AIM RULE 26
Principle 1: Establish a strategy and business model which promote long-term value for shareholders
Summerway’s updated strategy and Investing Policy is detailed in the Circular posted to Company Shareholders on 23 December 2020, which is also available on Summerway’s website at www.summerwaycapital.co.uk.
Summerway is currently seeking to invest in invest in or acquire businesses that can be organically or acquisitively grown to become leading providers of enterprise software, solutions and services.
The Directors of Summerway have a strong track record of strategic and operational leadership, and extensive experience of identifying, evaluating and executing opportunities (both quoted and unquoted) and creating value for stakeholders. Furthermore, the Directors believe that their combined and extended networks will yield a number of attractive acquisition and investment opportunities Summerway intends methodically to identify and develop such opportunities, as quickly and as prudently as possible.
With reference to the potential acquisitions of businesses the Directors will, in particular, seek businesses with where they believe there are tangible opportunities to drive strategic, operational and performance improvement, either as a standalone entity or as a result of broader initiatives.
The Directors will use their extensive business contacts and knowledge to source the most attractive transactions and assess potential targets for acquisition. It is anticipated that initial due diligence of any possible acquisition target will be carried out by the Directors who will seek specialist advice as they deem necessary. If, after the initial review, the Board agrees to proceed with an acquisition then it will:
- Appoint lawyers and accountants to undertake legal and financial due diligence;
- If the acquisition involves buying less than a 100% interest then the Board may also commission due diligence on the third parties involved in the project and will also ensure that the lawyers put in place the appropriate protections;
- In each case all decisions to proceed must be undertaken by the Board as a whole, although it can delegate the final execution of the transaction to a committee of the Board.
- Any proposed acquisition will be discussed in advance by the Board with the Nomad to confirm that they are satisfied with the due diligence being undertaken and with the brokers to ensure that, if required, funds can be raised from the AIM market to finance the acquisition.
Principle 2: Seek to understand and meet shareholder needs and expectations
Regular dialogues are held with shareholders, including holding briefings with analysts and other investors. The company also uses the Annual General Meeting as an opportunity to communicate with its shareholders. All directors are expected to attend the Annual General Meeting with the Chairman of the Audit and Remuneration Committees being available to answer shareholders’ questions. The Directors of the Board are the primary points of contact for all shareholders.
The Company produces year end and interim announcements as well as a Full Annual Report, all of which are available on the Company’s website and hard copies of the annual report will be distributed to those shareholders. The Company’s website contains information on the Group, matters reserved for the Board, the Company’s articles of association, the Committee terms of references, copies of all documents sent to shareholders and all market and regulatory announcements.
Also available on the website will be notices of Annual General and General Meetings, Proxy Voting details, circulars sent to shareholders and any other information sent to shareholders.
The Directors will continue to build relationships with institutional and private shareholders. Shareholder relations are managed primarily by the Directors, who, as appropriate, will make presentations to institutional shareholders and analysts following the release of full-year and half-year results and on an ad hoc basis upon request.
As a Rule 8 Investing Company, in accordance with the AIM Rules for Companies, if the Company has not substantially implemented its Investment Policy within 18 months, the Company will either ask Shareholders to approve an orderly winding up of the Company and return of funds to Shareholders (after payment of expenses and liabilities of the Company), or alternatively it will seek Shareholder approval for its Investment Policy at each subsequent annual general meeting until such time as the Investment Policy has been substantially implemented.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long- term success.
The Group’s stakeholders include shareholders, members of staff, potential vendors or potential executive management teams with which the Company may seek to engage. The principal ways in which their feedback on the group is gathered is via meetings, conversations and feedback processes.
In analysing acquisition and/or investment opportunities, the Company intends to identify and develop opportunities as quickly and as prudently as possible. As an AIM Rule 8 Investing Company, Summerway has limited trading operations and as such, it not yet appropriate to adopt in full certain governance policies; such as equality and diversity and health and safety policies. It is intended that upon completion of the Company’s first acquisition; which is expected to constitute a reverse takeover pursuant to Rule 14 of the AIM Rules for Companies, these governance policies will be reviewed in full and adopted as appropriate.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board is responsible for ensuring the Group has effective and sound systems of internal controls, which are designed to manage, but not eliminate, the risk of failure to achieve business objectives and provide reasonable, but not absolute, assurance against material misstatements and loss. The day-to-day management and monitoring of the Group’s systems of internal control is the responsibility of the Directors.
A formal risk register will be developed by the Board at an appropriate point once an acquisition has completed.
The Board will review the risk assessment at least annually. This review will follow the ICAEW’s guidance for directors on internal controls in determining what constitutes a sound system of internal controls. It is proposed that boards consider:
- the nature and extent of the risks which they regard as acceptable for the Company to bear within its particular business;
- the threat of such risks becoming reality;
- the Company’s ability to reduce the incidence and impact on business if the risk crystallises; and
- the costs and benefits resulting from operating relevant controls.
Principle 5: Maintaining the Board as a well-functioning, balanced team led by the Chair
The composition and experience of the Board is shown on the Company’s website www.summerwaycapital.co.uk.
The Directors are responsible for the running of the Board, together with seeking and analysing potential acquisition and/or investment opportunities, with a view to implementing the Company’s investing policy.
The Company intends to undertake an acquisition or acquisitions at which point it will re-evaluate the make up of its Board. It is anticipated that upon the consummation of an acquisition or acquisitions the Board would be changed as appropriate.
Directors’ conflict of interest
The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.
The Board will be provided with details of any proposed related party transactions as and when they are proposed and will consider and approve the terms and conditions of such transactions before they are entered into in order to avoid breaches of the AIM rules.
