GLOSSARY. Code Code of Corporate Governance issued by the Ministry of Industry, Commerce and Tourism, Kingdom of Bahrain

Transcription

1 2017

2 GLOSSARY AGM BOD CBB ACEO CFO Annual General Meeting Board of Directors; the Board Central Bank of Bahrain Acting Chief Executive Officer Chief Financial Officer Code Code of Corporate Governance issued by the Ministry of Industry, Commerce and Tourism, Kingdom of Bahrain EGM HC MOICT UGH UGB Extra Ordinary General Meeting Higher Level Controls; Module HC of the CBB Rulebook Ministry of Industry, Commerce and Tourism, the Kingdom of Bahrain United Gulf Holding Company B.S.C., the Company United Gulf Bank B.S.C., the Bank Page 1 of 16

3 Contents 1. POLICY Profile and ownership structure of the Bank Board of Directors Composition of the Board of Directors Board Terms and the Start Date of Each Term Board Induction Policy Responsibilities of the Board Board Meetings Board Committees Executive Committee (EC) Board Audit Committee (BAC) Nominating & Remuneration Committee (NRC) Evaluation of the Board and Its Committees Directors ownership and trading of shares during the year Directors Remuneration Management Senior Management s ownership and trading of shares during the year Disclosure on materially significant related party transactions Disclosure of Conflicts of Interest Disclosure and Transparency Policy Means of Communication External Auditor Page 2 of 16

4 1. POLICY United Gulf Holding Company (UGH) was incorporated in the Kingdom of Bahrain on 28 June It is licensed under the Ministry of Industry, Commerce & Tourism (MOICT) of the Kingdom of Bahrain. As it is listed on the Bahrain Bourse, it comes under the purview of the Exchange and the Capital Markets Supervision Directorate (CMSD) of the Central Bank of Bahrain. The CMSD is the primary regulator for listed companies. The Board of Directors (Board, BOD) of UGH recognize the importance of good governance in promoting and strengthening the trust of their shareholders and the public. It is their firm belief that sound ethical practices, transparency in operations and timely disclosures, go a long way in enhancing long term shareholder value and safeguarding the interest of the stakeholders. Members of UGH s Board of Directors support the FAIR principles of Fairness, Accountability, Integrity and Responsibility in their relationship with the Company s shareholders, subsidiaries and external stakeholders. As 28 th June 2017 marks the starting period of UGH s year of operations, the Company is in the process of complying with Corporate Governance Code of the Kingdom of Bahrain (Code) introduced by the MOICT in March Individual Policies and Procedure Manuals (Corporate Governance PPMs) were developed which address several aspects of the corporate governance framework. Corporate Governance Guidelines, which encompass UGH s adherence to the CBB s requirements, have been approved by the Board of Directors and posted on UGH s website The objective of this document is to inform shareholders of the status of UGH s compliance with the regulatory requirements, as well as explain the rationale for variances with the disclosure requirements. This is in line with the comply or explain philosophy. Page 3 of 16

5 2. Profile and ownership structure of the Bank The shares of UGH were listed on the Bahrain Bourse on 28 September 2017, following the successful share swap with the shares of its primary subsidiary United Gulf Bank B.S.C. (UGB). Regulatory approvals were obtained whereby the shareholders of UGB were allocated shares in UGH on a 2:1 basis. UGH s main shareholder continues to be the Kuwait Projects Company (Holding) (KIPCO Group) - one of the biggest diversified holding companies in the Middle East and North Africa, with consolidated assets of over $ 20 billion. Shareholder Information: UGH s shares are listed on the Bahrain Bourse. The Company has issued 412,974,651 equity shares each with a nominal value of 50 cents. All shares are fully paid up. Shareholding Structure: The shareholding structure of the Company as at 31 December 2017 was as follows: Nationality Number of Shareholders % Shares % Bahrain 1, % 10,215, % Kuwait % 402,200, % Oman 2 0.1% 1, % Qatar 5 0.3% 7, % Saudi Arabia % 483, % UAE 1 0.1% % Other 6 0.3% 64, % Total 1, % 412,974, % Page 4 of 16

