The Board of Directors of Lakes Oil NL is responsible for the corporate governance of the company. The Board guides and monitors the business and affairs of the company on behalf of the shareholders by whom they are elected and to whom they are accountable.
Lakes Oil N.L’s corporate governance principles and policies are structured with reference to the Corporate Governance Council’s best practice recommendations, which are as follows:
1. Lay solid foundations for management and oversight.
2. Structure the board to add value.
3. Promote ethical and responsible decision making.
4. Safeguard integrity in financial reporting.
5. Make timely and balanced disclosure.
6. Respect the rights of shareholders.
7. Recognise and manage risk.
8. Remunerate fairly and responsibly.
1. Lay solid foundations for management and oversight
The Board’s responsibilities include development of strategy, oversight of management, risk management and compliance systems, and monitoring performance. The Board has established certain policies and protocols in relation to the company’s operations, some of which are summarised below.
It is the responsibility of management to administer the company in accordance with the directions and policies of the Board and within the powers delegated by the Board. The functions of each senior executive are set out upon appointment and changes are advised by the Chairman as delegated by the Board. The details of these functions are not publicly available.
The responsibilities of the Board are set out in the Board Charter which is available upon request.
Appointment and induction of senior executives is carried out in a manner appropriate to the size of the company. Performance of the senior executives is monitored and appraised on a continuous basis by the Chairman in his executive capacity and communicated directly on an on-going basis in terms of his evaluation of performance against agreed work goals.
2. Structure the board to add value
The Board comprises an Executive Chairman and five non-executive directors whose qualifications and experience are set out in the Directors’ Report.
Corporate Governance Council Recommendation 2.1 requires a majority of the Board to be independent directors. Recommendation 2.2 requires the Chairperson to be independent and Recommendation 2.3 requires the role of Chairperson and CEO should not be exercised by the same person.
Three of the five non-executive directors, Mr Barney Berold, Professor Ian Plimer and the Hon. Alexander Downer AC are all considered to be independent having regard to the definition of Independent Director as set out in the ASX Governance Principles. Mr Mather and Mr Stubbs are not considered independent, using the same definition, because they are directors of Armour Energy Ltd, which holds an 18.60% fully diluted interest in Lakes Oil NL Mr. Robert Annells is the Executive Chairman and is not considered to be independent. A description of the qualifications and experience of each director is set out in the Directors’ Report. Accordingly the Board does not have a majority of independent directors. Despite this the Board considers that this is reasonable given the company’s size and budget and that the Board has an appropriate level of industry experience and business skills.
Mr. Robert Annells is the Executive Chairman, exercising the roles of Chairperson and CEO, and as Executive Chairman he is not considered to be independent. Lakes Oil NL has found that the combined role of Chairperson and CEO continues to work very well for the company given the environment in which it operates.
The company has no formal performance evaluation procedure for the Board. However the Board established a Remuneration Committee in July 2013 that is charged with, amongst other things, developing appropriate evaluation procedures.
The functions of a nomination committee are carried out by the full Board; therefore a separate nominations committee has not been formed. New Directors are recruited according to the company’s needs from time to time. The company has no formal policy in regard to nomination of new Directors. Re-election of Directors is done in accordance with the Listing Rules and the company’s Constitution.
Whenever necessary, individual members of the Board may seek independent professional advice at the expense of the company in relation to fulfilling their duties as directors.
Directors acknowledge the need to act in good faith in the interests of all shareholders.
3. Promote ethical and responsible decision-making
Directors, management and staff are expected to act ethically and responsibly and in accordance with the company’s Code of Conduct. All Board members are qualified professionals within their respective industries and accordingly conduct themselves in a professional and ethical manner in both their normal commercial activities and the discharge of their responsibilities as directors.
The company has a policy concerning trading in the company’s securities by directors, management, staff and consultants (insiders). Trading in the company’s securities by insiders should only occur in circumstances where the market is considered to be fully informed of the company’s activities. This policy establishes a blackout period during which trading by insiders is prohibited, except is exception circumstances and as approved by the Executive chairman. This policy requires that, at all other times, the insiders discuss their intention to trade in the company’s shares with the Executive Chairman of the company prior to trading. The Board recognises that it is the individual responsibility of each director and employee and consultant to comply with this policy.
The company’s Code of Conduct and Share Trading Policy, which are in accordance with the ASX Corporate Governance Principles, may be viewed on the company’s website.
Lakes Oil NL recognises the need to understand the cultural and spiritual significance to the community of the area in which it is licensed to operate.
Lakes Oil NL will work closely with relevant community groups and people to identify significant cultural and heritage sites and any impact the company’s activities may have on them.
Lakes Oil NL is committed to protecting the environment and safeguarding public and employee health in all aspects of its operations. Environmental protection and safe conduct are the responsibility of Lakes Oil NL, its employees, its alliance partners and suppliers of goods and services.
Specifically, Lakes Oil NL will:
• comply with the intent and provision of all applicable laws, regulations and standards;
• minimise environmental impact;
• ensure that employees, partners, suppliers and the public are made fully aware of Lakes Oil NL’s responsibility for the effect of its operations on the environment;
• ensure adequate management systems and procedures are in place to manage and mitigate the risks to the environment from Lakes Oil NL’s operations; and
• commit to continual improvement in environmental management performance.
