Aterian plc (“Aterian” or the “Company”) and its subsidiaries (together, the “Group”) are required to comply with a recognised corporate governance code, demonstrating how the Group complies with such corporate governance code and where it departs from it. The Company has decided to apply the QCA Corporate Governance Code (“QCA Code”), which is specifically designed for growing companies, as the Corporate Governance framework to ensure adequate corporate governance standards as befits the nature of the Company’s business and the stage attained in the continuing evolution of the Company, and in-line with its corporate strategy and business goals.
The QCA Code sets out ten principles by which the code may be applied to any company. These principles are outlined below as a demonstration of how the Company meets these requirements. The Board follows and applies the principles of the QCA Code and the Company will provide annual updates on its compliance with the QCA Code in its Annual Report.
Maintaining a Dynamic Management Framework
Establish a strategy and business model which promote long-term value for shareholders
The Company seeks to secure the acquisition of critical and strategic mineral resource assets relating to copper, silver, nickel, cobalt, tin, tungsten, niobium and tantalum exploration, production and trading across Africa. Aterian can deploy capital on ESG compliant producing and profitable mines to significantly increase productivity and improve safety. The opportunity exists to acquire and consolidate existing inefficient mines to create a tin, tungsten, and tantalum mining company providing the capital expenditure on mechanisation, technology and safety equipment needed to upgrade the sector and thereby significantly increase production. The Company remains active in identifying further opportunities across a range of critical strategic commodities and jurisdictions. The Company intends to achieve these goals while maintaining corporate governance principles in line with those outlined in the QCA Code. The key challenges in achieving this are set out below.
Seek to understand and meet shareholder needs and expectations
The Board considers that good communication with shareholders, based on the mutual understanding of objectives, is important. In addition to the information included in the Company’s annual and interim reports and required public announcements, there is regular dialogue between the Board and senior management and shareholders including regular presentations to investors, including one-to-one meetings with major shareholders in addition to specific meetings with shareholders relating to major transactions.
Through shareholder feedback the Company ensures that it remains in touch with the information requirements of our shareholders, their expectations regarding their investment, and the motivation behind their voting decisions. The Director’s consider shareholder’s motivations and expectations to be broadly correlated with that of the Company and the Company’s strategy.
The Company aims to update on key events within these categories frequently, and in a timely manner as events materialise. Directors recognise that shareholders require complete and timely information as a necessary input to their investment decisions. An up-to-date information flow is also maintained on the Company’s website (www.aterianplc.com) which contains all press announcements and financial reports as well as operational information on the Company’s activities.
The Board also encourages shareholders to attend the Annual General Meeting, at which members of the Board are available to answer questions and present a summary of the year’s activity and the corporate outlook for the Company.
Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board believes that long-term success relies upon good relations with a range of different stakeholder groups, both internal and external. Most importantly, however, we act with respect for people, communities and the environment and implement a strong ESG policy.
Companies in the natural resources and commodities industries are particularly exposed to ESG challenges, in large part due to the unique combination of environmental issues, human rights issues and financial transparency. Given our involvement in businesses centered primarily on the very large and diverse African continent our mining projects, we may be obliged to deal in geographical lacking well developed legal systems or human rights protections
As part of our business model, we identify the relationships on which the Company relies, including local populations, suppliers, customers, partners and other stakeholders, and seek to maintain and improve these relationships in a number of ways but particularily through direct engagement. We regularly seek to obtain, and take action on, feedback from the population, our employees, our suppliers and other parties with whom we transact, as to how we can best maintain and improve our interactions with each other.
Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board is responsible for reviewing and approving overall Company strategy, approving all revenue and capital budgets and plans, and for determining the financial structure of the Company including treasury, tax and dividend policy. Budgeting and planning is undertaken by management in conjunction with the Executive Chairman. The Board, while deciding the strategy, also weights different risks and adjusts their strategy accordingly
The Board recognises that maintaining sound controls and discipline is critical to managing the downside risks to the Company’s plan. The Board has ultimate responsibility for the Company’s system of internal control and for reviewing its effectiveness. However, any such system of internal control can provide only reasonable, but not absolute, assurance against material misstatement or loss. The Board considers that the internal controls in place are appropriate for the size, complexity and risk profile of the Company. The principal elements of the Company’s internal control system include:
- Close management of the day-to-day activities of the Company by the Executive Directors;
- A forecast budget that will be used to track actual performance on a regular basis, included detailed periodic reporting of performance against budget; and
- Central control over key areas such as capital expenditure authorisation and banking facilities.
