The Prospects MTF Rules issued by the Malta Stock Exchange require qualifying companies admitted to Prospects MTF to observe relevant corporate governance standards, in this case the
Code of Principles of Good Corporate Governance (”the Code”).
The Board of Directors (the “Board”; or the “Directors”) of The Convenience Shop (Holding) plc (the”Company”) acknowledges that although the Code does not dictate or prescribe mandatory rules, compliance with the principles of good corporate governance recommended in the Code is in the best interests of the Company, its shareholders and other stakeholders.
The Company’s decision-making structure is designed to meet the Company requirements and to ascertain that decision making is subject to the checks and balances where this is appropriate.
Good corporate governance is the responsibility of the Board as a whole, and has been, and remains a priority for the Company. In deciding on the most appropriate manner in which to implement the Code, the Board took cognisance of the Company’s size, nature and operations, and is of the opinion that the adoption of certain mechanisms and structures is proportionate to the scale of operations which the Company has.
The Board considers that, to the extent otherwise disclosed herein, the Company has generally been in compliance with the Code throughout the year under review.
This Statement sets out the structures and processes in place within the Company and how these effectively achieve the goals set out in the Code for the year under review. For this purpose, this Statement makes reference to the pertinent principles of the Code and then sets out the manner in which the Board considers that these have been adhered to, and where it has not.
For the avoidance of doubt, reference in this Statement to Compliance with the principles of the Code means compliance with the Code’s main principles.
The Directors believe that for the financial year under review, the Company has generally complied with the requirements for each of the Code’s main principles. Further information in this respect is provided hereunder.
Principle One: The Company's Board of Directors
The Directors report that for the financial year under review, the Directors have provided the necessary leadership in the overall direction of the Company and have performed their responsibilities for the efficient and smooth running of the Company with honesty, competence and integrity. The Board is composed of members who are fit and proper to direct the business of the Company with honesty, competence and integrity. All the members of the Board are fully aware of, and conversant with, the statutory and regulatory requirements connected to the business of the Company. The Board is accountable for its performance and that of its delegates to shareholders and other relevant stakeholders.
The Board has throughout the year under review adopted prudent and effective systems which ensure an open dialogue between the Board and senior management.
The Company has a structure that ensures a mix of executive and non-executive directors and that enables the Board to have direct information about the Company’s performance and business activities.
Principle Two: The Company's Chairman and Chief Executive
The roles of the Chairman and the Chief Executive are held by separate individuals and the division of responsibilities are clearly established and agreed by the Board.
The Chairman exercises independent judgment and is responsible to lead the Board and set its agenda, whilst also ensuring that the directors receive precise, timely and objective information so that they can take sound decisions and effectively monitor the performance of the Company. The Chairman is also responsible for ensuring effective communication with shareholders and ensuring active engagement by all members of the Board for discussion of complex or contentious issues.
The Chief Executive reports regularly to the Board on the business and affairs of the Company and the Group and the commercial, economic and other challenges facing it. He is also responsible to ensure that all submissions made to the Board are timely, give a true and correct picture of the issue or issues under consideration, and are of high professional standards as may be required by the subject matter concerned.
Each subsidiary within the Group has its own management structure and accounting systems and internal controls, and is governed by its own Board, whose members, are appointed by the Company.
This provides sufficient delegation of powers to achieve effective management. The organisational structure ensures that decision making powers are spread wide enough to allow proper control and reporting systems to be in place and maintained in such a way that no one individual or small group of individuals actually has unfettered powers of decision.
Principle Three: Composition of the Board
The Board is composed of 6 members, with 3 executive and 3 non-executive Directors, with each member offering core skills and experience that are relevant for the successful operation of the Company. The non-executive Directors are independent from the Group. The Board is responsible for the overall long-term strategy and general policies of the Company, of monitoring the Company’s systems of control and financial reporting and communicating effectively with the market as and when necessary.
