Corporate Governance

 

ADOPTION OF RECOGNISED CORPORATE GOVERNANCE CODE

All AIM companies are now required to apply a “recognised corporate governance code” and to explain how they apply that code.

The Directors of Lionsgold (“Lionsgold” or “the Company”) have chosen to apply the Corporate Governance Code produced by the Quoted Companies Alliance (“QCA”) (the “QCA Code”).

The QCA Code is constructed around ten broad principles and a set of disclosures which notes appropriate arrangements for growing companies and requires companies who have adopted the QCA Code to provide an explanation about how they are meeting those principles through the prescribed disclosures.

Below is a table stating those ten principles and which sets out how Lionsgold addresses them. This table was last updated on 27 September 2018.

QCA Code Principle

How it should be applied

What Lionsgold does

1

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

The board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term. It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.

Lionsgold is an integrated gold-focused company involved in the exploration, production and retail application of physical gold as a mainstream currency.

Lionsgold’s three core focuses are:

  • Developing the digital gold currency Goldbloc® which includes holding a strategic 12.5% ownership, and seat on the board, of banking and compliance platform developer Railsbank Technology Ltd, to enable customers to utilise direct ownership of physical gold as a currency via the international banking system ( www.goldbloc.com ).
  • Its strategic partnership with leading India gold exploration and mine development company, Geomysore Services India Ltd, in which Lionsgold owns 21.65%; and
  • Gold exploration and production in Finland via Lionsgold’s 30% ownership, and board seat, of its Finnish Joint Venture company, Kalevala Gold Oy.

Whilst general international entity corporate risks broadly apply, there are distinctly separate risks specific to the financial technology and mining platforms of Lionsgold, respectively.

In relation to Lionsgold’s financial technology platform, key challenges are commercial risk – consumer release market penetration of its alternative currency Goldbloc®, technology risks - combination of early stage technological development amongst several partner entities, regulatory risk - changing political conditions and the governmental regulation of banking, and finance risk – Lionsgold’s ability to access the necessary capital to fund its marketing and operations into positive cashflow.

Regarding Lionsgold’s gold mining focus in India and Finland, the company’s investments in its Indian partner, Geomysore, and Finnish partner, Kalevala, are tied to ongoing project development of mine sites in relatively geopolitically stable countries. Nonetheless, both the Indian and Finnish projects are at varying early stages and subject to several operational risks commonly observed in the gold mining sector.

Across both the financial technology and mining platforms, Lionsgold’s future potential revenues from product sales will likely be affected by changes in the market price of gold.

These risks are mitigated first and foremost through the risk management framework established and overseen by the Board. These risks are viewed by the Board as manageable and as business challenges to overcome.

2

Seek to understand and meet shareholder needs and expectations

Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.

The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions

The Board is committed to maintaining good communications and having a constructive dialogue with both its institutional and private shareholders. The Company endeavours to maintain a dialogue and keep shareholders informed though its public announcements and its corporate website. The Company website also allows shareholders and prospective shareholders to message the Company via the form on the ‘contact us’ page.

The Company encourages all shareholders to attend its Annual General Meeting where they can meet and question the Directors and express ideas or concerns. The Directors undertake presentations and roadshows to institutions and investors as appropriate and periodically participate in investor presentation events and recorded interviews that are available to view on the corporate website. Shareholders are welcome, by appointment, to visit the Company’s corporate headquarters at Salisbury House, London Wall, London to meet and talk with the CEO, subject to commercial confidentiality and regulatory restrictions.

In addition, shareholder communication is answered, where possible or appropriate, by the respective point of contact at Lionsgold, the Company’s stockbroker or the Company Nomad (nominated adviser). The shareholder liaison and specific point of contact for all shareholders is the CEO, Cameron Parry.

3.

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

Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interests and expectations.

Where matters that relate to the company’s impact on society, the communities within which it operates or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.

Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups

The Board recognises that the Company’s continued growth and long-term success is largely reliant on its relations with its stakeholders, both internal (employees and shareholders) and external (customers, suppliers, agents, business partners and advisers).

In both our financial technology and mining platforms, our employees and external operating partners are a key factor in delivering successful growth and as such the Company fosters an open and friendly dialogue among same. The Company endeavours to keep its employees and external operating partners informed on the Company’s progress and holds regular meetings, both formal and informal.