The Company continues to review its system of internal control to ensure compliance with best practice, while also having regard to its size and the resources available.
Other areas that will be subject to ongoing review as the Company grows will include regulatory compliance, business integrity, health and safety, risk management, business continuity and corporate social responsibility (including ethical trading, supplier standards, environmental concerns and employment diversity).
The QCA Code requires the Board to ensure the Company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver the Company’s strategy.
Whilst the Board is ultimately responsible for identifying and managing areas of significant business risk, it has established an Audit Committee that ensures effective Risk Management systems are in place that identify and manage key Company risks, establish and maintain effective controls, and ensure compliance with risk management policies and the reporting of any non-compliance occurrences.
The Company’s risk management systems have identified the following key risks as applicable to Aterian and appropriate mitigation controls (where possible or necessary) are in place:
- No assurance of titles or borders
- Mineral property exploration and mining risks (including HR exploitation)
iii. Joint venture funding risks
- Commodity price risks
- Financing and share price fluctuation risks
- Political and currency risks
vii. Insured and uninsured risks
viii. Environmental risks and hazards
- Conflicts of interests
- Key personnel risk
Risk management policies
As part of its Corporate Governance Plan, the Company has a number of policies that directly or indirectly serve to reduce and/or manage risk. These include, but are not limited to:
- Corporate Code of Conduct
- Share Dealing Code / Trading Policy
- Shareholder Communications Strategy
- Audit and Risk Committee Charter
- Risk Management Processes
- Anti-Corruption & Bribery Policy
Roles and responsibilities
The risk management and other policies listed above describe the roles and responsibilities for managing risk. This includes, as appropriate, details of responsibilities allocated to the Board.
The Board is responsible for reviewing and approving changes to the risk management policies and for satisfying itself that the Company has a sound system of risk management and internal control that is operating effectively.
The risk management and other policies will be reviewed annually.
Maintain the board as a well-functioning, balanced team led by the chair
The Board of Directors currently comprises an Executive Chairman, one executive director and two non-executive directors. All directors retire by rotation with at least one third submitting themselves for re-election each year at the Company’s Annual General Meeting.
Executive directors of the Company are required to work such hours as are required to fulfil their obligations to the Company and have service contracts with a 12-month notice period. They are not precluded from having other outside business commitments.
Non-executive directors have letters of appointment with a 3-month notice period and are required to be available to attend Board meetings and to deal with both regular and ad hoc matters. Their letters of appointment provide no indicative time commitment, but they are required to devote sufficient time as may reasonably be necessary for the proper performance of their duties.
The Board considers that both of the non-executive directors, are independent in character and judgement.
The Board is satisfied that it has a suitable balance between independence and knowledge of the business to allow it to discharge its duties and responsibilities effectively.
The Board receives monthly report updates from the management team through minutes of weekly Company meetings.
The Board and its Audit and Remuneration committees are made up of the following members:
Directors are expected to attend at least four Board meetings each year. The Board meets at least 4 times per annum however, the Board meets more frequently than this on an ad hoc basis.
The Audit Committee is scheduled to meet at least 2 times a year but may meet more frequently regarding the Company’s audit or on risk management issues. The Remuneration Committee is scheduled to meet at least once a year.
The Company will report annually on the number of Board and committee meetings held during the year and the attendance record of individual Directors. This information is disclosed in the Company’s Annual Report and Accounts. Formal agendas, papers and reports are sent to the directors in a timely manner, prior to the Board meetings.
Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
Experience and capabilities
The Board is satisfied that, between its Directors, it has an effective balance of skills and experience including technical and commercial mining industry knowledge and expertise and experience in sales, operations, performance improvement, finance, commercial law and capital markets. Each Board member brings a mix of different capabilities which blend well into a successful and effective team.