6 Major Shareholders: The following are the names and nationalities of the major equity holders and the number of equity shares held that exceed 5% of the Company s capital. Name Nationality Shares % Kuwait Projects Company (Holding) K.S.C.P. Kuwaiti 359,708, Overland Real Estate (subsidiary of KIPCO) Kuwaiti 38,206, ,914, On a consolidated basis, the KIPCO Group owns approximately 98% of the Company s outstanding shares. No government or sovereign funds hold any shares of UGH. Ownership Categories Holding Number of shareholders Number of shares % Less than 1% 1,768 7,730, % up to less than 5% 1 7,010, % up to less than 10% 1 38,206, Greater than 10% 1 360,026, Total 1, ,974, % The share registry of UGH is maintained by Bahrain Clear with whom the company has an electronic registry agreement. They have a shareholders register that records the names of shareholders, their nationalities, the number of shares that they hold and any transactions that they make. Page 5 of 16

7 3. Board of Directors The Board of Directors is committed to ensuring that procedures and processes are in place to reflect and support the Corporate Governance policies that were approved on 11 December The implementation of these policies is the responsibility of the Management team of UGB, with whom the Company has a Service Level Agreement. A robust corporate governance framework is also in place in the Company s primary subsidiary UGB and other Group companies. The extent of the arrangements is however subject to the requirements of the regulators of the jurisdictions in which the subsidiaries operate. 3.1 Composition of the Board of Directors 28th June 2017 marked the date of inception of UGH. The first Board of Directors was confirmed by the primary shareholders at the Constituent General Assembly held on 2 August As at year end it comprised the following five Directors: Directors Masaud J. Hayat Faisal Al Ayyar Sadoun Ali Tareq AbdulSalam Mazen Hawwa Classification Chairman, Executive Director Vice Chairman, Executive Director Executive Director Executive Director Executive Director The company has a written appointment agreement with each Director which recites the directors' powers and duties and other matters related to the term, the time commitment envisaged and others. The Company recognises the need to appoint independent Directors in order to ensure conformity with the regulatory requirement that in companies where there is a controller, at least one third of the board must be independent directors. 1 Three individuals have been identified for this role, and it is envisaged that they will be appointed at the AGM scheduled to be held in March After their appointment, the composition of the Board is expected to be: Category Number of Directors Percentage of the Board Executive % Independent, non executive directors % 1 CBB Rulebook, Volume 6, Module HC Page 6 of 16

8 The criteria used to determine independence for these Directors was reviewed by the Board at their meeting held on 27 February Going forward, all independent Directors of UGH will furnish an annual declaration that they meet the criteria of independence. For a Director to be considered independent, the Board determines that the incumbent does not have any direct or indirect material pecuniary relationship with the Company. The Board has adopted guidelines which are in line with the applicable legal requirements. The profile of UGH s directors, information on other Directorships that they hold and their biographical details are available on the website and will also be included in the first Annual Report published by the Company. None of the existing Directors of the Board holds more than three directorships in public companies in Bahrain. The CBB Rulebook and the Code of Corporate Governance (Code) states that the Chairman of the Board should be an independent, non Executive Director. UGH s Chairman Mr. Masaud J. Hayat has been an Executive Board Director of the Company s primary subsidiary - UGB for the past 28 years. He has a thorough understanding of its history, its functioning style and its operations. He represents the interests of the Company s controlling shareholder - KIPCO. 3.2 Board Terms and the Start Date of Each Term Each term of the Board of Directors consists of three years. The first term of the Directors will run from 2 August 2017 (date of Constituent General Assembly ) to the date of the AGM that will be held in March The Board has approved a separate policy called Criteria for the Election / Re-election of Directors. This policy contains the questionnaire evaluating the criteria for a person to be considered as appropriate for serving on the Board. In the absence of the Nominating & Remuneration Committee, the resumes of prospective candidates identified to be independent directors, were assessed by the entire Board of Directors at their meeting held on 27 February, Going forward, all applications will be assessed by the Nominating & Remuneration Committee based on information available on/from the prospective/ existing Director/s and submitted to the Board along with the Committee s recommendation. The Board has approved a separate policy called Ordinary / Extraordinary General Assembly Meetings Procedures. This incorporates the regulatory requirements dictated primarily by the Commercial Companies Law of the Kingdom of Bahrain. The Charter of the Board of Directors, also provides for the termination of membership of Board members for misuse of position; failure to attend at least three consecutive meetings or at least 75% of the meetings in a financial year without a reasonable excuse; resignation; Page 7 of 16