In relation to Goldbloc, our key resources and relationships are with Railsbank Technology Ltd and the Electronic Money Institution, PayrNet Ltd, gold market traders utilised, and gold vaulting service providers, and marketing and digital strategy agencies.

In relation to the Company’s mining assets, the key resources and relationships are with the two companies in which Lionsgold owns shares (Geomysore Services India Ltd in India, and Kalevala Gold Oy in Finland). Lionsgold is involved with both of those companies at board level, but those two companies and their stakeholder relationships are managed by their internal management teams.

The Company also maintains a regular dialogue with its external stakeholders and business partners around the world which help drive business development. The Company works closely with its advisers to ensure it operates in conformity with its listing regulations as well as the social, legal, religious and cultural requirements of the countries in which it operates.

4.

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

The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.

Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).

As an entrepreneurial business there is clearly an elevated risk which is balanced by potentially greater rewards. The Board is mindful of and monitors both its corporate risks and individual project risks. Risks are categorised by both probability and impact and appropriate measures identified to monitor and mitigate any potential impact.

Commercial risks in relation to product rollout and market penetration of Goldbloc® are dealt with through Lionsgold’s B2C (business to consumer) and B2B (business to business) strategy and specifics risks managed on a case by case basis and monitored as risks change and new risks appear. With regards to its mining interests, project risk mitigation forms part of regular project management meetings with those associate companies. The project manager within those associate companies has responsibility for maintaining the project risk register.

The Company’s corporate risks, risk monitoring, and risk management procedures are regularly reviewed by the Board at Board Meetings and the Company’s risk register updated as necessary. The Company Secretary will have responsibility for maintaining the corporate risk register. Due to its size, the Board does not believe a separate Risk Committee is warranted, and thus the Board Chairman will be responsible for ensuring the risk register is regularly reviewed and the CEO will report on status and updates at Board meetings. The Company provides a risk report in its Annual Report each year.

5.

Maintain the board as a well-functioning, balanced team led by the chair

The board members have a collective responsibility and legal obligation to promote the interests of the company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board.

The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non- executive directors. Independence is a board judgement.

The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.

Directors must commit the time necessary to fulfil their roles.

The Board is responsible for running theCompany, maintaining all internal control systems and considering all major business and financial risks. All strategic decisions are decided by the board acting collectively.

The current members of the board are:

  • Michael Corcoran – Interim Chairman and Non-Executive Director
  • Cameron Parry – Managing Director and CEO
  • Hanuma Prasad – Non-Executive Director

The CEO is engaged to dedicate the majority of his professional time (not less than 40 hours per week) to corporate strategy, business development and day-to-day operations, and the Non-Executive Directors commit sufficient time to the Company in addition to their attendance at Board and relevant Committee meetings.

More specifically with respect to the non-executive directors:

Mr Michael Corcoran is an independent non-executive director and provides a minimum of two days per month devoted to the Lionsgold business.

Dr Hanuma Prasad joined the Lionsgold board in November 2016. Mr Prasad is the CEO of the multi-metals group that established Geomysore, Lionsgold’s Indian gold mining partner. Dr Prasad has been with Geomysore since 2001, as exploration manager for 13 years, and now as technical and strategy advisor. Mr Prasad devotes up to two days per month specifically for his duties as Non-Executive Director of Lionsgold and dedicates the majority of his time to the operations and development of Lionsgold’s associate company in India.

The Company is currently undergoing a readmission process to AIM. As part of that process, the Company is likely to make certain changes to the board in the next two to three months, including the appointment of a permanent Non-Executive Chairman, a new Non-Executive Director and an executive Finance Director. At that point, there will be at least two independent, whilst maintaining a majority of, Non-Executive Directors.

The board endeavours to hold quarterly meetings and at any other time deemed necessary for the good management of the business. The meetings are held at a location agreed between the board members.

Board minutes and related papers are circulated to directors ahead of the relevant board meeting.

