INTEGRATED REPORT 2016
Compliance with the Corporate Governance Code
This report on compliance with the principles and recommendations of the Code of Corporate Governance was reviewed by the Board of Directors of PJSC Uralkali on 12 April 2017. The Board of Directors confirms that this report contains complete and reliable information regarding the Company’s compliance with the principles and recommendations of the Code of Corporate Governance.
| # | Principles of corporat governance | Criteria used to evaluate whether the principle is observed | Status of compliance with the principle of corporate governance | Explanation of deviation from compliance/ non-compliance with the principles of corporate governance |
| 1.1 | The company should ensure the equal and fair treatment of all its shareholders in the course of their exercising their rights to participate in the management of the company. | |||
| 1.1.1 | The company should create the most favourable conditions possible for its shareholders, enabling them to participate in the general meetings and to develop informed positions on the issues forming its agenda, as well as providing them with the opportunity to coordinate their actions and express their opinions regarding the issues under discussion | 1. The internal document of the
company which regulates the
procedure for convening, preparing
and holding general shareholders
meetings, and which was approved
by the general shareholders meeting,
should be available within the public
domain. 2. During the period of preparation for the meeting, the company shall establish the necessary organisational and technical conditions to ensure that shareholders may pose questions to members of the company’s executive bodies and board of directors, as well as to publicly express their opinions on the meeting’s agenda items. To this end, a company with a large number of shareholders is recommended to support a special telephone line (hotline) for communication with shareholders, to establish a special email address, and to provide a forum for discussion of the meeting agenda on its website. |
observed | |
| 1.1.2 | Procedures for notification of the general meeting and provision of materials for it should enable the shareholders to properly prepare themselves for participation therein | 1. A notice announcing a general
shareholders meeting should be
published on the website of the
company at least 30 days before the
date of the meeting. 2. In addition to the information which under the law must be contained in the notice of the general meeting, it is recommended to specify therein the exact location of the general meeting, including details of the room in which it will be conducted and information on documents required for admission to the premises on which the general meeting is to be held. 3. Information about who has proposed each item or nominated a particular candidate to a management body or other body of the company is of great importance for shareholders wishing to form an objective opinion on an agenda item. |
partially observed | The shareholders are not informed of who proposed agenda items for the AGM or nominated candidates for election to the bodies of the company. This has to do with the fact that the majority of items proposed to the shareholders in 2016 were (in compliance with the law and charter of the company) proposed by the board of directors with the board’s recommendation to approve the indicated issues. In this case, as we believe, it does not matter who proposed the relevant item, because the board of directors accepts shareholders’ proposals and provides shareholders with extracts from meeting minutes as part of the materials provided to shareholders in preparation for the general meeting. As far as candidates nominated for election are concerned, the company discloses detailed biographical data about the candidates, their current places of employment, and their positions, as well as their current status (independent, nonexecutive or executive director). In our opinion, this data is sufficient for the shareholders to make a decision and elect certain candidates to the board of directors. |
| 1.1.3 | During the preparation for and holding of the general meeting, the shareholders should be able to freely and in a timely manner receive information about the meeting and its materials, to pose questions to members of the company’s executive bodies and board of directors, and to communicate with each other. | 1. During the relevant reporting period
shareholders should be provided with
an opportunity to pose questions to
members of the company’s executive
bodies and board members before and
during the annual general meeting. 2. The materials set out the positions of the board of directors regarding the general meeting’s agenda, as well as dissenting opinions of board members on each item therein. Such materials are recommended for inclusion into the minutes of a meeting of the board of directors where such opinions have been expressed. 3. The company is recommended to provide those shareholders who are entitled to review the list of persons authorized to participate in the meeting with the opportunity to review it starting from the date when the company receives such information |
partially observed | The Charter of the company and the Law do not
make it obligatory for board members to be present
at the AGM; however board members can be invited
to participate in the general meeting. Traditionally,
attendance at general shareholders meetings, despite
the fact that these meetings are held at the location
of most shareholders of the company (Berezniki,
Perm Territory), is very low and the presence of board
members seems excessive and unnecessary as most
members of the Management Board including the
CEO (General Director), are present and willing to
answer any questions that the shareholders might
have. Shareholders also have the opportunity to pose
their questions to board members (for example, via
e-mail) and to members of the Management Board at
any time during preparation for and the actual holding
of the meeting. The position of the board of directors on agenda items is stated in the decisions adopted by the board of directors themselves. Notices of material corporate actions (significant facts) disclosed by the company reflect the number of votes cast by board members present at the meeting in support of a particular decision. There were no dissenting opinions of board members which had to be recorded in the minutes and subsequently disclosed. We deem unnecessary to disclose information about what directors and why preferred abstaining or voting against, as the board of directors is a collective body whose decisions are adopted by a quorum determined by the Law and the Charter. |
| 1.1.4 | There should be no unjustified difficulties preventing shareholders from exercising their right to demand that a general meeting be convened, nominate candidates to the company’s governing bodies, and to place proposals on its agenda. | 1. The shareholders have the
opportunity to propose items to be
included in the agenda of its annual
general meeting within a 60-day
period following the end-date of the
respective calendar year. 2. If there are typos and other insignificant flaws in shareholder proposals, it is not recommended that the company refuse to include these proposals on the agenda or refuse to allow the proposed candidate to claim his/her place on the list of nominees for election as long as the contents of the proposal as a whole are sufficient to determine the will of the shareholder and to confirm his right to submit the proposal. |
observed | |
| 1.1.5 | Each shareholder should be able to freely exercise his right to vote in a straightforward and most convenient way. | To rule out any abuse, the company should include in its internal documents a provision whereby a person filling out a voting ballot may, until the end of the general meeting, request that a copy of the ballot filled out thereby be certified by the company’s counting commission (or representatives of the registrar who carry out the functions of such counting commission). | not observed | No such provisions are made in the internal documents of the company; however, in reality no shareholder has ever been refused a copy of a ballot filled in by this shareholder and certified by the company’s counting commission if ever such request was made by a shareholder. |
| 1.1.6 | Procedures for holding a general meeting set by the company should provide equal opportunity to all persons present at the general meeting to express their opinions and ask questions that might be of interest to them. | 1. The general meeting should be
conducted in such a way as to enable
the shareholders to make informed
and reasoned decisions on all matters
on the agenda. In order to do so,
a sufficient time for reports on the
agenda should be provided and there
should be sufficient time to discuss
these issues. 2. The company should invite candidates nominated to its board of directors and internal audit commission to attend the respective general meeting (and such candidates are recommended to attend the same) so that shareholders will be able to ask them questions and make their judgments about such candidates. 3. The board of directors considered the use of telecommunication systems to provide the shareholders with remote access to their general meetings (for example, by broadcasting its proceedings via the company’s website or by using video conferencing). |
partially observed | Refer to comment to p. 1.1.3 |
| 1.2 | Shareholders should have equal and fair opportunities to participate in the profits of the company by means of receiving dividends. | |||
| 1.2.1 | The company should develop and put in place a transparent and clear mechanism for determining the amount of dividends and their payment. | 1. The company has developed and