Lakes Oil NL’s business ethos is to operate in a manner which addresses three fundamental principles to achieve balanced outcomes. These fundamental principles are:
• social acceptability
• economic viability; and
• environmental responsibility.
Lakes Oil NL is committed to meeting these objectives, to monitoring the meeting of these objectives and to amending its approach if it proves to be inadequate in complying with its stated intentions and plans. In addition, Lakes Oil NL is committed to the public dissemination of this information.
The Board continues to review for best practice and is aware that it has not yet formalised a Diversity Policy, however the company strives to provide the best possible opportunities for current and prospective employees of all backgrounds.
At 30 June 2013 the company had three women employees out of a total of seven employees and contractors, with two of these women in senior executive positions. There are no women on the Board.
4. Safeguard integrity in financial reporting
Recommendation 4.1 requires the CEO and CFO to certify that the financial reports give a true and fair view and are in accordance with accounting standards. The Executive Chairman Mr. Robert Annells and the Chief Financial Officer Mr. Leslie Smith have certified that the financial reports give a true and fair view and are in accordance with accounting standards.
The Board has established an Audit and Compliance Committee consisting of Mr Barney Berold BCom, MBA (Chairman), Mr William R Stubbs LLB and Professor Ian R. Plimer, all of whom are non-executive Directors. The number of meetings attended by each member is set out in the Directors’ Report.
The Audit Committee works under an Audit Committee Charter which can be viewed on the company’s website.
It is the Board’s responsibility to ensure that an effective internal control framework exists to examine the effectiveness and efficiency of significant business processes such as the safeguarding of assets, the maintenance of proper accounting records and the integrity of financial information, the implementation of quality assurance practices and procedures and ensuring compliance with environmental regulations. The Board continues to hold the responsibility for the establishment and maintenance of a framework of internal control mechanisms for the management of the company.
At regular occasions the Board:
• reviews the accounting policies;
• reviews the company’s annual and half yearly financial reports;
• reviews with the external auditors the effectiveness of accounting and internal control systems;
• addresses the findings of the external auditors;
• assesses the scope, quality and cost of the external audit;
• identifies any areas of operation, regulatory and legal risk and establishes procedures to ensure those risks are effectively managed;
• ensures that the auditors retain their independence and that the audit partner is changed periodically; and
• ensures that conflicts of interest do not arise from services provided by the company’s external advisors.
The Board has delegated to the Executive Chairman the responsibility to review the company’s quarterly reports
5. Make timely and balanced disclosure
The Board and Senior Management are aware of the Continuous Disclosure requirements of the ASX and have procedures in place to disclose any information concerning the company that a reasonable person would expect to have a material effect on the price of the company’s securities. These procedures are contained in the company’s Disclosure Policy.
Lakes Oil NL recognises that it has a legal and moral obligation to immediately disclose to the market any information that a reasonable person would expect to have a material effect on the price or value of the company’s securities.
The directors and senior management personnel of Lakes Oil NL acknowledge that they each have an obligation to identify and immediately disclose information that may be regarded as material to the price or value of the company’s securities.
The Chairman is authorised to make statements and representations on Lakes Oil NL’s behalf. The company Secretary is responsible for overseeing and coordinating the disclosure of information to the ASX, analysts, stockbrokers, shareholders, the media and the public. The Secretary must inform the Directors, senior management and employees of Lakes Oil NL’s continuous disclosure obligations on a quarterly basis.
The Directors and senior management personnel must ensure that the Secretary is aware of all information to be presented at briefings with analysts, stockbrokers, the media and the public. Prior to being presented, information that has not already been the subject of disclosure to the market and is not generally available to the market must be the subject of disclosure to the ASX. Only when confirmation of receipt of the disclosure and release to the market by the ASX is received and after the information is posted on the company’s website may the information be presented.
If information that would otherwise be disclosed comprises matters of supposition or is insufficiently definite to warrant disclosure, or if the effect of a disclosure on the value or price of the company’s securities is unknown, Lakes Oil NL may request that the ASX grant a trading halt or suspend its securities from quotation. Management of Lakes Oil NL may consult the company’s external professional advisers and the ASX in relation to whether a trading halt or suspension is required.
6. Respect the rights of shareholders
The Board aims to ensure in accordance with the Recommendation 6.1 that all shareholders are informed of major developments affecting the affairs of the company. Information is communicated to the shareholders through the annual, half year, quarterly reports, disclosures made to the ASX, notices of meetings and occasional letters to shareholders where appropriate.
The company maintains a website on which is placed company announcements, the Annual Report and company policies.
The auditor is invited to the Annual General Meeting for the purpose of answering shareholders’ questions.
7. Recognise and manage risk
The Board has responsibility for managing risk and internal control and acknowledges that risk management is a core principle of sound Corporate Governance. The financial viability, reputation and future of the company are materially dependent on the manner in which risk is managed.
