Corporate Governance Report
The board of directors adopted the Company’s corporate governance guidelines on April 2021, including inter alia rules of procedure for the board of directors, instructions for the audit committee, insider manuals, manual on disclosure of information and guidelines for corporate social responsibility.
The Company’s business is defined in the following manner in the Company’s Articles of Association.
Equity and Dividends
The Company’s equity level and financial strength shall be considered in light of its objectives, strategy and risk profile.
The Company has an ambition of optimizing its capital structure such that all vessels are able to generate positive cash flows to shareholders and fulfil its dividend policy. For newbuilds with longer term contracts, the Company targets to have a financial leverage in the range of [75-85]% of newbuild cost. For vessels without contract, the company seek to secure financing of [50-60]% of newbuild cost.
Given the expected mix of long-term charters with predictable cash flows and selected vessels available for short-term employment to exploit prevailing market conditions, the Company has an ambition to pay a regular dividend. The Company targets to distribute free cash flows to shareholders taking into account its outlook, investment opportunities, working capital, debt service and financial position, and, in any case, aims to pay a dividend of more than % of free cash flows after debt service. Any declaration of dividends will, however, be at the discretion of the board of directors.
The Company may revise its dividend policy from time to time
Share capital increases and issuance of shares
The board of directors will in the ordinary course of business of the Company have authorisations to increase the share capital of the Company and to repurchase the Company’s own shares.
Equal treatment of shareholders and transactions with related parties
Class of shares
The Company has one class of shares. All shares carry equal rights in the Company, and the Articles of Association do not contain any provisions restricting the exercise of voting rights.
Pre-emption rights to subscribe
According to the Norwegian Public Limited Liability Companies Act, the Company’s shareholders have pre-emption rights in share offerings against cash contribution. Such preemption rights may, however, be set aside, either by the general meeting or by the board of directors if the general meeting has granted a board authorisation which allows for this. Any resolution to set aside pre-emption rights will be justified by the common interests of the Company and the shareholders, and such justification will be publicly disclosed through a stock exchange notice from the Company.
Trading in own shares
In the event of a future share buy-back program, the board of directors will aim to ensure that all transactions pursuant to such program will be carried out either through the trading system at Oslo Børs or at prevailing prices at Euronext Growth and in accordance with the Market Abuse Regulation (“MAR”). In the event of such program, the board of directors will take the Company’s and shareholders’ interests into consideration and aim to maintain transparency and equal treatment of all shareholders. If there is limited liquidity in the Company’s shares, the Company shall consider other ways to ensure equal treatment of all shareholders.
Transactions with close associates
The board of directors aims to ensure that any not immaterial future transactions between the Company and shareholders, a shareholder’s parent company, members of the board of directors, executive personnel or close associates of any such parties are entered into on arm’s length terms. For any such transactions which do not require approval by the general meeting pursuant to the Norwegian Public Limited Liability Companies Act, the board of directors will on a case-by-case basis assess whether a fairness opinion from an independent third party should be obtained.
Guidelines for directors and executive management
The board of directors has adopted rules of procedures for the board of directors which inter alia includes guidelines for notification by members of the board of directors and executive management if they have any material direct or indirect interest in any transaction entered into by the Company.
Freely negotiable shares
The shares of the Company are freely transferable. There are no restrictions on transferability of shares pursuant to the Articles of Association.
The board of directors will make its best efforts with respect to the timing and facilitation of general meetings to ensure that as many shareholders as possible may exercise their rights by participating in general meetings, thereby making the general meeting an effective forum for the views of shareholders and the board of directors.
The notice for a general meeting, with reference to or attached support information on the resolutions to be considered at the general meeting, shall as a principal rule be sent to shareholders no later than 14 days prior to the date of the general meeting. The board of directors will seek to ensure that the resolutions and supporting information are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting. The notice and support information, as well as a proxy voting form, will normally be made available no later than 14 days prior to the date of the general meeting.
Participation and execution
To the extent deemed appropriate or necessary by the board of directors, the board of directors will seek to arrange for the general meeting to vote separately on each candidate nominated for election to the company’s corporate bodies.
The board of directors shall, as a general rule, be present at general meetings. The auditor will attend the ordinary general meeting and any extraordinary general meetings to the extent required by the agenda items or other relevant circumstances.
The board of directors will seek to ensure that an independent chairman is appointed if considered necessary based on the agenda items or other relevant circumstances.
The Company will aim to prepare and facilitate the use of proxy forms which allows separate voting instructions to be given for each item on the agenda, and nominate a person who will be available to vote on behalf of shareholders as their proxy. The board of directors may decide that shareholders may submit their votes in writing, including by use of electronic communication, in a period prior to the general meeting. The board of directors should seek to facilitate such advance voting.
