Corporate governance

The following statement sets out the governance practices of MDM. The Board of directors of MDM is responsible for the corporate governance of the Group. The Board guides and monitors the business affairs of MDM on behalf of shareholders by whom they are elected and to whom they are accountable.

Code of ethics

The Group’s code of ethics requires all employees within the Group to act with the utmost good faith and integrity in all transactions and with all stakeholders with whom they interact. It commits MDM and its employees to sound business practices and compliance with legislation.

MDM is committed to operating in accordance with the highest standards of professional and business ethics by maintaining a Board of directors and management as well as the development of a community of employees with the highest ethical standards.

The Group has developed a code of ethics which complies with sound corporate governance principles, and has the full support of the Board of directors and senior management. The Group has also established a method for reporting fraud which is well communicated to all staff and management.

Amongst the principles to which the directors, management and employees dedicate themselves are:

  • Compliance with legislative and regulatory provisions;
    The protection of human life by following sound safety, health and environmental practices;
  • Treating all stakeholders and employees with respect;
    Not discriminating against any person;
  • Providing employees with equality of opportunity, based on merit;
  • Avoiding all potential conflicts of interest by being transparent in the declaration of all interest;
  • Only using Group resources for the benefit of the Group and its shareholders; and
  • Providing all employees with the opportunity to grow and advance.

Board of directors

The Board is responsible for the overall management of the Group. It is governed by a charter which sets out the framework for the management of the Group and; responsibilities of the Board, its direction, strategies and financial objectives and the monitoring of the implementation of those policies, strategies and financial objectives.

In order to retain full and effective control over the Group and monitor the executive management team, the Board meets regularly and at least on a quarterly basis. All;directors may add to the agenda. Key executives of the Group contribute to Board papers and are from time to time invited to attend Board meetings.

Each director has the right to seek independent professional advice on matters relating to their position as a director or committee member of the Group at the Group’s expense, subject to prior approval of the Chairman, which approval shall not be unreasonably withheld.

Accountability and control

The Board of directors recognizes its responsibilities to retain full and effective control over the Group, review strategy, plan operational and financial performance, consider acquisitions, manage stakeholder communications and other material matters reserved for its decisions.

The directors set standards and management implements systems of internal controls to meet their responsibilities aimed at reducing the risk of error, fraud or loss in a cost-effective manner. This includes the proper delegation of responsibilities within a defined framework, accounting procedures and adequate segregation of duties. These controls are monitored throughout the Group, and all employees are required to maintain the highest ethical standards to ensure business practices are conducted in a beyond-reproach manner under reasonable circumstances.

The directors are of the opinion, based on information obtained from management, that the internal accounting controls are adequate, and the financial records may be relied on for the preparation of the financial statements as presented.

Rotation and selection process of directors

The retirement of directors follows a staggered process, with one-third of the directors retiring at each annual general meeting, and no director serving for more than three years without being re-elected by the members in the general meeting. Retiring directors are free to make themselves available for re-election and may, as such, be re-elected at the annual general meeting at which they retire. A summarized curriculum vitae of each retiring director is circulated to the shareholders with the notice of the annual general meeting.

The shareholders in the general meeting may also from time to time increase or reduce the number of directors and may also determine in what rotation such increased or reduced number is to go out of office. The non-executive directors also maintain the balance of power between shareholders and management.

Non-Executive directors are individuals of calibre and credibility, and have the necessary skill and experience to bring judgement to bear, independent management, on issues of strategy, performance, resources, transformation and diversity.

Executive directors

Executive directors are directors that are involved in the day-to-day management and running of the business and are in full time salaried employment of the Group.

Risk management

The Board of directors accepts its accountability and responsibility for risk management. The Board of directors meets quarterly and is responsible for the Group’s system of internal financial and operational control. The Group’s internal controls are designed to provide reasonable, but not absolute, assurance with regard to the integrity and reliability of the financial statements and to safeguard, verify and maintain accurate records of the Group’s assets and efficient management of the Group’s resources, and facilitate the early detection of potential fraud, liability, loss and material misstatement, whilst complying with applicable laws and regulations.

During the year under review, nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred. A material breakdown is defined as a critical weakness in the process or financial systems which could result in a material loss, contingency or uncertainty requiring disclosure in the published annual financial statements.

Effective risk management is about identifying the potential risks which can impact the enterprise’s objectives, improving understanding of the causes and consequences of those risks, and working to reduce the uncertainty and/or increase the ability to control events or outcomes.

Board structure

The by-laws of the Company determine that the Board consists of not less than two and no more than ten directors. At the date of this report, the Board comprised of five directors, two of whom are non-executive directors.