9 appointment to any other managerial position in the Bank for which the member receives remuneration, bankruptcy or any other violation of laws. 3.3 Board Induction Policy UGH s Board of Directors approved the Directors Induction Policy that requires each new Director to receive a formal and tailored induction with respect to the Company s strategy, corporate governance practices and financials. New Directors will be provided with the necessary documents, brochures, reports and internal policies. This in turn will enhance the incumbent s familiarisation with UGH s procedures and practices. The Charter of the Nominating & Remuneration Committee states that the Nominating & Remuneration Committee is responsible for the preparation of induction materials and orientation sessions for new Directors. 3.4 Responsibilities of the Board The Board s role and responsibilities include but are not limited to: The overall business performance and strategy for the company Causing financial statements to be prepared which accurately disclose UGH s financial position; Monitoring management performance; Convening and preparing the agenda for shareholder meetings; Monitoring conflicts of interest and preventing abusive related party transactions; Assuring equitable treatment of shareholders including minority shareholders; and Establishing the objectives of the Company Ensuring that the systems and controls framework, including the Board structure and organisational structure, is appropriate for the company s business and associated risks. These are enumerated in detail in the Corporate Governance guidelines published on the website, and the Charter of the Board of Directors. 3.5 Board Meetings During its first year of operations, UGH s Board of Directors held one meeting on 13 November Attendance of all five directors was complete. Going forward, the requirement that individual board members must attend at least 75% of all Board meetings in a given financial year, will be adhered to. Page 8 of 16

10 3.6 Board Committees The Board of Directors is the apex body constituted by the shareholders for the overall supervision and governance of the Bank. The Board provides and evaluates the strategic direction of the Company, management policies and their effectiveness and that the long term interests of the shareholders are being served. After the appointment of the independent Directors, the Chairman of the Board will be assisted by them and the executive directors in overseeing the functional matters of UGH. It is envisaged that the Executive Committee, Board Audit Committee and the Nominating and Remunerations Committees will be created after the independent Directors are appointed at the AGM scheduled for March The charters for these three committees have however been already approved by the Board on 11 December 2017; the constitution of members will be decided following the successful appointment of the independent Directors. Consequently, there were no meetings for any of the Board committees during the year ended The hierarchy of the proposed structure is as follows: Board of Directors Executive Committee Board Audit Committee Nominating and Remuneration Committee Executive Committee (EC) Responsibilities: After the forthcoming appointment of independent Directors, the Executive Committee will be appointed to exercise the powers and duties of the Board in the interim periods between Board meetings and by circulation when a full meeting of the Board is not possible. The EC is also empowered by its Charter to act on the Board s behalf if there is a pressing requirement to do so. The basic responsibility of the EC is to consider and approve decisions related to the key areas of strategy and planning and investments (policies, acquisitions and sales). Any improvements deemed necessary or desirable to the committee s charter, will be recommended by the EXCO to UGH s Board of Directors. Page 9 of 16

11 3.6.2 Board Audit Committee (BAC) Composition: After the forthcoming appointment of independent Directors at the Company s first AGM that will be held in 2018, the BAC will be appointed by the Board. It is envisaged that it will be chaired by an independent Director, and that it will comprise mainly independent Directors. Responsibilities : The BAC will assist the Board in its responsibility for overseeing the quality and integrity of the aaccounting, auditing and reporting practices of UGH, supervising the internal and external auditors and the Company s compliance with the legal and regulatory requirements. Its main functions as enumerated in its Charter encompass: assessing the quality and integrity of UGH s financial reporting; ensuring the independence of UGH s internal and external audit functions; reviewing the adequacy and overseeing UGH s compliance with all existing and newlyintroduced laws and regulations. reviewing the implementation of, enforcement of and adherence to the bank s code of conduct and ensuring that there are effective whistleblowing procedures in place It is also envisaged that the BAC will be vested with the responsibility for overseeing the implementation of UGH s corporate governance framework, as it is responsible for the supervision of the overall compliance of the company with existing regulations. It will also strive to fulfil the requirement of meeting with the external auditors at least twice during the year Nominating & Remuneration Committee (NRC) Composition: After the forthcoming appointment of independent Directors at the Company s first AGM that will be held in 2018, the NRC will be appointed by the Board. It is envisaged that it will be chaired by an independent Director, and that it will comprise independent Directors. Responsibilities: The NRC will assist the Board in assessing the skill sets of Board members and ensuring that there is an appropriate mix of eminent persons having an independent standing in their respective field/profession and who can effectively contribute to UGH s business and policy decisions. The Committee is empowered by its Charter, to oversee the preparation of appropriate nomination documents and notifications proposing candidates for Directorships. It will review the independence of Directors on an annual basis and supervise the preparation of induction materials and orientation sessions. Page 10 of 16

