The Group also endeavours to maintain a dialogue and keep shareholders informed through its public announcements and Company website. SmartSpace’s website provides not only information specifically relevant to investors (such as the Group’s annual report and accounts and investor presentations) but also regarding the nature of the business itself with considerable detail regarding the services it provides and the manner in which it carries on its business. 

The Group has not historically announced the detailed results of shareholder voting to the market, however, the Board intends to do so going forward.

 

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

The Group is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups, which include the Group’s employees, partners, customers, suppliers, and regulatory authorities. The Group’s operations take account of the need to balance the needs of all of these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Group for the benefit of its members as a whole. The Group endeavours to take account of feedback received from stakeholders, making amendments to working arrangements and operational plans where appropriate and where such amendments are consistent with the Group’s long-term strategy.

The Group considers its actions and likely impact that they may have on the environment and seeks to mitigate any negative impact wherever practicable. Through the various procedures and systems it operates, the Group complies with health and safety and environmental legislation relevant to its activities.

 

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board approves an annual budget which identifies the opportunities to develop the Group’s business as well as the resources required to implement its strategy. The Board reviews progress against budgets and forecasts on a regular basis to ensure the Group’s performance is on target or actions identified if it is not.

The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. Through the activities of the Audit Committee, the effectiveness of these internal controls is reviewed annually.

A summary of the principal risks and uncertainties facing the Group, as well as mitigating actions, are set out on page 20 of the Group’s 2018 Annual Report. The Group maintains appropriate insurance cover as part of its risk management programme.

The senior management team meet at least monthly to consider new risks and opportunities presented to the Group, making recommendations to the Board where necessary.

 

5. Maintain the Board as a well-functioning, balanced team led by the Chair

SmartSpace’s Board consists of four Directors, two of whom are non-executive directors. Each of the directors is subject to election by shareholders at the first Annual General Meeting after his/ her appointment to the Board; and then retires and seeks re-election in accordance with the Company’s Articles of Association, with effect from the next Annual General Meeting, all directors will seek re-election on an annual basis.

The Group does not have a director designated as a Senior Independent Director. In light of the size of the Board, and the Group’s stage of development, the Board does not consider it necessary to appoint a Senior Independent Director at this stage.

Directors’ biographies are available on the company website using the following link here.

The Board is responsible to the shareholders for the proper management of the Group and meets at least ten times a year to set the overall direction and strategy of the Group, to review technological, operational and financial performance and to advise on management appointments. All key operational and investment decisions are subject to Board approval as required by the Company’s schedule of matters reserved for the Board.

A summary of Board and Committee meetings held in the year ended 31 August 2018, and Directors’ attendance records, is set out below:

 

Board Meetings

Audit Committee Meetings

Remuneration Committee Meetings

Total meetings held

15/15

2/2

1/1

Guy van Zwanenberg

14/15

2/2

1/1

Frank Beechinor

15/15

 

1/1

Diana Dyer Bartlett

15/15

2/2

1/1

Spencer Dredge

15/15

 

 

Mark Braund

13/13

 

 


The nominations committee did not meet during the year ended 31 August 2018.

The Board adheres to the QCA Code’s recommendations that a board should have at least two independent non-executive directors. Both non-executive directors are regarded as independent under the QCA Code’s guidance for determining such independence.

The non-executive directors are remunerated by way of an agreed monthly fee. In 2015 they were granted share options under the Company’s Unapproved Share Option Scheme, at a time when the Company had trading difficulties and required substantial Board intervention but had limited funds. The options are not deemed to be significant enough to impact the non-executives’ independence and were granted following a shareholder consultation process. There is no intention to grant any further share options to non-executive directors.

 

6. Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities

The Board considers its Directors to have experience in areas critical to the long-term future success of the Group, covering a deep understanding of technology, corporate strategy, finance and investment. As above, the Directors’ biographies are available on the Company website using the following link.

The Board regularly reviews the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Group.

 

7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

Currently there is no formal Board performance evaluation procedure but the Board does discuss its operational efficiency as well as that of individual directors on a regular basis. As the business grows, consideration will be given to adopting a more formal process.

 

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

The Board seeks to maintain the highest standards of integrity in the conduct of the Group’s operations. An open culture is encouraged within the Group, with regular communications to staff regarding the Group’s progress. The senior management team regularly monitors the Group’s cultural environment and seeks to address any concerns that may arise from time to time.

The Group is committed to providing a safe environment for its staff and all other parties for which the Group has a legal or moral responsibility.

These core beliefs are reinforced by senior management throughout the year at Town Hall and other meetings.

 

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

The Board has overall responsibility for promoting the success of the Group. The executive directors have day-to-day responsibility for the operational management of the Group’s activities. The non-executive directors are responsible for bringing independent and objective judgment to Board decisions.

There is a clear separation of the roles of Chief Executive Officer and non-executive Chairman. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the non-executive directors are properly briefed on matters. The Chairman has overall responsibility for corporate governance matters in the Group and chairs the Remuneration Committee. The Chief Executive Officer has the responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group. The Company Secretary is responsible for ensuring that Board procedures are followed, and applicable rules and regulations are complied with.

The Board has established Audit, Remuneration and Nominations Committees with formally delegated duties and responsibilities and which comprise non-executive directors only, with executive directors attending by invitation.

Diana Dyer Bartlett chairs the Audit Committee, Guy van Zwanenberg chairs the Remuneration Committee and the Nominations Committee.

The Audit Committee normally meets twice a year and at other times if necessary. The Audit Committee recommends the appointment, scope and fees of the external auditor, discusses issues that arise from the audit, reviews the reports of the external auditors and internal control procedures and considers any financial statements before their publication. The external auditor attends meetings as required by the Committee to consider any issues arising from the audit and the auditor’s work. The audit partner meets the Audit Committee without the executive directors being present at least once a year.

The Remuneration Committee, which meets as required, but at least once a year, agrees the terms and conditions, including annual remuneration, of executive directors and reviews such matters for other senior personnel including their participation in long term incentive schemes. It also supervises the Company’s share incentive schemes and sets performance conditions for share options granted under the schemes.

The Nominations Committee meets periodically as required.

 

10. Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Group places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Group’s activities are clear, fair and accurate. The Company’s website is regularly updated, and users can register to be alerted when announcements are posted onto the website.

The Group’s financial reports, regulatory news announcements and notices of general meetings, can be found in the investor relations section of the Company’s website.

The Group has not historically announced the detailed results of shareholder voting to the market, however, the Board intends to do so going forward. The results of voting on all resolutions in future general meetings will be made available on the Group’s website.

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