Board members maintain their skillsets through practice in day-to-day roles enhanced with continuing professional development and specific training where required.
Biographies for each Board member are published on the Company’s website and in the Directors’ Report.
Internal Advisory Responsibilities
Due to the relatively small size and scale of the Company and its Board, the Directors do not consider it appropriate to appoint a Senior Independent Director.
Board members are encouraged to communicate with management, auditors and technical consultants, to keep themselves current with industry trends and developments and changes in legislation with management’s assistance and to attend related industry seminars and visit our offices. Board members have full access to the Company’s records.
The Company also encourages continuing education of its directors and officers, where appropriate, in order to ensure that they have the necessary skills and knowledge to meet their respective obligations to the Company.
All Directors have access to the advice and services provided by the Company Secretary whose appointment and removal is a matter reserved for the Board. The role of Company Secretary is outsourced to MSP Corporate Secretaries Ltd, whom amongst other things, carries out the following functions:
- preparing board packs, agendas and minutes and facilitating the flow of Board information between senior executives and non-executive Directors;
- implementing Board policies and procedures;
- liaising with the Company’s nominated adviser and other professional advisers;
- advising the Board, on corporate governance matters, the application of the Company’s Constitution, and other applicable laws; and
- inducting new Directors.
The Board maintains a regular dialogue with Novum Securities, its nominated corporate adviser, and obtains legal, financial and other professional advice as required to ensure compliance with the LSE Rules and other governance requirements.
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The Company does not currently undertake a formal annual evaluation of the performance of the Board or individual Directors but will consider doing so at an appropriate stage of its development in accordance with general market practice.
Given its relatively small size, the Company has no formal succession planning process in place. Recommendations for Board-level and other senior appointments are put to the Board for approval by the Executive Chairman.
Promote a corporate culture that is based on ethical values and behaviours
The company is founded on a culture of following and promoting the highest ethical standards with regard to its commercial transactions, business practices, strategy, internal employee relations and outward-facing stakeholder and community relationships.
The Board also believes that a healthy corporate culture both protects and generates value for the Company. We therefore seek to operate within a corporate culture that is based on sound ethical values and behaviours. We do this using certain rule-based procedures (such as our formal Corporate Code of Conduct) and, more importantly, by the behavioural example of individual Board members and senior managers. These values, which we seek to instil throughout the Company, include integrity, respect, honesty and transparency. As a small company, these characteristics are far more visible to staff than might otherwise be the case. We also hold internal meetings at which Directors and staff discuss matters, both formally and informally.
An ability to recognise and promote good ethical values and behaviours is seen throughout the organisation as an excellent behavioural asset to an employee or potential employee or indeed board member. The current board members have been chosen with this awareness of the corporate culture and the Company’s ethical standards in mind – new board appointments are also considered in this light. Corporate culture, and high ethical standards with regard to business practices are considered a critical element in attaining the Company’s strategy and goals.
Our culture is reflected in our approach to our relationship with our Environment, our Social presence, and and our Governance Policy. We constantly evaluate how we impact on the:
- Environment: biodiversity, ecosystem services, water management, mine waste / tailings, air, noise, energy, climate change (carbon footprint, greenhouse gas), hazardous substances, mine closure.
- Social: human rights, human resource exploitation, land use, resettlement, vulnerable people, gender, labour practices, worker/community health & safety, security, artisanal miners, mine closure / after use.
- Governance: legal compliance, ethics, anti-bribery and corruption (ABC), traceability & transparency.
The Company operates a well-defined organizational structure through which we constantly seek to determine that ethical values and behaviours are recognized, implemented and respected, in addition to which every employee is aware of our whistleblowing procedures.