The division of responsibilities between the Chairman and the Chief Executive Officer is reviewed regularly as defined below:

  • The Chairman, Bill Nairn, is responsible for leadership of the Board, ensuring that the Board receives accurate, timely and clear information in order to facilitate effectiveness of its role.
  • Martin Smith, the Chief Executive Officer, leads executive management. He has been delegated responsibility by the Board for the day-to-day operation and administration of the Group’s assets. The Chief Executive Officer is assisted in managing the business of the Group by an executive team that is comprised of the Senior Management.

Independence of non-executive directors

Independence of directors in essence means those directors are independent of management and free of any business or other relationship that could, or could reasonably be perceived to materially interfere with the exercise of unfettered and independent judgment.

The Board has accepted the guidelines outlined below in determining the independence of non-executive directors. In accordance with these guidelines, Bill Nairn and Mark Summers are both deemed independent.

The Board has accepted the following definition of an independent director:

An independent director is someone who is not a member of management, is not an executive director and who:

  • is not a substantial shareholder (5%) of the Company or an officer of, or otherwiseassociated directly with a substantial shareholder of the Company;
  • within the last three years has not been employed in an executive capacity by the Company or another Group member, or been a director after ceasing to hold any such employment;
  • within the last three years has not been a principal of a material professional advisor or a material consultant to the Company or another Group; member; or an employee materially associated with the service provided;
  • is not a material supplier or customer of the Company or other Group member; or an officer of or otherwise associated directly or indirectly with a material supplier or customer;
  • has no material contractual relationship with the Company or another Group member other than as a director of the Company;
  • has not served on the Board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interest of the Company; and
  • is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interest of the Company.

Company secretary

The Company Secretary is Pieter Theron from Nerine Trust Company (BVI) Ltd. All directors have access to theservices of the Company Secretary. The appointment and removal of the Company Secretary is a matter for the Board to determine as a whole.

Succession planning

The Board brings the range of skills, knowledge, international experience and expertise necessary to govern the Group, but it is aware of the need to ensure processes are in place to assist with succession planning, not only for the Board, but within senior management. The board periodically assesses its balance of skills and those within the Group in order to maintain an appropriate balance within the Group.

Induction training and professional development

In order to assist new directors and key executives in fulfilling their duties and responsibilities within the Group, an induction programme is provided by the Chief Executive Officer, which includes meetings with the executive team and visits to the operating sites of the Group.

The programme enables the new appointees to gain an understanding of the Group’s financial, strategic, operational and risk management position. Full access to all documentation pertaining to the Group is provided. It ensures new& directors and key executives are aware of their rights, duties and responsibilities.

Performance review

The Board of MDM conducts a performance review of itself on an ongoing basis throughout the year. The small size of the Group and hands-on management meet amongst themselves and with management both formally and informally.

The Board considers that the current approach that it has adopted with regard to the review of its performance and that of its key executives provides the best guidance and value to the Group.

Management has undertaken a detailed review of the MDM operations with a view to ensuring the entire value chain is optimally structured and to ensure that the Group is properly structured for the ongoing and future growth.

The strategies arising from this review will be actioned over the next quarter. This will allow us to fulfill ourmission statement which is shown below:

“To be the premium minerals engineering company for clients, staff and other stakeholders by
consistently delivering world-class and ethical engineering and project management solutions.”

Securities trading policy

The Board has adopted a policy covering dealings in securities by directors and relevant employees. The policy is designed to reinforce to shareholders, customers and the international community that MDM directors and relevant employees are expected to comply with the law and best practice recommendations with regard to dealing in securities of the Company.

In addition to restrictions on dealing in closed periods, a director and relevant employees must not deal in any securities of the Company on considerations of a short-term nature and must take reasonable steps to prevent any dealings by, or on behalf of, any person connected with him in any securities of the Company on considerations of a short-term nature. All dealings by directors in the securities of the Company are announced to the market.

Committees of the board

The Board has established three standing committees to assist in the execution of its responsibilities: the Audit and Risk Management Committee, the Remuneration Committee, and the Nomination Committee. Other committees are formed from time to time to deal with specific matters.

In line with best practice, each of the committees operates under a charter approved by the Board detailing their role, structure, responsibilities and membership requirements. Each of these charters is reviewed annually by the Board and the respective committee.

Audit and risk management committee

The Audit and Risk Management Committee has been established to assist the Board of MDM in fulfilling its corporate governance and oversight responsibilities in relation to the Group’s financial reports and financial reporting in process, internal control structure, risk management systems (financial and non-financial) and the external audit process. The Committee is governed by a charter approved by the Board.

The Committee consists of:

  • two members;
  • entirely of non-executive directors; and
  • independent chairperson, who shall be nominated by the Board from time to time.