The Board of Directors consists of the following:
- Mr Benjamin Muscat – Chairman & Non-executive Director
- Mr Charles Scerri – Non-executive Director
- Dr Kevin Deguara – Non-executive Director
- Mr Joseph Pace – Executive Director
- Mr Ivan Calleja – Executive Director
- Mr Manuel Piscopo – Executive Director
During the year, the Company Secretary was Dr. Richard Deschrijver.
In accordance with the provisions of the Company’s Articles of Association, the appointment of Directors to the Board is exclusively reserved to the Company’s shareholders, except in so far as appointment is made by the Board to fill a casual vacancy, which appointment would be valid until the conclusion of the next Annual General Meeting of the Company following such an appointment. In terms of the Articles of Association, a Director shall hold office without retirement until death or until they retire or are removed by the Company in accordance with Article 140 of the Companies Act Cap. 386.
Mr. Benjamin Muscat and Mr. Charles Scerri are considered by the Board to be independent non- executive members of the Board.
None of the independent non-executive Directors:
- is or has been employed in any capacity with the Company and/or the Group;
- has or had a significant business relationship with the Company and/or the Group;
- has received significant additional remuneration from the Company and/or the Group;
- has close family ties with any of the Company’s executive Directors or senior employees;
- has served on the Board for more than twelve consecutive years; or
- is or has been within the last three years an engagement partner or a member of the audit team of the present or former external auditor of the Company and/or the Group.
Each non-executive Director has declared in writing to the Board that he undertakes:
- to maintain in all circumstances his independence of analysis, decision and action;
- not to seek or accept any unreasonable advantages that could be considered as compromising his/her independence; and
- to clearly express his/her opposition in the event that he finds that a decision of the Board may harm the Company.
Principle Four: The Responsibilities of the Board
The Board acknowledges its statutory mandate to conduct the administration and management of the Company. In fulfilling this mandate and discharging its duty of stewardship of the Company, the Board assumes responsibility for the Company’s strategy and decisions with respect to the issue, servicing and redemption of its bond in issue, and for monitoring that its operations are in conformity with its commitments towards bondholders, shareholders, and all relevant laws and regulations. The Board is also responsible for ensuring that the Company establishes and operates effective internal control and management information systems and that it communicates effectively with the market.
Directors are entitled to seek independent professional advice at any time on any aspect of their duties and responsibilities, at the Company’s expense.
The Board has also established an Audit Committee in terms of rule 4.01.01(d) of the Prospects MTF Rules as follows:
The Audit Committee
The Audit Committee’s primary objective is to assist the Board in fulfilling its responsibilities: in dealing with issues of risk, control and governance; and review the financial reporting processes, financial policies and internal control structure. During the financial year under review, the Audit Committee met seven times.
Although the Audit Committee is set up at the level of the Company its main tasks are also related to the activities of the Group.
The Board has set formal terms of establishment and the terms of reference of the Audit Committee that establish its composition, role and function, the parameters of its remit as well as the basis for the processes that it is required to comply with. The Audit Committee is a sub-committee of the Board and is directly responsible and accountable to the Board.
Furthermore, the Audit Committee has the role and function of scrutinising and evaluating any proposed transaction to be entered into by the Company and a related party, to ensure that the execution of any such transaction is at arm’s length and on a commercial basis and ultimately in the best interests of the Company.
The Audit Committee is composed of 3 members:
- Mr Charles Scerri – Chairman
- Mr Benjamin Muscat – Member
- Dr Kevin Deguara – Member
Mr. Charles Scerri and Mr. Benjamin Muscat are non-executive Directors and qualified accountants, who the Board considers as independent and competent in accounting. The Audit Committee met seven times during the year. All members were present for all meetings.
Internal Control and Risk Management
The Board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. The Directors are aware that internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve business objectives, and can only provide reasonable, and not absolute, assurance against normal business risks.
During the financial year under review the Company operated a system of internal controls which provided reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the Company.
