Corporate Governance Statement
The Board of Directors is responsible for the corporate governance of the company. The Board guides and monitors the business activities and affairs of the company on behalf of the shareholders by whom they are elected and to whom they are accountable. The company has adopted systems of control and accountability as the basis for the administration of corporate governance. The Board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the company’s needs. The Corporate Governance Statement has been structured with reference to the Australian Stock Exchange Corporate Governance Council’s (“Council”) “Principles of Good Corporate Governance and Best Practice Recommendations” to the extent that they applicable to the Company.
Information about the company’s corporate governance practices available via the Company website are set out below:
The Board of Directors
The company’s Constitution provides that the number of Directors shall not be less than three. There is no requirement for any shareholding qualification.
If the company’s activities increase in size, nature and scope, the size of the Board will be reviewed periodically and the optimum number of Directors required to adequately supervise the company’s activities will be determined within the limitations imposed by the Constitution and as circumstances demand.
The membership of the Board, its activities and composition is subject to periodic review. The criteria for determining the identification and application of a suitable candidate for the Board shall include quality of the individual, background of experience and achievement, compatibility with other Board members, credibility within the company’s scope of activities, intellectual ability to contribute to Board duties and physical ability to undertake Board duties and responsibilities.
Directors are initially appointed by the full Board, subject to election by shareholders at the next annual general meeting. Under the company’s Constitution the tenure of a director (other than managing director, and only one managing director where the position is jointly held) is subject to reappointment by shareholders not later than the third anniversary following his or her last appointment. Subject to the requirements of the Corporations Act, the Board does not subscribe to the principle of retirement age and there is no maximum period of service as a Director. A managing director may be appointed for the period and on any terms the Directors think fit and, subject to the terms of any agreement entered into, the appointment may be revoked on notice.
The company is not currently of a size, nor are its affairs of such complexity, to justify the formation of other separate or special committees at this time. The Board as a whole is able to address the governance aspects of the full scope of the company’s activities and to ensure that it adheres to appropriate ethical standards.
Appointments to Other Boards
Directors are required to take into consideration any potential conflicts of interest when accepting appointments to other boards.
Independent Professional Advice
The Board has determined that individual Directors have the right in connection with their duties and responsibilities as Directors, to seek independent professional advice at the company’s expense. With the exception of expenses for legal advice in relation to Director’s rights and duties, the engagement of an outside adviser is subject to prior approval of the Chairman and this will not be withheld unreasonably.
Risk Management Systems
The identification and management of risk, including calculated risk-taking activity is viewed by management as an essential component in creating shareholder value.
Management, through the Chief Executive Officer is responsible for developing, maintaining and improving the Company’s risk management and internal control system. Management provides the board with periodic reports identifying areas of potential risks and the safeguards in place to efficiently manage material business risks. These risk management and internal control systems are in place to protect the financial statements of the entity from potential misstatement, and the Board is responsible for satisfying itself annually, or more frequently as required, that management has developed a sound system of risk management and internal control.
Strategic and operational risks are reviewed at least annually as part of the forecasting and budgeting process. The Company has identified and actively monitors a number of risks inherent in the industry in which the Company operates. These include:
These risk areas are provided to assist shareholders and potential investors to better understand the risks faced by our Company and the industry in which we operate, and are not an exhaustive list of the business risks faced by the Company.
The Board also receives a written assurance from the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) that to the best of their knowledge and belief, the declaration provided to the Board in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control, and that the system is operating effectively in relation to financial reporting risks. The Board notes that due to its nature, internal control assurance from the CEO and CFO can only be reasonable rather than absolute. This is due to such factors as the need for judgement, the use of testing on a sample basis, the inherent limitations in internal control and because much of the evidence is persuasive rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in internal control procedures.
Continuous Review of Corporate Governance
Directors consider, on an ongoing basis, how management information is presented to them and whether such information is sufficient to enable them to discharge their duties as Directors of the company. Such information must be sufficient to enable the Directors to determine appropriate operating and financial strategies from time to time in light of changing circumstances and economic conditions. The Directors recognise that oil and gas exploration is a business with inherent risks and that operational strategies adopted should, notwithstanding, be directed towards improving or maintaining the net worth of the company.
ASX Principles of Good Corporate Governance
The board has reviewed its current practices in light of the ASX principles of good corporate governance and best practice guidelines 2004 with a view to making amendments where applicable after considering the company's size and the resources it has available.
As the company's activities develop in size, nature and scope, the size of the board and the implementation of any additional formal corporate governance committees will be given further consideration.
Those policies, practices and arrangements are reviewed regularly. Some of those arrangements are set out below:
· Code of Conduct
· Selection and Appointment of Directors
· Compliance Procedures for ASX Listing Rules
· Shareholder Communication Strategy
· Board and Management Functions
· Share Trading Policy
The following table sets out the ASX Corporate Governance Guidelines with which the company does not comply:
|
ASX Principle |
|
Reference/comment |
Principle 2: |
Structure the board to add value |
||
2.4 |
The board should establish a nomination committee |
|
The Board has no formal nomination committee. Acting in its ordinary capacity from time to time as required, the Board carries out the process of determining the need for, screening and appointing new directors. In view of the size and resources available to the company, it is not considered that a separate nomination committee would add any substance to this process. |
Principle 4: |
Safeguard integrity in financial reporting |
||
4.1 – 4.4 |
The board should establish an audit committee |
|
The company does not have an Audit Committee. The Board believes that, with only 3 Directors on the Board, the Board itself is the appropriate forum to deal with this function. |
Principle 8: |
Remunerate fairly and responsibly |
|
|
8.1 |
The board should establish a remuneration committee |
|
Given the current size of the board, the company does not have a remuneration committee. The board as a whole reviews remuneration levels on an individual basis, the size of the company making individual assessment more appropriate than formal remuneration policies. In doing so, the board seeks to retain professional services as it requires, at reasonable market rates, and seeks external advice and market comparisons where necessary. |
8.2 |
Companies should clearly distinguish the structure of non-executive director’s remuneration from that of executive directors and senior executives. |
|
The Board acknowledges the grant of options to directors’ is contrary to Recommendation 8.2 of the ASX Corporate Governance Principles and Recommendations. However, the Board considers the granting of Director Options to be reasonable in the circumstances, given the necessity to attract and retain the highest calibre of professionals to the Company, whilst maintaining the Company’s cash reserves. |