The following table summarises the board and committee meetings held during the time period July 1, 2017 – June 30, 2018 (most recent first):

Date

Meeting Type

Directors In Attendance

28 June 2018

Board Meeting

Cameron Parry and Hanuma Prasad

28 March 2018

Board Meeting

David Price and Cameron Parry

20 February 2018

Board Meeting

David Price and Cameron Parry

25 January 2018

Board Meeting

Cameron Parry, David Price and Hanuma Prasad

4 January 2018

Board Meeting

Cameron Parry, David Price and Hanuma Prasad

29 December 2017

Board Meeting

Cameron Parry, David Price and Hanuma Prasad

28 December 2017

Annual General Meeting

Cameron Parry and David Price

20 December 2017

Board Meeting

David Price, Cameron Parry and Hanuma Prasad

19 December 2017

Board Meeting

David Price, Cameron Parry and Hanuma Prasad

6 December 2017

Board Meeting

Cameron Parry, David Price and Hanuma Prasad

22 November 2017

Board Meeting

Cameron Parry, Luke Cairns (part) and Hanuma Prasad

As noted in the above table, Mr Luke Cairns (until November 22, 2017) and Mr David Price (from November 22, 2017 through the end of the financial year ended June 30, 2018) served as directors of Lionsgold.

The board has established audit and remuneration committees which meet in accordance with their terms of reference.

6

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

The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition.

The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board.

As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.

Cameron Parry, the CEO, is an experienced chief executive running public market listed companies in both the financial technology and mining sectors. Mr Parry is also an FCA regulated person deemed controller of an FCA licenced firm and keeps abreast of changes in regulations and data privacy requirements as a regulated person.

Michael Corcoran, the Interim Chairman, is a corporate lawyer with vast experience in advising public companies in a range of sectors, but particularly resources and technology (including fintech), the areas on which Lionsgold is focused. Mr Corcoran maintains ongoing professional development as a practising lawyer.

Hanuma Prasad, Non-Executive Director, is a highly experienced mining professional and doctor of geology. Dr Prasad maintains ongoing industry involvement as required to be demonstrated to maintain being a member of the Australian Institute of Mining & Metallurgy.

As stated above, it is anticipated that the board’s composition will be expanded significantly in the next two to three months as part of the readmission to AIM process.

The Company periodically holds briefings for the directors covering regulations that are relevant to their role as directors of an AIM-quoted company from its Nominated Adviser and lawyers.

7.

Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.

The board performance review may be carried out internally or, ideally, externally facilitated from time to time.

The review should identify development or mentoring needs of individual directors or the wider senior management team.

It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable

Evaluation of the performance of the Company’s board has historically been implemented in an informal manner.

In the coming year however, the board will formally review and consider the performance of each director at or around the time of the Company’s annual general meeting using a process which is currently under development.

For the aforementioned forthcoming new appointments, the search for candidates is being conducted and appointments will be made, on merit, against objective criteria and with due regard for the benefits of relevant industry experience and diversity of skillset on the Board.

8.

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

The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team. Corporate values should guide the objectives and strategy of the company.

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.

The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company

The board recognises that a corporate culture based on sound ethical values and behaviours is an asset and a commitment to its core values provides competitive advantages. The Company operates internationally and is mindful that respect of individual cultures is critical to corporate success. The Company endeavours to conduct its business in an ethical, professional and responsible manner, treating our employees, customers, suppliers and partners with equal courtesy and respect at all times. To ensure that the Company has the means to determine that ethical values and behaviours are recognised and respected, the board has endorsed multiple policies which mandate ethical behaviour, both internally as to employees and externally as to its various counterparties. Examples of such policies are AML, KYC, fair treatment and equal opportunity.

9.

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

The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:

  • size and complexity; and
  • capacity, appetite and tolerance for risk.

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.

The board sets the Company’s strategic aims and ensures that necessary resources are in place in order for the Company to meet its objectives. All members of the board take collective responsibility for the performance of the Company and all decisions are taken in the interests of the Company. The following are non-exhaustive, detailed specific matters subject to decision by the board. These include joint ventures and investments, projects of a capital nature and all significant contracts. The Non-Executive Directors have a particular responsibility to constructively challenge the strategy proposed by the CEO to scrutinise and challenge performance and to ensure appropriate performance-focused remuneration structures.

The Chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role. The Chairman with the assistance of the Chief Executive Officer sets the Board’s agenda and ensures that adequate time is available for discussion of all agenda items, in particular strategic issues.

The CEO is responsible for creating corporate strategy for approval by the Board, running the business and implementing the decisions and policies of the Board. The CEO is also responsible for the Company’s finances and capital raising endeavours and for ensuring the Company’s communication with shareholders is timely, informative and accurate with due regard to commercial sensitivity and regulatory requirements.

The Chief Financial Officer (CFO) is responsible for the Company’s financial controls. The role of Company Secretary is undertaken separately to that of the CFO.