The full board of directors shall collectively carry out the duties of a nomination committee. This includes to propose candidates for election to the board of directors and to propose remuneration for the board of directors, including remuneration for participation in board committees.
The board of directors shall carry out the duties of a nomination committee in accordance with the following principles:
(a) Candidates to the board of directors shall be selected considering the interests of shareholders in general. This requires dialogue and cooperation with different shareholders and with the Company’s executive management.
(b) Shareholders shall be given suitable time to submit proposals for candidates for election.
(c) Nominations shall be finalised at least 14 days prior to the general meeting, in order for the recommendations to be communicated to the shareholders simultaneously with the notice of the general meeting.
In functioning as nomination committee, the board of directors shall give its recommendation to the general meeting and the proposals shall be justified. The recommendation should include a statement that the proposed board composition fulfils all formal requirements, including requirements in the Articles of Association and the statutory requirements set out in Chapter 6 of the Norwegian Public Limited Liability Companies Act with respect to number of directors, residence requirements and gender representation.
Board of Directors: composition and independence
Pursuant to the Articles of Association section 5, the Company’s board of directors shall consist of 3 to 6 members.
The composition of the board of directors should ensure that the board can attend to the common interests of all shareholders and meet the Company’s need for expertise, capacity and diversity. Attention should be paid to ensuring that the board can function effectively as a collegiate body.
The composition of the board of directors should ensure that it can operate independently of any special interests. The majority of the shareholder-elected members of the board should be independent of the Company’s executive personnel and material business contacts. At least two of the members of the Board elected by shareholders should be independent of the Company’s main shareholder(s).
The board of directors should not include executive personnel. If the board does include executive personnel, the Company should provide an explanation for this and implement consequential adjustments to the organisation of the work of the board, including the use of board committees to help ensure more independent preparation of matters for discussion by the board.
The chairman of the board of directors should be elected by the general meeting.
The term of office for members of the board of directors should not be longer than two years at a time. The annual report should provide information to illustrate the expertise of the members of the board of directors, and information on their record of attendance at board meetings. In addition, the annual report should identify which members are considered to be independent.
The work of the board directors
The rules of procedure for the board of directors
The board of directors is responsible for the overall management of the Company, and shall supervise the Company’s business and the Company’s activities in general.
The Norwegian Public Limited Liability Companies Act regulates the duties and procedures of the board of directors. In addition, the board of directors has adopted supplementary rules of procedures, which provides further regulation on inter alia the duties of the board of directors and the chief executive officer, the division of work between the board of directors and the chief executive officer, the annual plan for the board of directors, notices of board proceedings, administrative procedures, minutes, board committees, transactions between the Company and the shareholders and matters or confidentiality.
The board shall produce an annual plan for its work, with particular emphasis on objectives, strategy and implementation. The chief executive officer shall at least once a month, by attendance or in writing, inform the board of directors about the Company’s activities, position and profit trend.
The board of directors’ consideration of material matters in which the chairman of the board is, or has been, personally involved, shall be chaired by some other member of the board.
The board of directors shall evaluate its performance and expertise annually.
The audit committee
The Company shall have an audit committee governed by a separate instruction adopted by the board of directors. The members of the audit committee are appointed by and among the members of the board of directors. A majority of the members shall be independent of the Company’s operations, and at least one member who is independent of the Company shall have qualifications within accounting or auditing. Board members who are also members of the executive management cannot be members of the audit committee. The principal tasks of the audit committee are to:
(a) prepare the board of directors’ supervision of the Company’s financial reporting process;
(b) monitor the systems for internal control and risk management;
(c) have continuous contact with the Company’s auditor regarding the audit of the annual accounts; and
(d) review and monitor the independence of the Company’s auditor, including in particular the extent to which the auditing services provided by the auditor or the audit firm represent a threat to the independence of the auditor.
The remuneration committee
The full board of directors shall collectively carry out the duties of remuneration committee. This includes the following principal tasks:
(a) prepare recommendations for determination of salaries and other remuneration for executive management; and
(b) other matters relating to remuneration and other material employment issues in respect of the executive management
In functioning as a remuneration committee, the board of directors shall contribute to the Company’s business strategy and long-term interests and sustainability
Risk Management and internal control
Risk management and internal control are given high priority by the board of directors ensuring that adequate systems for risk management and internal control are in place. The control system consists of interdependent areas which include risk management, control environment, control activities, information and communication and monitoring.