disclosed its dividend policy approved
by the board of directors. 2. If the dividend policy of the company utilizes indicators from the financial statements of the company to determine the size of the dividend, the relevant provisions of the dividend policy should include the consolidated indicators of financial statements. |
observed | The dividend policy of the company was approved by the board of directors and disclosed on the official website of the company. The dividend policy is not linked to a specific financial indicator of the company’s financial statements. |
| 1.2.2 | The company should not make a decision on the payment of dividends if such decision, without formally violating limits set by law, is nevertheless unjustified from the economic point of view and might lead to the formation of false assumptions about the company’s activity. | The dividend policy of the company should contain clear indications of financial/economic circumstances which prohibit the company from paying dividends. | observed | |
| 1.2.3 | The company should not allow deterioration of dividend rights of its existing shareholders. | The company has not taken any actions which would allow for the deterioration of dividend rights of existing shareholders in the reporting period. | observed | |
| 1.2.4 | The company should strive to rule out any means through which its shareholders can obtain profit or gain at the company’s expense other than dividends and distributions of its liquidation value. | The company has established appropriate control mechanisms in its internal documents to prevent its controlling persons from deriving a profit (income) from the company in ways other than dividends or liquidation value. Internal documents of the company contain provisions establishing control mechanisms for timely identification and approval of transactions with affiliated parties and major shareholders (persons entitled to control votes attached to voting shares) in cases when the law does not formally recognize these transactions as interested-party transactions. | partially observed | In 2015, for objective reasons, the company was unable to pay dividends due to several financial and accounting limitations imposed by the law, which could have led to the deterioration of the financial status of the company. The internal documents of the company (Regulations on the Audit Committee) provide for a specific procedure for the Committee’s work in cases of strategic transactions which, inter alia, may include transactions with the company’s substantial shareholders. Such transactions are concluded once a special committee comprised exclusively of independent directors has issued an appropriate recommendation. In 2016, the company initiated another program to repurchase shares and global depositary receipts which enabled the shareholders to sell their securities at market value, since no dividends would be paid in the foreseeable future. |
| 1.3 | The system and practices of corporate governance should ensure equal terms and conditions for all shareholders owning shares of the same class (category) in a company, including minority and foreign shareholders. Equal treatment should be unilateral and beyond dispute. | |||
| 1.3.1 | The company should create conditions which would force its governing bodies and controlling personnel to treat each shareholder fairly, especially in the area of negating the possibility of any abuse of minority shareholders by major shareholders. | During the reporting period the procedures adopted for management of potential conflict between major shareholders were effective, and the board of directors paid sufficient attention to conflicts, if any, between shareholders. | observed | |
| 1.3.2 | The company should not perform any acts which would or could result in artificial reallocation of corporate control therein. | There were no quasi-treasury shares or they did not participate in voting during the course of the reporting period. | not observed | In September 2016, the size of the quasi-treasury block of the company exceeded 50% of the share capital. In this regard, holding the general meeting of shareholders (securing a quorum that makes the meeting eligible), as well as taking decisions on a number of issues of the company’s activities (in particular, approval of the revised company’s charter, due to the need to obtain a qualified majority of votes of at least 75% of shareholders registered for participation in the general meeting) became impossible without the use of a quasi-treasury block. At the same time, considering that the quasi-treasury block of the Company is divided into several smaller blocks, the Company used only a small portion of quasi-treasury shares necessary to ensure the eligibility of the meeting and the adoption of the revised charter, approved in connection with the need to bring the provisions of the charter into compliance with the requirements of current Russian legislation, namely, the Federal Law On Joint Stock Companies and the Civil Code of the Russian Federation. In voting on other items of the agendas, the quasitreasury block was not used. |
| 1.4 | The shareholders should be provided with reliable and efficient means of recording their rights in shares as well as with the opportunity to freely dispose of such shares in a non-onerous manner. | |||
| 1.4.1 | The shareholders should be provided with reliable and efficient means of recording their rights in shares as well as with the opportunity to freely dispose of such shares in a non-onerous manner. | The quality and reliability of the work performed by the registrar of the company answers the requirements of the company and its shareholders. | observed | |
| 2.1 | The board of directors shall be in charge of strategic management of the company, determine major principles of and approaches to creation of a risk management and internal control system within the company, monitor the activity of the company’s executive bodies, and carry out other key functions. | |||
| 2.1.1 | The board of directors should be responsible for decisions to appoint and remove members of executive bodies, including taking action in response to failure of the latter to properly perform their duties. The board of directors should also guarantee that the company’s executive bodies act in accordance with an approved development strategy and the main business goals of the company. | 1. According to the charter of the
company, the board of directors has
the authority to appoint, dismiss and
determine the terms and conditions of
contracts with members of executive
bodies of the company. 2. During the reporting period the board heard reports of the one-person executive body and members of the collective executive body on the implementation of the strategy, with particular attention to conformity with the company’s performance in targeting indicators set forth by the company’s strategy. | partially observed | the authority to appoint, terminate the appointment, and to determine the terms and conditions of the employment contract only in relation to the General Director (one-person executive body) of the company. Members of the Management Board are appointed and dismissed by the board of directors; however, the terms and conditions of their employment contracts are not determined by the board of directors in compliance with the Law and the charter of the company. The Nomination and Remuneration committee is charged with the preparation of recommendations regarding the principles and criteria of establishing the amount of the remuneration payable to members of the Management Board. The board of directors regularly reviews reports of the General Director on the results of the company’s activities (quarterly), which also include information about the status of implementation of the strategy of the company. In addition, the company has a practice of holding annual strategic sessions. |
| 2.1.2 | The board of directors should establish basic long-term targets of the company’s activity, evaluate and approve its key performance indicators and principal business goals, as well as evaluate and approve its strategy and business plans in respect of its principal areas of operations. | During the reporting period the board of directors has reviewed matters related to the status of execution of the strategy of the company, approval of its financial plan (budget) and the review of criteria and indicators (including interim) pertaining to the execution of the strategy and business plans of the company. | observed | |
| 2.1.3 | The board of directors should determine principles of and approaches to creation of the risk management and internal control system in the company. | 1. The board of directors has
determined the principles and
approaches to creation of the risk
management and internal control
system in the company. 2. The board of directors has evaluated the risk management and internal control system during the reporting period. | observed | |
| 2.1.4 | The board of directors should determine the company’s policy on remuneration due to and/or reimbursement of costs incurred by its board members, members of its executive bodies and other key managers. | 1. The company has developed and
implemented a policy (policies) on
remuneration and/or reimbursement
of costs incurred by its board
members, members of executive
bodies and other key managers. This
policy (policies) was approved by the