The Non-Executive Directors are appointed not only to provide independent oversight and constructive challenge to the Executive Directors but also chosen to provide strategic advice and guidance. This is particularly important given the Company operates internationally in challenging markets.

All directors are able to allocate sufficient time to the Company to discharge their duties. There is a formal, rigorous and transparent procedure for the appointment of new directors to the Board. The search for Board candidates is conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board.

The Board is responsible for ensuring that a sound system of internal control exists to safeguard shareholders’ interests and the Company’s assets. It is responsible for the regular review of the effectiveness of the systems of internal control. Internal controls are designed to manage rather than eliminate risk and therefore even the most effective system cannot provide assurance that each and every risk, present and future, has been addressed. The key features of the system that operated during the year are described below.

The Board has established the following committees to assist with oversight and governance:

Audit Committee

The Audit Committee comprises Lionsgold’s Chairman and CFO and the Company’s auditor. It oversees and reviews the Company’s financial reporting and internal control processes, its relationship with external auditors and the conduct of the audit process together with its process for ensuring compliance with laws, regulations and corporate governance. Although it is composed of the Chairman (and non-executive director) and the CFO, other individuals such as the Company’s CEO or company representatives may be invited to attend all or any part of any meeting when deemed appropriate. Additional members of the Company’s external auditors will be invited to attend meetings of the Committee as and when required.

There is currently no internal audit function in view of the size of the Group, although this is kept under annual review.

 

Remuneration Committee

The Remuneration Committee comprises any two directors independent to the remuneration in question. The Remuneration Committee is responsible for establishing a formal and transparent procedure for developing policy on executive remuneration and to set the remuneration packages of individual Directors. This includes agreeing with the Board the framework for remuneration of the Chief Executive, all other Directors and such other members of the executive management of the Company as it is designated to consider. It is furthermore responsible for determining the total individual remuneration packages of each Director including, where appropriate, bonuses, incentive payments and share options.

The Committee’s policy is to provide a remuneration package which will attract and retain Directors and management with the ability and experience required to manage the Company and to provide superior long-term performance. It is the aim of the Committee to reward Directors competitively and on the broad principle that their remuneration should be in line with the remuneration paid to senior management of comparable companies. There are four main elements of the remuneration package for Executive Directors: base salary, share options, benefits and annual bonus

 

The board has established audit and remuneration committees, which meet regularly in accordance with their terms of reference. This detail also includes the roles and responsibilities of each of the directors, with all of the Non-Executive directors sitting on each of the sub-committees of the board.

The matters reserved for the board, are set out in the Board Terms of Reference, and can be summarised as follows:

- Reviewing, approving and guiding corporate strategy, major plans of action, risk appetite and policies, annual budgets and business plans; setting performance objectives; monitoring, implementation and corporate performance; and overseeing major capital expenditures, acquisitions and disposals;

- Monitoring the effectiveness of the Company’s governance arrangements and practices, making changes as needed to ensure the alignment of the Company’s governance framework with current best practices;

- Ensuring that appointments to the Board or its Committees are effected in accordance with the appropriate governance process;

- Monitoring and managing potential conflicts of interest of management, Board members, shareholders, external advisors and other service providers, including misuse of corporate assets and abuse in related party transactions; and

- Overseeing the process of external disclosure and communications. The Board is also responsible for all other matters of such importance as to be of significance to the Group as a whole because of their strategic, financial or reputational implications or consequences.

At this stage the board believes that the governance framework is appropriate for a Company of its size but it continues to keep this under review.

10.

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

A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company.

In particular, appropriatecommunication and reporting structures should exist between the board and all constituent parts of its shareholder base. This will assist:

• the communication of shareholders’ views to the board; and

• the shareholders’ understanding of the unique circumstances and constraints faced by the company.

It should be clear where these communication practices are described (annual report or website).

The Company is committed to open dialogue with both institutional and retail shareholders. The CEO liaises with Lionsgold’s principal shareholders and relays their views to the wider board.

On the Company’s website shareholders can find all historical RNS announcements, interim reports and annual reports. The Audit Committee and Remuneration Committee reports, whilst not currently available, will be included in the next Annual Report. Annual Reports and Annual General Meeting Circulars are posted directly to all registered shareholders or nominees and results of Annual General Meeting votes are also published on the Company’s website. As described above, the Company also maintains email and phone contacts, which shareholders can use to make enquiries or requests in accordance with the Company’s social media policy.