The Company’s management is responsible for establishing and maintaining sufficient internal control over financial reporting. Company specific policies, standards and accounting principles have been developed for the annual and quarterly financial reporting of the group. The Chief Executive Officer and Chief Financial Officer supervise and oversee the external reporting and the internal reporting processes. This includes assessing financial reporting risks and internal controls over financial reporting within the group. The consolidated external financial statements are prepared in accordance with Norwegian Generally Accepted Accounting Principles (NGAAP), but the Company may consider to convert to International Financial Reporting Standards (IFRS).
The board of directors shall ensure that the Company has sound internal control and systems for risk management, including compliance to the Company’s corporate values, ethical guidelines and guidelines for corporate social responsibility. The Company’s Code of Conduct describes the Company’s ethical commitments and requirements related to business practice and personal conduct. If employees experience situations or matters that may be contrary to rules and regulations or the Company’s Code of Conduct, they are urged to raise their concern with their immediate superior or another manager in the Company.
The Company has established a whistle-blowing function that will enable employees to alert the Company’s governing bodies about possible breaches of the Code of Conduct.
The board of directors shall present a report of the Company’s financial statement in the annual report. The audit committee shall assist the board of directors on an ongoing basis in monitoring the company’s system for risk management and internal control. In connection with the quarterly financial statements, the audit committee shall present to the board of directors reviews and information regarding the Company’s current business performance and risks.
Remuneration of the board of directors
The remuneration of the board of directors shall be decided by the Company’s general meeting, and should reflect the board of directors’ responsibility, expertise, time commitment and the complexity of the Company’s activities. The remuneration should not be linked to the Company’s performance.
The annual report shall provide details of all elements of the remuneration and benefits of each member of the board of directors, which includes a specification of any remuneration in addition to normal fees to the members of the board.
If members of the board of directors take on specific assignments for the Company outside ordinary duties as board members, this should be disclosed to the full board. The remuneration for such additional duties should be approved by the board of directors.
Remuneration of the executive management
The board of directors shall prepare a policy for the stipulation of salary and other remuneration to executive management. The policy shall include the main principles applied in determining the salary and other remuneration of the executive management, and shall ensure convergence of the financial interests of the executive management and the shareholders.
The board of directors aims to ensure that performance-related remuneration of the executive management in the form of share options, annual bonus programs or the like, if used, are linked to value creation for shareholders or the Company’s earnings performance over time. Performance-related remuneration should be subject to an absolute limit.
Information and communications
The board of directors has adopted a separate manual on disclosure of information, which sets forth the Company’s disclosure obligations and procedures. The board of directors will seek to ensure that market participants receive correct, clear, relevant and up-to-date information in a timely manner, taking into account the requirement for equal treatment of all participants in the securities market.
The Company will each year publish a financial calendar, providing an overview of the dates for major events such as its ordinary general meeting and publication of interim reports.
Information to shareholders
The Company shall have procedures for establishing discussions with important shareholders to enable the Board to develop a balanced understanding of the circumstances and focus of such shareholders. Such discussions shall be done in compliance with the provisions of applicable laws and regulations.
All information distributed to the Company’s shareholders will be published on the Company’s website at the latest at the same time as it is sent to shareholders.
In the event the Company becomes the subject of a takeover bid, the board of directors shall seek to ensure that the Company’s shareholders are treated equally and that the Company’s activities are not unnecessarily interrupted. The board of directors shall also ensure that the shareholders have sufficient information and time to assess the offer.
There are no defence mechanisms against takeover bids in the Company’s Articles of Association, nor have other measures been implemented to specifically hinder acquisitions of shares in the Company. The board of directors has not established written guiding principles for how it will act in the event of a takeover bid, as such situations are normally characterized by concrete and one-off situations which make a guideline challenging to prepare. In the event a takeover were to occur, the board of directors will consider the relevant recommendations in the Corporate Governance Code and whether the concrete situation entails that the recommendations in the Corporate Governance Code can be complied with or not.
The board of directors will require the Company’s auditor to annually present to the audit committee a review of the Company’s internal control procedures, including identified weaknesses and proposals for improvement, as well as the main features of the plan for the audit of the Company.
Furthermore, the board of directors will require the auditor to participate in meetings of the board of directors that deal with the annual accounts. At least one board meeting with the auditor shall be held each year in which no member of the executive management is present.
The board of directors’ audit committee shall review and monitor the independence of the Company’s auditor, including in particular the extent to which services other than auditing provided by the auditor or the audit firm represents a threat to the independence of the auditor.
The remuneration to the auditor for statutory audit will be approved by the ordinary general meeting. The board of directors should report to the general meeting on details of fees for audit work and any fees for other specific assignments.