board of directors. 2. During the reporting period the board of directors reviewed matters related to the indicated policy (policies). | partially observed | The company developed and implemented Regulations on Remuneration and Reimbursement of Members of the Board of Directors (hereinafter – the Regulations on Remuneration), which were approved by the general shareholders meeting. During the reporting year, the general meeting of shareholders of PJSC Uralkali approved amendments to the Regulations on Remuneration, according to which the right to receive remuneration was also granted to non-executive members of the board of directors. Over the course of the reporting period there was no need to update or adjust documents related to remuneration and reimbursement of executive bodies or key managers of the company. |
| 2.1.5 | The board of directors should play a key role in prevention, detection and resolution of internal conflicts between the company’s bodies, shareholders and employees. | 1. The board of directors plays a key
role in prevention, detection and
resolution of internal conflicts. 2. The company has created a system of identification of transactions related to a conflict of interest and a system of measures intended to resolve such conflicts. | observed | |
| 2.1.6 | The board of directors should play a key role in ensuring that the company is transparent, discloses information in full and in due course, and provides its shareholders with unhindered access to its documents. | 1. The board of directors has approved
a regulation on information policy. 2. The company has appointed persons in charge of the implementation (enforcement) of the information policy. | observed | |
| 2.1.7 | The board of directors should monitor the company’s corporate governance practices and play a key role in its material corporate events. | During the reporting period the board of directors reviewed the corporate governance practices in the company. | observed | |
| 2.2 | The board of directors should be accountable to the company’s shareholders. | |||
| 2.2.1 | Information about the board of directors’ work should be disclosed and provided to the shareholders. | 1. The annual report of the company
for the reporting period contains
information regarding the directors’
attendance at board and committee
meetings. 2. The annual report contains information about the key results of the evaluation of the work of the board of directors in the reporting period. | observed | |
| 2.2.2 | The chairperson of the board of directors should be available for communication with shareholders. | The company has a transparent procedure allowing shareholders to send questions to the chairperson of the board of directors and clarify their position on them. | observed | |
| 2.3 | The board of directors should be an efficient and professional governing body of the company able to make objective and independent judgments and pass resolutions in the best interests of the company and its shareholders. | |||
| 2.3.1 | Only persons with impeccable business and personal reputation should be elected to the board of directors; such persons should also have knowledge, skills, and experience necessary to make decisions that fall within the jurisdiction of the board of directors and to perform all such functions efficiently. | 1. The performance assessment
procedure for the board of directors
adopted in the company includes
the evaluation of professional
qualifications of board members. 2. In the reporting period, the board of directors (or its nominations committee) evaluated candidates nominated to the board in terms of their experience, knowledge, business and personal reputation, absence of conflicts of interest etc. | partially observed | The company has put a procedure in place to assess the performance of the board of directors; however, it does not include an assessment of professional qualifications of board members. In addition, over the course of the reporting period the board of directors did not evaluate candidates nominated to the board of directors in terms of their experience, knowledge, business reputation or absence of a conflict of interest, because candidates to the board are nominated and elected by shareholders and the Law does not provide for a procedure of refusal to accept candidates or to appoint candidates to the board of directors due to their not possessing certain knowledge or skills. With regard to a potential conflict of interest, 1) such conflict is identified at the stage of nomination of candidates due to the fact that candidates are obliged to provide certain information about themselves including information about any persons with whom the candidate is affiliated; 2) the possibility of a conflict of interest after a candidate’s election to the board is minimized by the fact that members of the board of directors who are interested parties for the purpose of the company’s transactions do not take part in voting on these transactions and the fact that the law provides for the obligation of a board member to inform the company of his/her being an interested party; 3) in 2016, the Nomination and Remuneration Committee for the first time assessed the compliance of candidates for election to the board of directors with the independence criteria set by the Listing Rules of the Moscow Stock Exchange. Information on compliance with the independence criteria and on the absence of a conflict of interest was taken into account. |
| 2.3.2 | Board members should be elected pursuant to a transparent procedure enabling the shareholders to obtain information about respective candidates sufficient for them to get an idea of the candidates’ personal and professional qualities. | Biographical data on all candidates nominated to the board of directors, and the results of the evaluation of such candidates conducted by the board of directors (or its nominations committee), information regarding the candidate’s conformity with independence criteria in accordance with recommendations 102-107 of the Code, and the candidates’ written consent to be elected to the board, were provided to shareholders in preparation for all meetings where the election of board members was on the agenda. | observed | The results of the evaluation of candidates conducted by the board of directors or the Nomination and Remuneration Committee in 2016 were not provided to shareholders; however, detailed biographies of candidates indicating their status (independent, nonexecutive, executive) were made available to them. |
| 2.3.3 | The composition of the board of directors should be balanced, in particular in terms of qualifications, expertise, and the business skills of its members. The board of directors should enjoy the confidence of the shareholders. | During the procedure of assessment of the work of the board of directors conducted in the reporting period, the board analysed its composition in terms of the qualifications and expertise of its members. | not observed | Refer to comment to p. 2.3.1 |
| 2.3.4 | The membership of the board of directors of the company must enable the board to organise its activities in the most efficient way possible, in particular, to create committees of the board of directors, as well as to enable substantial minority shareholders of the company to put forth a candidate to the board of directors for whom they would vote | During the procedure of assessment of the work of the board of directors conducted in the reporting period, the board of directors analysed the conformity of its membership to the needs of the company and its shareholders. | not observed | Such an assessment procedure was not carried out by the board of directors. The issue of conformity of the board’s membership with the needs of the company and interests of shareholders has never been raised as the company has never had any shareholders’ request to change the board’s composition or to provide any information confirming that the number of board members does not correlate with the interests of the company or its shareholders. The number of board members is in line with the law, and the Company sees no reason to change it. |
| 2.4 | The board of directors should include a sufficient number of independent directors. | |||
| 2.4.1 | An independent director should mean any person who has the required professional skills and expertise and is sufficiently able to have his/her own position and make objective and bona fide judgments, free from the influence of the company’s executive bodies, any individual group of its shareholders or other stakeholders. It should be noted that, under normal circumstances, a candidate (or an elected director) may not be deemed to be independent, if he/she is associated with the company, any of its substantial shareholders, material trading partners or competitors, or the government. | During the reporting period all independent board members met all the all requirements of recommendations 102-107 of the Code or were deemed independent pursuant to a decision of the board of directors. | observed | |
| 2.4.2 | It is recommended to evaluate whether candidates nominated to the board of directors meet the independence criteria as well as to review, on a regular basis, whether or not independent board members meet the independence criteria. When carrying out such evaluation, substance should take precedence over form. | 1.During the reporting period the
board of directors (or its nominations
committee) issued an opinion
regarding the independence of each
candidate nominated to the board and
provided the shareholders with the
appropriate conclusion. 2. At least once in the reporting period the board of directors (or its nominations committee) evaluated the independence of current members of the board of directors indicated by the company in the annual report as independent directors. 3. The company has developed procedures indicating the actions which must be taken by a board member once he/she ceases to be independent, including their obligation to inform the board of directors of these circumstances in a timely fashion. | partially observed | Refer to comment to p. 2.3.1.