Other key features of the system of internal control adopted by the Company in respect of its own internal control as well as the control of its subsidiaries and affiliates are as follows:
Risk identification, control and reporting
The Board, with the assistance of the management team, is responsible for the identification and evaluation of key risks applicable to the areas of business in which the Company and its subsidiaries are involved. These risks are assessed on a continual basis with a view to control and mitigate where deemed necessary. Major risks applicable to their areas of business are reported upon on a monthly basis.
Information and communication
Periodic strategic reviews which include consideration of long-term financial projections and the evaluation of business alternatives are regularly convened by the Board. An annual budget is prepared and performance against this plan is actively monitored and reported to the Board.
The Group has implemented control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. Measures taken include physical controls, segregation of duties and reviews by management. On a monthly basis the Board receives a comprehensive analysis of financial and business performance, including reports comparing actual performance with budgets as well as analysis of any variances.
In conclusion, the Board considers that the Company has generally been in compliance with the Principles throughout the year under review as befits a company of this size and nature. Non-compliance with the principles and the reasons thereof have been identified below.
Principle Five: Board Meetings
The Directors meet regularly to dispatch the business of the Board. The Directors are notified of forthcoming meetings by the Company Secretary with the issue of an agenda and supporting Board papers, which are circulated in advance of the meeting. Minutes are prepared during Board meetings recording faithfully attendance, and resolutions taken at the meeting. The Chairman ensures that all relevant issues are on the agenda supported by all available information, whilst encouraging the presentation of views pertinent to the subject matter and giving all Directors every opportunity to contribute to relevant issues on the agenda. The agenda on the Board seeks to achieve a balance between long-term strategic and short-term performance issues.
The Board meets as often as frequently required in line with the nature and demands of the business of the Company. Directors attend meetings on a frequent and regular basis and dedicate the necessary time and attention to their duties as Directors of the Company. The Board met seven times during the financial year under review.
The following Directors attended Board meetings as follows:
Number of Meetings
Mr Benjamin Muscat
Chairman & Non-executive Director
7 out of 7
Mr Charles Scerri
7 out of 7
Dr Kevin Deguara
7 out of 7
Mr Joseph Pace
7 out of 7
Mr Ivan Calleja
7 out of 7
Mr Manuel Piscopo
7 out of 7
Principle Six: Information and Professional Development
As part of succession planning and employee retention, the Board and Chief Executive ensure that the Company implements appropriate schemes to recruit, retain and motivate employees and senior management and keep a high morale amongst employees.
The Chief Executive, although responsible for the recruitment and selection of senior management, consults with the Board on the appointment of, and on a succession plan for, senior management.
Training (both internal and external) of management and employees remains a priority. This is coordinated through the Company’s Human Resources Department.
The Board has access to the advice and services of the company secretary who is responsible for ensuring that board procedures are complied with, as well as for ensuring sound information flows between the Board and the Audit Committee.
Principle Seven: Evaluation of the Board’s Performance
Under the present circumstances, the Board still does not consider it necessary to appoint a committee to carry out a performance evaluation of its role, as the Board’s performance is always under the scrutiny of the shareholders of the Company.
Principle Eight: Remuneration and Nomination Committees
The Board of Directors considers that the size and operation of the Company does not warrant the setting up of a nomination and remuneration committee. The Company will not be incorporating a nomination committee. Appointments to the Board of Directors are determined by the shareholders of the Company in accordance with the company’s Memorandum and Articles of Association. The Company considers that the members of the Board possess the level of skill, knowledge and experience expected in terms of the Code.
Principles Nine and Ten: Relations with Shareholders and with the Market and with Institutional Shareholders
Pursuant to the Company’s statutory obligations in terms of the Companies Act (Cap. 386 of the Laws of Malta), the Annual Report and Financial Statements, the election of Directors and approval of Directors’ fees, the appointment of the auditors and the authorisation of the Directors to set the auditors’ fees, and other special business, are proposed and approved at the Company’s Annual General Meeting.
The Board is responsible for making relevant public announcements and for the Company’s compliance with its continuing obligations in terms of the rules of Prospects MTF. With respect to the Company’s bondholders and the market in general, during the financial year under review, there were twenty (20) Company announcements issued to the market.