Aterian is an equal opportunities employer.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
The Board is responsible for the long-term performance of the Company. There is a formal schedule of matters specifically reserved for the Board, in addition to the formal matters required to be considered by the Board under the Corporations Act. This list includes matters relating to:
- a) appointing executive directors and determining their remuneration;
- b) determining strategy and policy;
- c) reviewing and ratifying risk management and compliance systems and controls;
- d) approving major capital expenditure, acquisitions and disposals;
- e) approving and monitoring budgets and the integrity of financial reporting;
- f) approving interim and annual financial reports;
- g) approving significant changes to the organizational structure;
- h) approving any issues of shares or other securities;
- i) ensuring high standards of corporate governance and regulatory compliance;
- j) the appointment of the Company’s auditors.
The Executive Chairman’s role involves both the leadership of the Board (including responsibility for the establishment of sound corporate governance principles and practices) and leading the Company’s executive management team in the execution of its strategy. He also plays a pivotal role in developing and reviewing the strategy in consultation with the Board.
The QCA Code’s recommendation is that the role of Chairman and Chief Executive are not combined, Aterian’s use of an Executive Chairman reflects both the entrepreneurial nature and early stage of development of its business. The Board sought and secured the contribution of a new CEO and this addition has greatly strengthed the Board and the Company.
The Executive Directors are responsible for implementing and delivering the strategy and operational decisions agreed by the Board, making operational and financial decisions required in day-to-day operations, providing executive leadership to managers, championing the Company’s core values and promoting talent management.
The Independent Non-Executive Directors contribute independent thinking and judgement through the application of their external experience and knowledge and are tasked with scrutinising the performance of management, providing constructive challenge to the executive directors and ensuring that the Company is operating within the governance and risk framework approved by the Board.
The Company’s Board Charter requires it to establish Audit, Remuneration and Nomination Committees to assist the Board in fulfilling its duties once the Board has determined that it is of a sufficient size and structure. At present, the Board believes that, due to the relatively small size of the Company, its Board and operational business, such committees are not yet required. These functions are therefore currently carried out by the Board:
- Financial statements are prepared with assistance from the management accountants and are reviewed by the Executive Chairman before being approved by the Board as a whole. Due to the current, relatively small size of the business, it is not considered appropriate to have an internal audit function.
- Remuneration for both executive and non-executive directors is determined by the Board save that no Director is involved in deciding their own remuneration.
- Given its relatively small size, the Company has no formal succession planning process in place. Recommendations for Board-level and other senior appointments are put to the Board for approval by the Executive Chairman.
Evolution of the Corporate Governance Framework
During 2020 a number of changes were introduced to the Company’s corporate governance procedures in order to improve compliance with the QCA Code.
The Company’s corporate governance policies and procedures will continue to be reviewed regularly and may change further as its business develops and in response to further regulatory and other relevant guidance.
Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Board attaches great importance to providing shareholders with clear and transparent information on the Company’s activities, strategy and financial position. Details of all shareholder communications are provided on the Company’s website. The Company communicates with shareholders through its annual report and accounts, half yearly trading updates, its annual general meeting and one-to-one meetings with certain existing and potential new shareholders.
The Company’s website includes the outcomes of shareholder votes cast at the Annual General Meeting and historic annual accounts, half-year reports and AGM notices.
In formally adopting the QCA Code as its corporate governance framework, the Board has reviewed all aspects of compliance and has taken action to improve disclosures in its annual report and accounts and on its website.
Departures from the QCA code
In accordance with the requirements of the AQSE Rules for Companies, Aterian departs from the QCA Code in the following ways:
Evaluate board performance based on clear and relevant objectives, seeking continuous improvementAterian’s board is focused on implementing the Company’s strategy. Given the size and nature of Aterian, the Board does not consider it appropriate to have a formal performance evaluation procedure in place, as described and recommended in Principle 7 of the QCA Code. The Board will closely monitor the situation as the Company acquires assets and grows.
Maintain governance structures and processes that are fit for purpose and support good decision-making by the board
No nominations committee
The QCA Code states that there should be a nomination committee to deal with the appointment of both executive and non-executive Directors except in circumstances where the Board is small. The Directors consider the size of the current Board to be small and have not therefore established a separate nomination committee. The appointment of executive and non-executive Directors is currently a matter for the Board as a whole. This position will be reviewed should the number of directors increase.