The company does not have any special procedures
determining what actions must be taken by
board members in cases when they cease to be
independent. We do not consider the development
of such procedures necessary, because the Law
On Joint Stock Companies and the Regulation on
the Board of Directors of the company sufficiently
regulate this issue by providing that board members
must notify the board of directors (supervisory
board) of the company, the revision commission
and/or auditor of the company of the following: - legal entities where they independently or together with their affiliates own 20% or more of voting shares (stakes); = legal entities where they are members of governance bodies; = all current or potential transactions where they may be deemed to be interested parties. |
| 2.4.3 | Independent directors should account for at least one-third of all directors elected to the board of directors. | Independent directors should account for at least one-third of all directors elected to the board of directors. | observed | |
| 2.4.4 | Independent directors should play a key role in prevention of internal conflicts in the company and performance by the latter of material corporate actions. | Independent directors (with no conflict of interest) should preliminarily review material corporate actions related to a potential conflict of interest and a document setting out the results of such evaluation should be made available as part of materials to be provided in connection with a board meeting where a respective matter is to be considered. | observed | |
| 2.5 | The chairperson of the board of directors should help it carry out the functions imposed thereon in a most efficient manner. | |||
| 2.5.1 | It is recommended to either elect an independent director to the position of chairperson of the board of directors or identify the senior independent director among the company’s independent directors who would coordinate work of the independent directors and liaise with the chairperson of the board of directors. | 1. The chairperson of the board of
directors is an independent director
or a senior independent director
who was appointed from among the
independent directors39. 2. The role, rights and responsibilities of the chairperson of the board (and, if applicable, of the senior independent director) are clearly determined in the internal documents of the company. | partially observed | The chairperson of the board of directors is an independent director. Also, the board of directors has elected a senior independent director; however his role, rights and obligations are not determined under any internal document. Nevertheless, every year, the company discloses information about the role of the senior independent director in the annual report. |
| 2.5.2 | The board chairperson should ensure that board meetings are held in a constructive atmosphere and that any items on the meeting agenda are discussed freely. The chairperson should also monitor fulfilment of decisions made by the board of directors. | The performance of the chairperson of the board of directors was evaluated within the framework of the board performance assessment procedure in the reporting period. | partially observed | The individual role of the chairperson was not evaluated separately within the framework of the assessment; however, the work of the board as a team and its effectiveness as a whole was evaluated. According to the Law, the chairperson of the board of directors organises the work of the board of directors, and, overall, it was deemed to be effective. This is why we did not see any need to assess the work of the chairperson of the board of directors in 2016. |
| 2.5.3 | The chairperson of the board of directors should take any and all measures as may be required to provide the board members in a timely fashion with information required to make decisions on issues on the agenda. | The obligation of the chairperson of the board of directors to take any and all measures to provide the board members in a timely fashion with information required to make decisions is stipulated in the internal documents of the company. | observed | |
| 2.6 | Board members must act reasonably and in good faith in the best interests of the company and its shareholders, being sufficiently informed, with due care and diligence. | |||
| 2.6.1 | Acting reasonably and in good faith means that board members should make decisions considering all available information, in the absence of a conflict of interest, treating shareholders of the company equally, and assuming normal business risks. | 1. Internal documents of the company
should stipulate that if a board
member has a conflict of interest, he/
she should promptly inform the board
of directors (through its chairman or
the company’s corporate secretary)
both of the existence of and grounds
for such conflict of interest. In any
case, such notification shall be made
before the issue is discussed at a
meeting of the board of directors or
by any of its committees at which such
board member is present. 2. According to internal documents of the company, if a board member has a conflict of interest, he/she may not take part in decision-making. He/ she should abstain from voting on any issues in which he/she has a conflict of interest. 3. The company should provide for a procedure (and a related budget) enabling board members to receive, at the expense of the company, professional advice on issues relating to the jurisdiction of the board of directors. | partially observed | According to p. 3.3 of the Regulations on the Board of
Directors, board members must inform the board of
directors, the revision commission and the authority
of the company of information specified in Article
82 of the Federal Law On Joint Stock Companies,
and inform the board of any changes in the indicated
information in a timely fashion. It is not required
that board members must refrain from voting on
any matter where he/she has a conflict of interest;
however, the company has never had a case of voting
when there was a conflict of interest. The absence of
such provision in the company’s internal documents
is, in our opinion, compensated by the provisions of
p. 3.3 of the Regulations on the Board of Directors
of PJSC Uralkali, which obliges board members to
act reasonably, in good faith and with appropriate
consideration for the company. Pursuant to p. 3.1 of the Regulations on the Board of Directors, board members have the right to request that experts and consultants be retained by the company at the expense of the company whenever the need arises. The procedure for retention of such experts is not formalized, but, as a rule, board members who wish to retain a consultant address their requests (as with any other matter related to the work of the board of directors) to the Corporate Secretary of the company who, in compliance with the Regulations on the Corporate Secretary of PJSC Uralkali, provides organisational support to the board of directors and ensures effective coordination between board members and the company’s management. |
| 2.6.2 | Rights and duties of board members should be clearly stated and documented in the company’s internal documents. | The company adopted and published an internal document whereby the rights and duties of board members are clearly stated. | observed | |
| 2.6.3 | Board members should have sufficient time to perform their duties. | 1. Individual attendance at board and
committee meetings and time devoted
to preparation for participation in
meetings was considered during the
procedure of assessment of the board
of directors in the reporting period. 2. In accordance with internal documents of the company, board members should notify the company’s board of directors of their intention to take a position in management bodies of other entities and, immediately after their election (appointment) to the management bodies of such other entities, of such election (appointment). | partially observed | The company’s internal documents do not require that
board members notify the board of directors of their
intention to take a position in management bodies of
other entities. Board members must inform the board
of directors of the fact of their appointment (election)
to the management bodies of other entities in
compliance with the Law and p. 3.3 of the Regulations
on the Board of Directors. Imposing an obligation
on board members to inform the company of their
intentions seems excessive for the following reasons: 1) until the moment of their appointment this information may constitute insider information and cannot be made known to the company; 2) their appointment may not be finalized for various reasons. |
| 2.6.4 | All board members should have equal opportunity to access the company’s documents and information. Newly elected board members should be provided with sufficient information about the company and work of its board of directors as soon as possible. | 1. In accordance with internal
documents of the company, board
members are given an opportunity to
obtain any and all information required
to perform their duties, including
information on legal entities controlled
by the company. The duty of the
company’s officials to provide the