The Company’s website (https://www.theconvenienceshop.com/investor-information/) also contains information about the Company and its business which is a source of further information to the market.
Principle Eleven: Conflicts of Interest
The Directors are strongly aware of their responsibility to act at all times in the interest of the Company and its shareholders as a whole and of their obligation to avoid conflicts of interest.
All of the Directors of the Company, except for Mr Benjamin Muscat and Mr Charles Scerri, have a direct beneficial interest in the share capital of the Company, and as such are susceptible to conflicts arising between the potentially diverging interests of the shareholders and the Company. During the financial year under review, no private interests or duties unrelated to the Company were disclosed by the Directors which were or could have been likely to place any of them in conflict with any interests in, or duties towards, the Company.
If a Director has a continuing material interest that conflicts with the interests of the Company, he is obliged to take effective steps to eliminate the grounds for conflict. In the event that such steps do not eliminate the grounds for conflict then the Director should consider resigning.
Moreover, the Audit Committee has the task to ensure that any potential conflicts of interest are resolved in the best interests of the Company. Furthermore, in accordance with the provisions of article 145 of the Companies Act (Cap. 386 of the Laws of Malta), every Director who is in any way, whether directly or indirectly, interested in a contract or proposed contract with the Company is under the duty to fully declare his interest in the relevant transaction to the Board at the first possible opportunity and he will not be entitled to vote on matters relating to the proposed transaction and only parties who do not have any conflict in considering the matter will participate in the consideration of the proposed transaction (unless the Board finds no objection to the presence of such Director with conflict of interest).
Principle Twelve: Corporate Social Responsibility
The Company seeks to adhere to sound Principles of Corporate Social Responsibility in its management practices and is committed to enhance the quality of life of all stakeholders and of the employees of the Company and the Group.
The Board is mindful of the environment and its responsibility within the community in which it operates.
Since its origins, the Group chooses to recognise its social and environmental responsibilities by making Corporate Social Responsibility an important tool to mediate and achieve an optimum balance in responding to the different needs of the various stakeholders.
In 2022 the Group continued exercising its commitment in supporting several NGOs including the Malta Community Chest Fund, The Malta Trust Foundation, ALS Malta, Caritas, Missio and Dar Tal Providenza. The Group has a retail outlet in Qormi with all profits being passed on to Puttinu Cares Foundation.
In carrying on its business the Group is fully aware and at the forefront to preserving the environment and continuously review its policies aimed at respecting the environment and encouraging social responsibility and accountability.
Non-Compliance with the Code
As at the date hereof, the Board considers the Company to be in compliance with the Code except for the following:
Evaluation of the Board’s Performance
The Board has not appointed a committee for the purpose of undertaking an evaluation of the Board’s performance in accordance with the requirements of Code Provision 7.1. The Board believes that the size of the company and the Board itself does not warrant the establishment of a committee specifically for the purpose of carrying out a performance evaluation of its role. Whilst the requirement under Code Provision 7.1 might be useful in the context of larger companies having a more complex set-up and a larger Board, the size of the company’s Board is such that it should enable it to evaluate its own performance without the requirement of setting up an ad-hoc committee for this purpose. The Board shall retain this matter under review over the coming year.
The Board considers that the size and operation of the Company does not warrant the setting up of nomination and remuneration committee in line with Code Provision 8A. The Board relies on the constant scrutiny of the Board itself, the company’s shareholders, the market and the rules by which the company is regulated as a listed entity. In addition, the Board took into consideration the fact that the remuneration of the Board is not performance related. The Board intends to keep under review the utility and possible benefits of having a Remuneration Committee in due course.
Appointments to the Board of Directors are determined by the shareholders of the Company in accordance with the company’s Memorandum and Articles of Association. The Company considers that the members of the Board possess the level of skill, knowledge and experience expected in terms of the Code.
Approved by the Board on 12 April 2023