Corporate governance

The board of directors is accountable to the company’s shareholders for good corporate governance and the directors support the Combined Code as far as it is appropriate to the group’s stage of development. Whilst not mandatory for an AIM company, the directors have implemented, where practical for a company of this size and nature, the main provisions of the principles of good governance and code of best practices.

The board has also considered the guidance published by the Institute of Chartered Accountants in England and Wales concerning the internal control requirements of the Combined Code, in line with the Turnbull Report. The board regularly reviews key business risks, via a number of properly constituted committees, in addition to the financial risks facing the group in the operations of the business.

The board of directors

The company is led and controlled by a board comprising two executive directors and two nonexecutive directors.

There are no matters specifically reserved to the board for its decision although effectively no decision of any consequence is made other than by the directors. Board meetings are held when required. All directors participate in the key areas of decision-making, including the appointment of new directors, although there is no separate Nomination Committee due to the current size of the board.

The board receives timely information on all material aspects about the group to enable it to discharge its duties.

While all directors have equal responsibility in law for managing the company’s affairs, it is the role of executive management to run the business within the parameters laid down by the board and to produce clear and accurate reports to enable the board to assess their performance. The executives make full use of the expertise and experience that the non-executive directors bring from their business careers.

There is no agreed formal procedure for the directors to take independent professional advice at the group’s expense.

All directors submit themselves for re-election at the Annual General Meeting (AGM) at regular intervals. There are no specific terms of appointment for nonexecutive directors.

A Technical Committee has been established, comprising Roy Pitchford (chairman) and Roy Lander.

Directors’ remuneration

The company has now established a Remuneration Committee.

The chairman is responsible for consideration and approval of the terms of service, remuneration, bonuses, share options and other benefits of the other two directors and they, in turn, are responsible for his. All decisions are made after giving due consideration to the size and nature of the business and the importance of retaining and motivating management.

All directors have service contracts with the company.

Accountability and audit

The company has established an Audit Committee, and it met once in 2006 and 2007. The Audit Committee is chaired by Roy Pitchford. The chairman and chief financial officer are responsible for reviewing the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditors. A formal statement of independence is received from the external auditor each year.

Relations with shareholders

The chairman and chief executive officer are the company’s principal spokespeople with investors, fund managers, the press, and other interested parties. At the AGM, private investors are given the opportunity to question the board.

Internal control

The board acknowledges its responsibility for establishing and monitoring the group’s systems of internal control. Although no system of internal control can provide absolute assurance against material misstatement or loss, the company’s systems are designed to provide the directors with reasonable assurance that problems are identified on a timely basis and dealt with appropriately.

The key procedures that have been established and which are designed to provide effective control are as follows:

• Management structure - The board meets when required to discuss all issues affecting the group.
• Investment appraisal - The group has a framework for investment appraisal, and approval is required by the board where appropriate.

The board reviews the effectiveness of the systems of internal control and considers the major business risks and the control environment. No significant control deficiencies have come to light during the period and no weakness in internal financial control has resulted in any material losses, contingencies or uncertainties which would require disclosure as recommended by the guidance for directors on reporting on internal financial control.

Going concern

Having made appropriate enquiries and having examined the major areas which could affect the group’s financial position, the directors are satisfied that the group has adequate resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to adopt the going concern basis in preparing the financial statements.