board members with such information
is set forth by the company’s internal
documents. 2. The company has a formal induction program for newly elected board members. | observed | |
| 2.7 | Meetings of the board of directors, preparation for them, and participation of board members therein should ensure efficient work of the board. | |||
| 2.7.1 | It is recommended to hold meetings of the board of directors as needed, with due account of the company’s scope of activities and its then current goals. | The board of directors held at least 6 meetings in the reporting period. | observed | |
| 2.7.2 | It is recommended to develop a procedure for preparing for and holding meetings of the board of directors and setting it out in the company’s internal documents. The above procedure should enable the shareholders to prepare themselves properly for such meetings. | The company has an internal document in place regulating the procedure for preparation and holding of board meetings which, inter alia, requires that the notice of a meeting must be made, as a rule, at least 5 days before the date of the meeting. | observed | Note: The company’s internal documents require that notices of meetings and materials thereto must be provided to board members not later than 3 business days before the meeting (5 calendar days at the most). In exceptional cases, materials may be provided one business day in advance. |
| 2.7.3 | The form of a meeting of the board of directors should be determined with due account of the importance of the issues on the agenda of the meeting. Most important issues should be decided at the meetings held in person. | 1. According to the charter or an internal document of the company, the most important issues (in accordance with the list provided in recommendation 168 of the Code) must be considered and decided at meetings held in person. | partially observed | The Regulations on the Board of Directors determine a list of issues which cannot be reviewed at absentee meetings; however, formally this list does not meet the requirements of p. 168 of the Code. Nevertheless, almost all issues listed in p. 168 of |
| 2.7.4 | Decisions on most important issues relating to the company’s business should be made at a meeting of the board of directors by a qualified majority vote or by a majority vote of all elected board members. | According to the charter of the company, the most important issues as described by recommendation 170 of the Code must be decided by a qualified majority vote of at least three quarters of the votes or by a majority vote of all elected board members. | partially observed | The charter of the company does not provide for the issues listed in recommendation 170 of the Code to be decided by a qualified majority. According to the Law, all members of the board of directors must vote unanimously to adopt decisions pertaining to the conclusion of major transactions which fall within the purview of the board of directors. Other matters (except interested-party transactions) are decided by a majority vote of board members present at the respective meeting, as required by the law. This approach conforms to the law and it seems excessive to establish another quorum for decision-making at board meetings. Considering the fact that board meetings enjoy almost a 100% attendance by board members, almost all decisions are adopted by the majority vote of all elected board members. |
| 2.8 | The board of directors should form committees for preliminary consideration of the most important issues of the company’s business. | |||
| 2.8.1 | For the purpose of preliminary consideration of any matters of control over the company’s financial and business activities, it is recommended to form an audit committee comprised of independent directors. | 1. The board of directors formed an
audit committee comprised exclusively
of independent directors. 2. The objectives of the audit committee, including the objectives listed in recommendation 172 of the Code, are determined in the internal documents of the company. 3. At least one member of the audit committee, who is an independent director, has experience and knowledge of preparation, analysis, evaluation and audit of accounting (financial) statements. 4. Meetings of the audit committee were held at least once every quarter during the reporting period. | observed | |
| 2.8.2 | For the purpose of preliminary consideration of any matters of development of efficient and transparent remuneration practices, it is recommended to form a remuneration committee comprised of independent directors and chaired by an independent director who should not concurrently be the board chairperson. | 1. The board of directors formed a
remuneration committee comprised
exclusively of independent directors. 2. The committee is chaired by an independent director who is not the board chairperson at the same time. 3. The objectives of the remuneration committee, including the objectives listed in recommendation 180 of the Code, are determined in the internal documents of the company. | partially observed | Most members of the Audit Committee are independent directors, which is in line with the Listing Rules of the Moscow Exchange. For objective reasons the company cannot form the Audit Committee exclusively of independent directors as the chairperson of the board of directors of the company is not a member of board committees and oversees only the board of directors as a whole. All other recommendations are fully observed. |
| 2.8.3 | For the purpose of preliminary consideration of any matters relating to human resources planning (making plans regarding successor directors), professional composition and efficiency of the board of directors, it is recommended to form a nominating committee (a committee on nominations, appointments and human resources) with a majority of its members being independent directors. | 1. The board of directors formed
a nominations committee
(or its objectives indicated in
recommendation 186 of the Code
are implemented by a different
committee40), with a majority of its
members being independent directors. 2. The objectives of the nominations committee (or the relevant committee performing these functions) including the objectives indicated in recommendation 186 of the Code are determined in the internal documents of the company. | partially observed | Combined with the Nomination and Remuneration Committee. See comment to p. 2.8.2. |
| 2.8.4 | Taking account of its scope of activities and levels of related risks, the company should form other committees with its board of directors, in particular, a strategy committee, a corporate governance committee, an ethics committee, a risk management committee, a budget committee or a committee on health, safety and environment, etc. | In the reporting period the board of directors considered the conformity of the composition of its committees to the objectives of the board of directors and of the company. Additional committees were either formed or were deemed unnecessary. | observed | The company has additionally formed an Investment and Development Committee and a Corporate Social Responsibility Committee. |
| 2.8.5 | The composition of the committees should be determined in such a way that it would allow a comprehensive discussion of issues being considered on a preliminary basis with due consideration of differing opinions | 1. Board committees are chaired by
independent directors. 2. Given the specific nature of issues considered by the audit committee, the nominating committee and the remuneration committee, persons who are not members of the above committees can attend their meetings only at the invitation of their chairpersons. | partially observed | Board committees are chaired by independent directors. At the same time, committee chairpersons always welcome other board members, who are not members of a particular board committee, to attend committee meetings. This is standard practice for board committees despite the fact that this is not formalized in the company’s internal documents. |
| 2.8.6 | Committee chairpersons should inform the board of directors and its chairperson of the work of their committees on a regular basis. | During the reporting period chairpersons of board committees presented regular reports to the board of directors on their activities. | observed | |
| 2.9 | The board of directors should make an exhaustive evaluation of the quality of its work and that of its committees and board members. | |||
| 2.9.1 | Evaluation of the quality of the board of directors’ work should be aimed at determining how efficiently the board of directors, its committees and board members work and whether their work meets the company’s needs, as well as at making their work more intensive and identifying areas of improvement. | 1. Self-evaluation or external
evaluation of the work of the board
of directors in the reporting period
included the evaluation of the work
of the board committees, separate
members of the board of directors and