The Board’s strategy covers the areas of financial risk, operational risk, insurance and internal control. The company has not appointed a Risk Management Committee due to the importance the Board places on risk mitigation. In addition, the small size of the Board makes it appropriate for the full board to manage this area.
The Board receives regular financial reports which measure performance and trends. The reports are discussed at Board Meetings and the Chief Financial Officer answers questions posed by the Directors. Any variations from prior periods and/or budget are highlighted, explained and evaluated. This scrutiny is appropriate to a company of the size of Lakes Oil NL. In addition to quarterly financial reporting, the company has in place policies to manage credit, foreign exchange and other business risks. Non-executive Directors meet at appropriate times with the external auditor in order to fulfil the Audit Committee Charter. This Charter may be viewed on the company’s website.
Projects are approved only after extensive review by a highly qualified technical staff and detailed submissions to the Board through the Chairman. The operations of the company consist of a search for oil, gas and minerals and projects are only considered after a review and evaluation of all technical data on record. Outside consultants are engaged as required to enhance the chances of success. Environmental considerations are factors in the consideration of every new project and are fully evaluated and reported before approval by the Board.
Insurance as a risk mitigation strategy
The Board recognises the value of insurance as a risk mitigation strategy and requires that a leading insurance broker is engaged to ensure that appropriate insurance cover is in place at all times. Contracts with contractors are drawn up or reviewed by solicitors prior to the company entering into any commitment.
Internal control and audit
In a small company, an extensive internal control system is not possible. There is a natural control as a consequence of being small, as the transactional volume is low and administration costs are generally fixed. It is considered that an internal audit function is therefore not appropriate at this time. The Directors believe the system of internal control is appropriate to the size of the company and to its level of potential risk.
Declaration by the Chairman and Chief Financial Officer
Both the Chairman and Chief Financial Officer sign the following declaration in the presence of the Board prior to the Board accepting the Financial Results each year:
That in accordance with the Corporations Act 2001 section 295A, we declare that , to the best of our knowledge and belief
• the financial records of the disclosing entity for the financial year have been properly maintained in accordance with section 286; and
• the financial statements, and the notes for the financial year comply with the accounting standards; and
• the financial statements and notes for the financial year give a true and fair view; and
• any other matters that are prescribed by the regulations for the purposes of this declaration in relation to the financial statements and the notes for the financial year are also satisfied.
Also in accordance with the ASX Corporate Governance Council Best Practice Recommendations 4.1 and 7.2, to the best of our knowledge and belief, and in our opinion:
i. the financial reports present a true and fair view, in all material respects, of the company’s financial condition and operational results and are in accordance with relevant accounting standards;
ii. the statement in (i) above concerning the integrity of financial statements is founded on a sound system of risk management and internal compliance and control, which implements the policies adopted by the board; and
iii. the company’s risk management and internal compliance and control system is operating efficiently and effectively in all material respects.
Signed by the Chairman and Chief Financial Officer.
The Board has procedures in place to recognise and manage risk in accordance with Recommendation 7.1. Regular reporting of financial performance is in place as are policies to manage credit, foreign exchange and other business risks.
The Board has delegated to the Chairman and Chief Financial Officer such matters as the company’s liquidity, currency, interest rate and credit policies and exposures.
8. Remunerate fairly and responsibly.
It is the company’s objective to provide maximum shareholder benefit from the retention of high quality Board members and Executives. In order to retain and attract executives of sufficient calibre to facilitate the efficient and effective management of the company’s operations, the Board seeks the advice of external advisers in connection with the structure of remuneration packages. Directors and Executives are remunerated with reference to market rates for comparable positions. Details of the remuneration of specified directors and executives are contained in the Directors’ report.
The company established a Remuneration Committee in July 2013. The Remuneration Committee is charged with establishing and reviewing remuneration procedures appropriate for a Board and company of this size.
Previously the full Board was responsible for determining and reviewing the remuneration of the directors including the Executive Chairman. The Board reviewed the levels and form of remuneration for non executive directors with reference to performance, relevant comparative remuneration and independent expert advice. The total sum of remuneration payable to non executive directors shall not exceed the sum fixed by members of the company in general meeting.
The Board was responsible for the review and determination of the level and form of remuneration for the Executive Chairman. It performed this duty with reference as necessary to performance, relevant comparative remuneration and independent expert advice although no independent expert advice was sought in the year to 30 June 2013.
The Board was responsible for the review, upon the recommendation of the Executive Chairman, of the level and form of remuneration of all other employees. This process required the Executive Chairman to consider the levels and form of remuneration appropriate to securing, motivating and retaining employees with the skills to manage the company’s operations.
The Board reviewed the composition of the Board on a regular basis to ensure that the Board has the appropriate mix of expertise and experience.
Termination payments are not agreed in advance. In the event of a termination, the company complies with all appropriate legal requirements and company policy precludes any payment in the event of removal for misconduct.
No formal evaluation of the performance of the Board is conducted. The Board, being a small active Board is in a position to view its performance on a constant basis.
The Chairman, in his executive capacity, continuously monitors and appraises the performance of senior executives. This review is aided by the Board’s review of executives’ performance during their regular Board presentations.