12 As per the Code of Corporate Governance all performance-based incentives will be based after evaluations/appraisals are conducted. 3.7 Evaluation of the Board and Its Committees 28 th June 2017 was the date of inception of the operations of UGH. The constitution of the Board was not complete as independent Directors were yet to be appointed by the shareholders. It was hence considered preliminary to have an evaluation for the year ended 2017, given that there was only one meeting held during the latter part of the year. The methodology for the evaluation of the Board and the committees was however reviewed and approved by the Directors on 11 December Directors ownership and trading of shares during the year Following the share swap of UGB to UGH shares, the Directors ownership of shares as at December 2017 was as follows: # of shares Masaud M.J. Hayat 53,050 Faisal Hamad Al Ayyar 53,050 It should be noted that the above mentioned shares were allocated by KIPCO to the Directors, in their capacity as UGB Board members. This was done in order to comply with the old requirement of the Bahrain Commercial Companies Law of 2001, which needed Directors of publicly listed companies to hold a certain number of shares. As this requirement has now been repealed, the Company is in the process of transferring these shares back to KIPCO. 3.9 Directors Remuneration No Board remuneration or sitting fees was paid to the Directors during the first year of operations of the Company. 4. Management UGH signed a Service Level Agreement on 24 August 2017 with its primary subsidiary UGB, to avail the considerable skills, knowledge and experience of UGB s employees for the management of the company. Under the terms of the agreement, it was agreed that UGB would provide at its own cost, the staff, facilities, premises, systems, data, information and equipment required to fulfill at its responsibilities. There is hence no separate succession plan that is presented to the Company s Board of Directors. Page 11 of 16

13 The profile of the Management Members and their biographical details are available on the website No separate remuneration was paid to the management team or the employees in The following chart represents the Corporate Governance structure of UGH. Key Persons Committee Management Committee Investment Committee Board of Directors & Chairman ALCO Committee IT Steering Committee Risk & Compliance Committee Acting Chief Executive Officer Business Groups Control & Support Services Treasury Asset Management & Investment Banking Accounts & Finance Human Resources Operations Information Technology Administration Compliance / MLRO Credit and Risk Management Internal Audit Corporate Secretary Management Committees As per the service level agreement mentioned above the following UGB management committees currently extend their roles and responsibilities to provide sufficient coverage to UGH s day to day operations, risk management and financial dealings. Management Committee (MANCO) The Management Committee acts as the steering body of the company and consists of ACEO and all Department Heads. It provides a forum for discussing all relevant issues pertaining to the company s ongoing activities and follow-up on any action points, as and when warranted. Investment Committee (IC) The Investment Committee comprises the Acting Chief Executive Officer, the Head of Asset Management and Investment Banking and the Chief Financial Officer. The Acting Head of Credit and Risk Management is the Secretary of this Committee and participates in meetings as a nonvoting member. It meets whenever deemed essential to do so. Page 12 of 16

14 Asset and Liability Committee (ALCO) The Asset and Liability Committee is assigned the task of establishing policy and objectives for the asset and liability management of UGH s balance sheet in terms of structure, distribution, risk, return and its impact on profitability. IT Steering Committee (ITSC) The IT Steering Committee headed by the Acting Chief Executive Officer, is responsible for assisting the Board in the supervision of IT related activities pertaining to UGH. It meets whenever deemed essential to do so. Risk & Compliance Committee (RCC) The primary function of the Risk and Compliance Committee is to assist the Board of Directors in fulfilling its responsibilities of defining UGH s risk appetite and overseeing the identification, measurement, monitoring and controlling of UGH s principal business risks. It also monitors adherence to stipulated regulatory deadlines, reviews compliance to internal and external policies Key Persons Committee (KPC) The Key Persons Committee was constituted in line with the requirements of the Bahrain Bourse. It comprises the Acting Chief Executive Officer, the Chief Financial Officer and the Head of Operations/Key Persons Registrar who acts as the Secretary of this committee. Chief Audit Executive attends the meetings in his capacity as an observer. The Committee s broad mandate is to provide approvals for staff designated as Key Persons 2 to trade in UGH Shares and ensure that there is no scope of market abuse or insider trading. Reports on transactions in UGH shares conducted by Key Persons, are reviewed by the Committee. The Key Persons Register is independently verified by the Internal Audit Department. 2 As per the Bahrain Bourse s definition, a Key Person is a member of an issuer s Board of Directors, senior management, the Issuer itself and such other such persons as decided by the Issuer s board, to have access to inside information relating to the Issuer from time to time. UGB s Board of Directors has approved that all Directors, members of the various standing committees of the Board and UGB employees designated with the rank of Assistant Vice President and above will be deemed to be Key Persons. Page 13 of 16