of the board of directors as a whole. 2. The results of the self-evaluation or external evaluation of the board of directors in the reporting period were reviewed by the board of directors at meetings held in person. | partially observed | The self-evaluation did not include an assessment of individual board members - at this stage the company does not deem this to be necessary. The results of the evaluation were reviewed at a board meeting held in person. |
| 2.9.2 | Quality of work of the board of directors, its committees and board members should be evaluated on a regular basis, at least once a year. To carry out an independent evaluation of the quality of the board of directors’ work, it is recommended to retain a third party entity (consultant) on a regular basis, at least once every three years. | An external organisation (consultant) was retained to evaluate the work of the board of directors at least once in the last three reporting periods. | not observed | No external consultant was invited by the company. The culture of performance assessment is being developed by the company gradually. At this stage retaining an external consultant seems premature. |
| 3.1 | The company’s corporate secretary shall be responsible for efficient interaction with its shareholders, coordination of the company’s actions designed to protect the rights and interests of its shareholders, and support of efficient work of its board of directors. | |||
| 3.1.1 | The corporate secretary should have knowledge, experience, and qualifications sufficient for performance of his/her duties, as well as an impeccable reputation and should enjoy the trust of the shareholders. | 1. The company has adopted and
disclosed an internal document -
regulation on the corporate secretary. 2. The company disclosed on its website and in its annual report information on the corporate secretary which is as detailed as that required to be disclosed in relation to board members and members of the executive bodies of the company. | partially observed | The biography of the corporate secretary was not disclosed on the website or in the Annual Report as the disclosure of this information was not a priority in accordance with the information policy of the company in 2016. |
| 3.1.2 | The corporate secretary should be sufficiently independent of the company’s executive bodies and be vested with powers and resources required to perform his/her tasks. | The board of directors approves the appointment, termination of appointment, and additional remuneration of the corporate secretary. | observed | |
| 4.1 | The level of remuneration paid by the company should be sufficient to enable it to attract, motivate, and retain persons having required skills and qualifications. Remuneration due to board members, the executive bodies, and other key managers of the company should be paid in accordance with a remuneration policy approved by the company. | |||
| 4.1.1 | It is recommended that the level of remuneration paid by the company to its board members, executive bodies, and other key managers should be sufficient to motivate them to work efficiently and enable the company to attract and retain knowledgeable, skilled, and duly qualified persons. The company should avoid setting the level of remuneration any higher than necessary, nor allowing for an excessively large gap between the level of remuneration of any of the above persons and that of the company’s employees. | The company has adopted an internal document (documents) - a remuneration policy (policies) in relation to its board members, members of executive bodies and other key managers whereby the approaches to the remuneration of the indicated persons are clearly determined. | observed | |
| 4.1.2 | The company’s remuneration policy should be developed by its remuneration committee and approved by the board of directors. With the help of its remuneration committee, the board of directors should monitor implementation of and compliance with the remuneration policy by the company and, should this be necessary, review and amend the same. | During the reporting period the remuneration committee reviewed the remuneration policy (policies) and the practice of its (their) implementation and, when necessary, provided the board of directors with the relevant recommendations. | not observed | The board of directors did not see the need to revise the policy in relation to the company’s executive bodies and key managers in 2016. |
| 4.1.3 | The company’s remuneration policy should provide for transparent mechanisms to be used to determine the amount of remuneration due to members of the board of directors, the executive bodies, and other key managers of the company, as well as to regulate any and all types of payments, benefits, and privileges provided to any of the above persons. | The remuneration policy (policies) of the company contains (contain) transparent mechanisms to be used to determine the amount of remuneration due to members of the board of directors, executive bodies and other key managers of the company and regulates (regulate) all types of payments, benefits and privileges provided to any of the indicated persons. | observed | |
| 4.1.4 | The company is recommended to develop a policy on reimbursement of expenses which would contain a list of reimbursable expenses and specify service levels provided to members of the board of directors, the executive bodies, and other key managers of the company. Such a policy can form part of the company’s policy on compensations. | The remuneration policy (policies) of the company or other internal documents of the company set forth the rules of reimbursement of expenses of board members, members of executive bodies and other key managers of the company. | observed | |
| 4.2 | The system of remuneration of board members should ensure harmony between the financial interests of the directors and the long-term financial interests of the shareholders. | |||
| 4.2.1 | A fixed annual fee shall be a preferred form of monetary remuneration of the board members. It is not advisable to pay a fee for participation in individual meetings of the board of directors or its committees. It is not advisable to use any form of short-term incentives or additional financial incentives in respect of board members. | A fixed annual fee has been the only form of monetary remuneration of board members for their services on the board in the reporting period. | observed | |
| 4.2.2 | Long-term ownership of shares in the company contributes most to aligning the financial interests of board members with the long-term interests of the company’s shareholders. However, it is not recommended to make the right to dispose of shares dependent on the achievement by the company of certain performance results; nor should board members take part in the company’s option plans. | If the company has a practice (policy) of paying remuneration to the board members in the form of its shares, its policy (internal document) of remuneration payable to the board members should set out clear and transparent rules regulating the ownership of shares by the board members. These rules should encourage them to increase their shareholdings and own the shares on a long-term basis. | observed | Board members do not own company shares. The information about share ownership by the company’s directors is disclosed in the Annual Report of the company. |
| 4.2.3 | It is not recommended to provide for any additional allowance or compensation in the event of early dismissal of board members in connection with a change of control over the company or other circumstances. | The company does not provide for any additional allowance or compensation in the event of early dismissal of board members in connection with a change of control over the company or other circumstances. | observed | |
| 4.3 | The system of remuneration due to the executive bodies and other key managers of the company should provide that their remuneration is dependent on the company’s performance results and their personal contributions to the achievement thereof. | |||
| 4.3.1 | Remuneration due to the executive bodies and other key managers of the company should be set in such a way as to procure a reasonable and justified ratio between its fixed portion and its variable portion that is dependent on the company’s performance results and employees’ personal (individual) contributions to the achievement thereof. | performance indicators approved by
the board of directors were used to
determine the amount of variable
remuneration of members of executive
bodies and other key managers of the
company. 2. During the last evaluation of the system of remuneration of members of executive bodies and other key managers of the company, the board of directors (remuneration committee) made sure that the company used an effective ratio between the fixed and variable remuneration. 3. The company has a procedure ensuring that any award/bonus funds wrongfully obtained by members of executive bodies or managers are repaid to the company. | partially observed | Recommendation 1 - observed Recommendation 2 - the system of remuneration was not reviewed in 2015 by the board of directors (Nomination and Remuneration Committee). In the opinion of the board of directors, in 2016, there was no need to revise this system. Recommendation 3 - the company does not have a formalized procedure for having wrongfully obtained award/bonus funds returned to the company by members of executive bodies and key managers, because bonuses are paid on the basis of approved performance charts where the real KPI result is shown, which makes wrongful payments impossible. Should any such error occur in the future, the necessary repayments will be made in compliance with the law. Additional Information Report on Compliance with the Principles and Recommendations of the Code of Corporate Governance CONTINUED |
