Chairman's statement

In this section, we explain our approach to the corporate governance of the Company and its group (the “Group”). As Chairman, I am responsible for the leadership of the Board, ensuring its effectiveness in all aspects of its functions and, within that role, for promoting good governance throughout the Group.

The Board recognises the importance of good corporate governance and has, since the Company’s initial public offering and as the Group has grown, maintained a regular review and evaluation of its effectiveness, and that of the wider governance structure of the Group. I believe that the Company’s governance structure has facilitated the growth and development of the Group, while remaining accountable to all of its stakeholders, including shareholders, employees, collaborators and regulators.

The AIM Rules for Companies require the Board to apply a recognised corporate governance code, and disclose on its website how it complies with that code and, where it departs from that code, an explanation of the reasons for doing so.

The Board has chosen to formally apply the Quoted Companies Alliance Corporate Governance Code, updated in 2018 (the “QCA Code”). The QCA Code was developed by the Quoted Companies Alliance, an independent membership organisation championing the interests of small to mid-sized quoted companies, one of whose aims is to promote high quality corporate governance in quoted companies. In consultation with a number of significant institutional small company investors, it has developed the QCA Code as an alternative corporate governance code applicable to quoted companies that do not have a premium listing of equity shares, including AIM companies.

The QCA Code is constructed around ten broad principles and a set of disclosures grouped under three broad headings: deliver growth; maintain a dynamic management framework; build trust. To see how the Company addresses these key governance principles, please view our QCA code compliance page here.

As set out in the statements on corporate governance in the Company’s previous annual reports, the Board has previously sought to apply the earlier versions of the QCA Code to the extent appropriate and practical for a company of its nature and size. It is the Board’s view that the Company’s governance structures and practices meet the expectations set by the QCA Code.

The Board will continue to maintain a regular review and evaluation of its effectiveness, and that of the wider governance structure of the Group.

Axel Glasmacher, Non-Executive Chairman

This disclosure was last reviewed and updated on 13 December 2021

The Board consists of six directors, four of whom are Non-Executive. The names of the directors, together with their biographical details, are set out here.

The Board has determined that each of Ed Baracchini, Axel Glasmacher, Sandy Macrae and Katrin Rupalla is independent in character and judgement, and that there are no relationships or circumstances which could materially affect or interfere with the exercise of his independent judgement.

The Board remains satisfied with its composition and the balance between Executive and Non-Executive Directors, which allows it to exercise objectivity in decision making and proper control of the Group’s business.

The Board’s primary objective is to focus on adding value to the assets of the Group by identifying and assessing business opportunities and ensuring that potential risks are identified, monitored and controlled.

Material issues are reserved to a decision of the Board, including approval (and review of performance) of the Group’s strategic aims and objectives; approval of the annual operating and capital expenditure budgets (and any material changes to them); approval of all financial statements and results; and maintenance of a sound system of internal control and risk management. The implementation of Board decisions and day-to-day operations of the Group are delegated to Executive Directors.

The Board meets both at regular intervals and also at short notice to consider specific matters (for example proposed material transactions). The Board receives appropriate and timely information prior to each meeting, with a formal agenda and Board and Committee papers being distributed several days before meetings take place. Any Director may challenge Group proposals, and decisions are taken democratically after discussion. Any Director who feels that any concern remains unresolved after discussion may ask for that concern to be noted in the minutes of the meeting. Any specific actions arising from such meetings are agreed by the Board and then followed up by management.

The Non-Executive Directors constructively challenge and help develop proposals on strategy and bring strong, independent judgement, knowledge and experience to the Board’s deliberations. The Directors are given access to independent professional advice at the Group’s expense when the Directors deem it is necessary in order for them to carry out their responsibilities.

The Group has effective procedures in place to deal with conflicts of interest. The Board is aware of other commitments of its Directors, and changes to these commitments are reported to the Board.

Each of the Directors is subject to retirement by rotation and re-election in accordance with the articles of association of the Company. All Directors appointed by the Board are subject to election by shareholders at the first Annual General Meeting after their appointment.

Board committees

The Board has established an Audit and Risk Committee and a Remuneration Committee, with formally delegated duties and responsibilities. The Board has, since the admission of the Company’s shares to trading on AIM, kept under regular review the possible establishment of a nomination committee. The Board remains of the view that, given the current composition of the Board, it is not appropriate to have a nomination committee. This will continue to be kept under regular review by the Board.

The Audit and Risk Committee comprises Paul Maier (Chair), Ed Baracchini and Axel Glasmacher. Paul Maier is an independent Director and has recent and relevant financial expertise. The Committee has primary responsibility for monitoring the quality of internal controls, ensuring that the financial performance of the Company is properly measured and reported on, and reviewing reports from the Company’s auditor relating to the Company’s accounting and internal controls, in all cases having due regard to the interests of shareholders. The Audit and Risk Committee will meet at least twice a year.

The Company has established a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual Directors and senior management. The Remuneration Committee comprises Sandy Macrae (Chair) and Axel Glasmacher. The Committee reviews the performance of the Executive Directors and senior management and determines their terms and conditions of service, including their remuneration and the grant of incentives, having due regard to the interests of shareholders. The Remuneration Committee will meet at least once a year.

The Board believes that the Audit and Risk Committee and the Remuneration Committee have the necessary character, skills and knowledge to discharge their duties and responsibilities effectively.

4D pharma plc Remuneration Committee Terms of Reference