15 4.1 Senior Management s ownership and trading of shares during the year Details of the movement of UGH shares held by Senior Management as at December 2017 were as follows: # of shares Hussain Lalani 67 Mohammed Al Qumaish - Deepa Chandrasekhar - Rehan Ashraf - Adel Al Arab - Nirmal Parik - Abbas Al Tooq - Hamid Al Hashimi - 5. Disclosure on materially significant related party transactions Related party transactions are defined as those that may have potential conflict with the interests of the Company at large. None of the transactions with any of the related parties was in conflict with the interest of the Company. The attention of readers is drawn to the disclosure of transactions set out in Note 28 of the Financial Statements for the year ended The Company s major related party transactions are generally conducted on an arm s length basis with the affiliated companies of the KIPCO Group. Such transactions are entered into based on considerations of various business exigencies such as synergy in operations, optimization of market share, legal requirements and liquidity. 6. Disclosure of Conflicts of Interest During the financial year ended 2017, there were no materially significant transactions that warranted Directors to abstain from voting or declare their conflicts. This is in accordance with the Disclosure of Conflict of Interest policy that was approved by UGH s Board of Directors in December In the event that there is any conflict, directors are expected to inform the entire Board of their rationale, their activities and commitments to other organisations as they arise, and abstain from voting on any matter where they perceive a conflict. All material facts Page 14 of 16

16 in the case of a contract or transaction involving the director should also be notified to the Board. If the disclosure is upheld, the director deemed to have a conflict of interest is expected to abstain from voting on the issue. Such abstention will be recorded by the Secretary of the Board in the minutes of the committee or the Board (as appropriate). Furthermore, the policy requires the Company to disclose to its shareholders in this Corporate Governance Report, any abstention from voting motivated by a conflict of interest, as well as any authorisation of a conflict of interest contract or transaction. No abstentions were recorded for the year ended Disclosure and Transparency Policy The Company has a Disclosure Policy that reiterates its commitment to disclose all relevant information to stakeholders on a timely basis and emphasises: Adequate documentation and definition of the key components of UGH s disclosure controls and procedures and the standards to which they are designed and implemented. Information with respect to the steps that UGH will take when it has material information to release to the public. Approval of the limited group of authorised spokespersons who are entitled to speak on behalf of the Company when material information may be disclosed. Adequate awareness for Directors and officers of UGH for understanding the disclosure practices and policies. 7.1 Means of Communication a) Annual and Quarterly Results: In accordance with the CBB s Disclosure Standards, these are published in an English newspaper and an Arabic Newspaper. These are also displayed on the Company s website b) News Releases, Presentations, etc. : Official news releases, detailed presentations made to the shareholders etc. are available on the Company s website after they have been released to the CBB and the Bahrain Bourse. c) Website : The Company maintains a website which contains information related to its profile. It also has an investor relations section along with financial information. Page 15 of 16

17 d) Copies of the Dispute Resolution Policy and the Whistleblowing Policy, are available on the Company s website. There is also a whistleblowing form alongside procedures to highlight complaints and wrongdoing. There is a separate section on the website (under Investor Relations) where the bank posts relevant shareholders information eg. AGM agenda, proxies etc.). The bank has an (info@ughbh.com) which is already in place to allow shareholders to obtain the above information shareholders who require more such information, can always raise their queries using this address. 8 External Auditor The Company s external auditors are Ernst and Young. In accordance with Article 206 of the Bahrain Commercial Companies Law (2001), the external auditors will be re-appointed each year by the shareholders at the AGM. The external auditors fees are approved by shareholders. For the year ended 2017, the external fees were US$ 34,483. No non-audit service fees were rendered to UGH by its external auditors. In December 2017, the Board of Directors approved a policy for the Evaluation of Independence of External Auditors. This document mandates the external auditor to maintain a quality control system that provides reasonable assurance that its independence will not be impaired. Going forward, the External Auditor is also expected to annually confirm its independence in writing, specifically stating whether any non-audit services provided during the year compromised its independence. Page 16 of 16