| 4.3.2 | Companies whose shares are admitted to trading at organised markets are recommended to put in place a long-term incentive program for the company’s executive bodies and other key managers involving the company’s shares (or options or other derivative financial instruments the underlying assets for which are the company’s shares). | 1. The company has put in place a
long-term incentive program for the
company’s executive bodies and
other key managers of the company
involving the company’s shares
(financial instruments for which the
company’s shares are the underlying
assets). 2. The long-term incentive program should provide that the right to dispose of shares or exercise options shall arise no earlier than in three years from the date when such shares were provided. In addition, the right to dispose of the same, upon the expiration of a respective period, should be made conditional on the achievement of certain targets by the company, including non-financial targets, if applicable. | not observed | The company does not have a long-term incentive program because at this moment, amidst financial instability in Russia, and considering a number of financial constraints in the Company, we believe that such a program would be untimely. |
| 4.3.3 | The amount of severance pay (so-called «golden parachute») payable by the company in the event of early dismissal of an executive body or other key manager at the initiative of the company, provided that there have been no bad faith actions on the part of such person, should not exceed double the fixed portion of his/her annual remuneration. | The amount of severance pay (golden parachute) payable by the company in the event of early dismissal of an executive or other key manager at the initiative of the company, provided that there have been no bad faith actions on the part of such persons, did not exceed double the fixed portion of his/her annual remuneration. | observed | The policies of the company do not provide for the payment of “golden parachutes”. |
| 5.1 | The company should have in place an efficient risk management and internal control system designed to provide reasonable confidence that the company’s goals will be achieved. | |||
| 5.1.1 | The board of directors should determine the principles of and approaches to creation of the risk management and internal control system in the company. | The functions of various governance bodies and divisions of the company in the risk management and internal control system are clearly determined in the internal documents of the company/policy of the company approved by the board of directors. | observed | |
| 5.1.2 | The company’s executive bodies should ensure the establishment and continuing operation of the efficient risk management and internal control system in the company. | The company’s executive bodies ensured the distribution of functions and authority in relation to risk management and internal control among managers (heads) of divisions and departments subordinate to them. | observed | |
| 5.1.3 | The company’s risk management and internal control system should enable all concerned to obtain an objective, fair and clear view of the current condition and prospects of the company, integrity and transparency of its accounts and reports, and reasonableness and acceptability of risks being assumed by the company. | 1. The company has a corruption
prevention policy in place. 2. The company has developed a procedure for informing the board of directors or the audit committee of violations of the law, internal procedures and the ethics code of the company. | observed | |
| 5.1.4 | The board of directors is recommended to take required and sufficient measures to guarantee that the existing risk management and internal control system of the company is consistent with the principles of and approaches to its creation as set forth by the board of directors and that it operates efficiently. | During the reporting period the board of directors reviewed the organisation, operation, and efficiency of the risk management and internal control system and, if necessary, made recommendations for its improvement. The results of such review of the system’s efficiency were communicated to the shareholders as part of the annual report of the company. | observed | |
| 5.2 | To independently evaluate, on a regular basis, the reliability and efficiency of the risk management and internal control system and corporate governance practices, the company should arrange for internal audits. | |||
| 5.2.1 | It is recommended that internal audits be carried out by a separate structural division (internal audit department) to be created by the company or through retaining an independent third-party entity. To ensure the independence of the internal audit department, it should have separate lines of functional and administrative reporting. Functionally, the internal audit department should report to the board of directors, while from the administrative standpoint, it should report directly to the company’s one-person executive body. | A separate structural division (internal audit department) that reports directly to the board of directors or the audit committee was created in the company; an external independent organisation with the same status was retained to conduct the audit. | observed | |
| 5.2.2 | When carrying out an internal audit, it is recommended to evaluate the efficiency of the internal control system and the risk management system, as well as to evaluate corporate governance and apply generally accepted standards of internal auditing. | 1. In the reporting period, within
the framework of internal audit
procedures, the efficiency of the
internal control system and the risk
management system was evaluated. 2. The company uses generally accepted approaches to internal control and risk management. | observed | |
| 6.1 | The company and its activities should be transparent to its shareholders, investors, and other stakeholders. | |||
| 6.1.1 | The company should develop and implement an information policy enabling the company to efficiently exchange information with its shareholders, investors, and other stakeholders. | 1. The board of directors approved
an information policy developed in
compliance with the recommendations
of the Code. 2. The board of directors (or one of its committees) reviewed the company’s compliance with the information policy at least once in the reporting period. | observed | |
| 6.1.2 | The company should disclose information on its corporate governance system and practices, including detailed information on compliance with the principles and recommendations of this Code. | 1. The company discloses information
on its corporate governance system
and the corporate governance
principles applied in the company on
its official website. 2. The company discloses information regarding the composition of its executive bodies and the board of directors, independence of board members and their membership in board committees (in compliance with the Code). 3. If there is a person who controls the company, that person sets their plans with respect to the company in a special memorandum which is then disclosed. | observed | Note: The company does not have a controlling person. |
| 6.2 | The company should disclose, on a timely basis, full, updated and reliable information about itself so as to enable its shareholders and investors to make informed decisions. | |||
| 6.2.1 | The company should disclose information in accordance with the principles of regularity, consistency and timeliness, as well as accessibility, reliability, completeness and comparability of disclosed data. | 1. The information policy of the
company determines the approaches
and criteria of identifying information
which may substantially affect the
standing of the company and the value
of its securities and the procedures
which ensure that such information is
disclosed in a timely fashion. 2. If the company’s securities are traded on international organised markets, material information is disclosed both in the Russian Federation and on such markets in the same amount and at the same time or within the reporting period. 3. If foreign shareholders own a substantial number of shares in the company, the company discloses information not only in Russian, but in one of the most commonly-used foreign languages as well. | observed | |
| 6.2.2 | The company is advised against using a formalistic approach to information disclosure; it should disclose material information on its activities, even if disclosure of such information is not required by law. | 1. During the course of the reporting
period the company disclosed annual
and semiannual financial statements
prepared in compliance with IFRS.