Any director, to whom a contract or transaction is proposed involving a related party of that director, is not permitted to vote on the approval of such contract or transaction. If necessary, the other directors will consult with and consider the Nomad’s advice on any such related party transactions.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience in order to effectively implement its investing policy.
The Board of Directors meet quarterly and more often if required. Board meetings are held via teleconference although whenever practically possible the Directors endeavour to attend in person with the primary focus (amongst other matters) of making or divesting of investments, due diligence procedures that will be followed concomitant with any acquisition or investment and changes to the Company’s investment policy (to be proposed for approval by shareholders).
All Directors can take independent professional advice in the continuance of their duties, if necessary, at the Company’s expense.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The Board continually considers and evaluates its own performance and effectiveness and that of the individual Directors and Board Committee members. The Company conducts annual formal performance appraisals for Directors.
Principle 8: Promote a culture that is based on ethical values and behaviours
As a Rule 8 Investing Company, Summerway currently has limited trading operations and no employees. The Directors have however put in place adequate procedures to ensure that the Company has sufficient internal controls and policies in place to maintain compliance with the UK Bribery Act 2010. It is expected that following the Company’s first acquisition, if appropriate, the Directors will undertake a full evaluation of the operations and culture of the acquired trading business or assets. The Directors will seek to establish a corporate culture based on sound ethical values and behaviours and intends to lead from the front in promoting the adoption of this culture throughout the enlarged group.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The role of the Board is to ensure implementation of the Company’s investing policy and deliver long-term shareholder value, while also managing and overseeing key risks, management development and corporate responsibilities. The general obligations of the Board and the roles and responsibilities of its respective members are set out in a formal Board responsibilities statement approved by the Board. The Board fulfils its role by reviewing its investing policy on an annual basis and monitoring business performance throughout the year, and the Directors are responsible for determining the strategic focus of the Company. Any material change to the Company’s investing policy is subject to approval by shareholders at a general meeting. There is in place a schedule of matters reserved for Board approval set out in full below.
The Board have approved an annual Board calendar setting out the dates, location and standing agenda items for each formal scheduled Board and Committee meeting and scheduled Board calls. Board papers are circulated to Directors in advance of scheduled and unscheduled meetings, which are of an appropriate quality to enable the Directors to fulfil their obligations and adequately monitor the performance of the business. Directors who are unable to attend a meeting are expected to provide their comments to the rest of the Board members, or the Company Secretary as appropriate.
The Board is supported by the Audit and Remuneration Committees, further details of which are set out below. Both Committees have access to such resources, information and advice as it deems necessary, at the cost of the Company, to enable the Committee to discharge its duties.
The Board recognises the need to eliminate the misuse of inside information and are aware of the guidance issued by the FCA. The Directors have put in place adequate procedures to ensure that the Company has sufficient controls to eliminate such insider dealing and misuse of information.
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The Company encourages two-way communication with both its institutional and private investors and responds quickly to all queries received. The Directors talk regularly with the Group’s major shareholders and ensures that their views are communicated fully to the Board.
In addition, the Company communicates with shareholders through the Annual Report, full-year and half-year announcements, the Annual General Meeting, General Meetings and one-to-one meetings with large existing or potential new shareholders.
The Remuneration Committee shall be responsible for considering all material elements of remuneration policy, the remuneration and incentivisation of Directors and senior management and to make recommendations to the Board on the framework for remuneration and its cost. The role of the Remuneration Committee is to keep under review the Company’s remuneration policies to ensure that the Company attracts, retains and motivates the most qualified talent who will contribute to the long-term success of the Company.
The Remuneration Committee is chaired by David Firth (the Non-Executive Director) with Ben Shaw and Liz Shanahan as its other members. The composition of the Remuneration Committee will be reviewed and revised (if appropriate) in connection with the Company’s first acquisition.
The Audit Committee is responsible for assisting the Board’s oversight of the integrity of the financial statements and other financial reporting, the independence and performance of the auditors, the regulation and risk profile of the Group and the review and approval of any related party transactions. The Audit Committee may hold private sessions with management and the external auditor without management present.
The Audit Committee is chaired by David Firth (the Non-Executive Director) with Ben Shaw and Liz Shanahan as its other members. The composition of the Audit Committee will be reviewed and revised (if appropriate) in connection with the Company’s first acquisition.
The Company has not established a nomination committee as the Directors do not consider that committee appropriate given the nature of the Company’s board structure and operation. The Directors will review the various committees and procedures of the Board in connection with the Company’s first acquisition and at that time consider the need for additional corporate governance measures; for example, the constitution of a nominations committee.
Matters reserved for the Board
The Board of Directors will meet quarterly and more often if required. Board meetings may be held via teleconference although whenever practically possible the Directors will endeavour to attend in person.
The matters reserved for the attention of the Board include, inter alia:
- The making or divesting of investments;
- The due diligence procedures that will be followed concomitant with any acquisition or investment;
- Changes to the investment policy (to be proposed for approval by shareholders);
- Opening bank accounts;
- Creating new subsidiaries;
- Engagement of lawyers;
- Engagement of professional advisors;
- Staff recruitment;
- All bonus payments and salary reviews;
- The approval of financial statements, dividends and significant changes in accounting practices;
- Board membership and powers including the appointment and removal of Board members, determining the terms of reference of the Board and establishing the overall control framework;
- Appointment, dismissal, remuneration and on-going performance monitoring of the Directors and professional advisors/outsourcing providers;
- AIM related issues including the approval of the Company’s announcements and communications with both shareholders and the Stock Exchange;
- Senior management and subsidiary Board appointments and remuneration, contracts and the grant of share options;
- Key commercial matters;
- Risk assessment;
- Financial matters including the approval of the budget and financial plans, related parties, changes to the capital structure and business strategy; and
- Other matters including health and safety policy, insurance and legal compliance.
Updated on 24th September 2021