The members of the Committee at the date of this report are as follows:

  • Bill Nairn
  • Mark Summers

Qualifications of Audit and Risk Management Committee members:

Mr. Nairn has had over 47 years; senior experience in the mining industry and is intimately familiar with the nature of business.

Mr. Summers is a chartered accountant and director of various other entities.

The Board deems all members of the Committee have the relevant experience and understanding of accounting, financial issues and the resources industry to enable them to effectively oversee audit procedures.

The Committee reviews the performance of the external auditors on an annual basis and meets with them to:

  • review the results and findings of the audit at year end and review the annual and interim financial statements and recommend their acceptance or otherwise to the Board; and
  • consider the appropriateness of provisions and estimates included in the financial results,any suggestions in regards the adequacy of accounting and financial controls, and to obtain feedback on the implementation of recommendations made.

The Committee receives regular reports from the external auditor on the significant accounting policies and practices of the Group that have been discussed with management.

The Committee assesses the Group’s structure, business and controls annually. It ensures that the Board is made aware of internal control practices, risk management and compliance matters which may significantly impact upon the Group in a timely manner. The Committee meets when deemed necessary and at least twice a year.

Remuneration committee

The members of the Remuneration Committee at the date of this report are:

  • Bill Nairn
  • Mark Summers

The Committee is governed by a charter approved by the Board. The Board deems all members of the Committee have the relevant experience and understanding to enable them to effectively oversee their responsibilities. The members of the Committee comprise entirely of Non-Executive directors.

The Committee reviews compensation arrangements for the directors and the executive team. The Committee assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to the relevant employment market conditions, with the overall objective of ensuring maximum shareholder benefit from the retention of a high quality executive team. The nature and amount of directors’ and officers’ emoluments are linked to the Group’s financial and operational performance.

In carrying out its responsibilities, the Committee is authorized by the Board to secure the attendance of any person with relevant experience and expertise at Committee meetings, if it considers their attendance to be appropriate and to engage, at the Group’s expense, outside legal or other professional advice or assistance on any matters within its charter or terms of reference.

The Committee reviews succession planning for key executive positions (other than executive directors) to maintain an appropriate balance of skills, experience and expertise in the management of the Group.

The Committee does not allow for retirement benefits of non-executive directors and non-executive directors are remunerated by way of an annual fee in the form of cash.

For details of remuneration of directors and executives please refer to note 24.

The Committee meets as necessary, but must meet at least once a year and the minutes are distributed to all Board members.

Nomination committee

In order to fulfill the Group’s responsibility to shareholders to ensure that the composition, structure and operation of the Board are of the highest standard, the full Board of MDM acts as the Nomination Committee. The Board believes the input of all directors is essential due to their respective expertise and knowledge of the industry and exposure to the markets in which the Group operates.

The Board is guided by a charter and may at times take into consideration the advice of external consultants to assist with this process.

Meetings take place as often as necessary, but the Committee must meet at least once a year and minutes are distributed to all Board members.

Appointments are referred to shareholders at the next available opportunity for election in the general meeting.

Continuous disclosure

The Company has in place a Continuous Disclosure Policy. The policy takes into account the AIM Rules on timely and balanced disclosure. This outlines the Group&rsquo commitment to disclosure, ensuring that timely and accurate information is provided to all shareholders and stakeholders.

Dominique de la Roche is the nominated Communication Officer and is responsible for liaising with the Board to ensure that the Company complies with its continuous disclosure requirements. The Board regularly reviews the Group’s compliance with its continuous requirements.

Communications with shareholders

Shareholder communication is given high priority by the Group. In addition to statutory requirements, such as the annual report and financial statements for the half and full year, MDM maintains a website which contains announcements which have been released to the market. Shareholders are able to contact the Company via the website at www.mdm-engineering.com. Through thewebsite, shareholders are also given the opportunity to provide an email address through which they are able to receive these documents.

Meetings

MDM’s notice of meeting material is distributed to shareholders with an accompanying explanatory memorandum. These documents present the business of the meeting clearly and concisely and are presented in a manner that will not mislead shareholders or the market as a whole.

The notice is dispatched to shareholders in a timely manner providing at least 21 days’ notice pursuant to the by-laws of the Group. Each notice includes the business of the meeting, dealings of the location, time and date of the meeting and proxy voting instructions are included.

Upon release of the notice of meeting and explanatory memorandum to the market, a full text of the notice of meeting and explanatory memorandum is placed on the website of the Group at www.mdm-engineering.com for shareholders and other market participants who may consider investing in the Group.

Company structure

Company structure

Listen with care. Design with purpose. Deliver beyond expectation.


© 2009 MDM Engineering Group Limited