The annual report of the company for
the reporting period contains annual
financial IFRS statements and the
relevant audit report. 2. The company discloses full information about the structure of the capital of the company in compliance with Recommendation 290 of the Code in the annual report and on the website of the company. | partially observed | The disclosure of information about the structure of share capital by the company is not fully in line with the Recommendation 290 of the Code; however, in the opinion of the company, the current scope of disclosure provides sufficient information about the structure of the share capital, and greater detail is not required. |
| 6.2.3 | The company’s annual report, as one of the most important tools of its information exchange with its shareholders and other stakeholders, should contain information enabling one to evaluate the company’s performance results for the year. | 1. The annual report of the company
contains information about the key
aspects of the company’s operational
activities and financial results. 2. The annual report of the company contains information about the environmental and social aspects of the company’s activities. | observed | |
| 6.3 | The company should provide information and documents requested by its shareholders in accordance with the principle of equal and unhindered accessibility. | |||
| 6.3.1 | Exercise by the shareholders of their right to access the company’s documents and information should not be unreasonably burdensome. | The procedure of information provision to shareholders (including information about the organisations controlled by the company) upon their request is not unreasonably burdensome. | observed | |
| 6.3.2 | When providing information to its shareholders, the company should maintain a reasonable balance between the interests of individual shareholders and its own interests related to the fact that the company is interested in keeping confidential sensitive business information that might have a material impact on its competitiveness. | 1. During the reporting period the
company did not deny shareholders’
requests to provide information or
such refusals were justified. 2. In cases specified in the information policy of the company shareholders are warned of the confidential nature of the information and undertake to protect its confidentiality. | observed | |
| 7.1 | Any actions which will or may materially affect the company’s share capital structure and its financial position and, accordingly, the position of its shareholders (“material corporate actions”) should be taken on fair terms and conditions ensuring that the rights and interests of the shareholders as well as other stakeholders are observed. | |||
| 7.1.1 | Material corporate actions shall be deemed to include reorganisation of the company, acquisition of 30 or more percent of its voting shares (takeover), entering by the company into any material transactions, increasing or decreasing its share capital, listing and delisting of its shares, as well as other actions which might result in material changes in the rights of its shareholders or violation of their interests. It is recommended to include in the company’s articles of association a list of (criteria for identifying) transactions or other actions falling within the category of material corporate actions and provide therein that decisions on any such actions should fall within the jurisdiction of the company’s board of directors. | association (charter) include a list of
(criteria for identifying) transactions
or other actions falling within the
category of material corporate actions
and provide therein that decisions
on any such actions fall within the
jurisdiction of the company’s board of
directors. In cases when the indicated
actions are within the purview of
the general shareholders meeting in
compliance with the requirements of
the law, the board of directors issues
recommendations to the shareholders. 2. The charter of the company determines the following (as a minimum) as material corporate actions: reorganisation of the company, acquisition of 30% and more of voting shares (takeover), major transactions, increase or reduction of the charter capital of the company, as well as the listing or delisting of the company’s shares. | not observed | The charter of the company does not provide a list of material corporate actions and transactions. Nevertheless, the Regulations on the Audit Committee provide for a special procedure for work on strategic transactions which are described (criteria are provided) in the text of the Regulations |
| 7.1.2 | The board of directors should play a key role in passing resolutions or making recommendations relating to material corporate actions; for that purpose, it should rely on the opinions of the company’s independent directors. | The company has a procedure in place whereby independent directors state their position/opinion on material corporate actions prior to their approval | partially observed | The Regulations on the Audit Committee provide for a special procedure for the execution of strategic transactions, which implies the establishment of a special committee consisting of independent directors of the company. There are no additional procedures for independent directors to voice their opinions on material corporate actions, but such decisions are taken by the board of directors after discussion at meetings of specialised committees or the board of directors’ meetings, during which all directors of the company, including independent directors, have the right to express their position on any issue under consideration, including material corporate actions. |
| 7.1.3 | When taking any material corporate actions which would affect the rights or legitimate interests of the company’s shareholders, equal terms and conditions should be ensured for all of the shareholders; if statutory mechanisms designed to protect the shareholder rights prove to be insufficient for that purpose, additional measures should be taken with a view to protecting the rights and legitimate interests of the company’s shareholders. In such instances, the company should not only seek to comply with the formal requirements of the law but should also be guided by the principles of corporate governance set out in this Code. | 1. The company’s articles of
association (charter) establish lower
criteria than those specified under
the law for the categorization of the
company’s transactions as material
corporate actions. 2. During the reporting period all material corporate actions were subject to approval prior to their execution. | partially observed | Refer to p. 7.1.3. Recommendation 2 is observed by the company. |
| 7.2 | The company should have in place such a procedure for taking any material corporate actions that would enable its shareholders to receive full information about such actions in due course and thus be in a position to influence them, and which would also guarantee that the shareholders’ rights are observed and duly protected in the event of taking such actions. | |||
| 7.2.1 | When disclosing information about material corporate actions, it is recommended to give explanations concerning reasons for, conditions and consequences of such actions. | During the course of the reporting period the company disclosed information (in detail) about material corporate actions in a timely fashion, including the reasons for, conditions and consequences of such actions | observed | |
| 7.2.2 | Rules and procedures in relation to material corporate actions taken by the company should be set out in its internal documents. | 1. The company’s internal documents
specify a procedure for the retention
of the services of an independent
appraiser to determine the value of
the property being transferred or
acquired under a major transaction or
an interested-party transaction. 2. The company’s internal documents specify a procedure for the retention of the services of an independent appraiser to determine the purchase or buyback value of the shares of the company. The documents of the company provide an extended list of reasons to deem members of the board of directors and other persons specified by the law to be interested parties in the transactions of the company. | partially observed | The company’s internal documents do not provide for a special procedure applicable to the retention of an independent appraiser; the company retains an appraiser in cases specified by the law and also, if necessary, in cases when the company is taking material corporate actions because this is in line with the high standards of corporate governance adopted in the company. |