The corporate affairs are governed by the memorandum and articles of association of the Company and the provisions of applicable Cyprus law. Although the Company is not subject to any mandatory corporate governance code in its home jurisdiction of Cyprus, nor required to observe the UK Corporate Governance Code, it has implemented various corporate governance measures. These include the appointment of two independent non-executive Directors to its Board of Directors and the establishment of an Audit Committee and a Remuneration Committee. Each of these Committees of the Board of Directors is chaired by an independent, non-executive Director. Under the Cyprus Companies Law, the directors have to declare the nature of their interest (either direct or indirect) in transactions at a meeting of the directors of the company. Under the articles of association of the Company, directors have no right to vote on a matter in which they have an interest even if the director has disclosed any interests in the transaction. HMS Group continues to review its corporate governance policies in line with international best practice.
The Board of Directors consists of eight (8) members, three (3) of whom are Executive Directors. During the year Mr. Vladimir V. Lukyanenko was appointed as a Director of the Company by the Board of Directors.
The Board of Directors held six meetings in 2016, all of which occurred in Cyprus. During the course of the year, the Board of Directors continued working on the development of the Company’s mid-term and long-term financial and business strategy, including investment plans, M&A activities, budgeting, long-term incentive program for the management of the Company and general corporate development. In addition, the Board of Directors appointed Mr. Vladimir V. Lukyanenko as a non-executive director of the Company to serve until the next General Meeting.
Mr. Vladimir V. Lukyanenko was also elected as a member of the Remuneration Committee, the Audit Committee and the Strategy and Investments Committee. In December 2016, the Board of Directors approved the payment of an interim dividend to the shareholders of the Company.
At its meetings, the Board of Directors also reviewed other issues connected with the activities of the Company that are within its remit, including the approval of corporate reports.
The Board of Directors Committees
There are three Committees of the Board of Directors: the Audit Committee, the Remuneration Committee, and the Strategy and Investments Committee. Each Committee has its own internal terms of reference which set forth its duties and responsibilities, as well as qualifications for Committee membership, procedures for Committee member appointment and removal, Committee structure and operations and reporting lines to the Board of Directors. A brief description of the main activities of these Committees in 2016 is set out below.
The Audit Committee comprises three independent Directors and is expected to meet three to four times per year. Currently, the Audit Committee is chaired by Mr. Philippe Delpal; its other members are Mr. Gary S. Yamamoto and Mr. Vladimir V. Lukyanenko.
The Audit Committee is responsible for considering, amongst other matters: (i) the integrity of the Group’s financial statements, including its annual and interim financial statements; (ii) the effectiveness of the Group’s internal controls and risk management systems; (iii) auditors’ reports on the Group; and (iv) the terms of appointment and remuneration of the auditors of the Group.
The Audit Committee supervises, monitors, and advises the Board of Directors on risk management, control systems, and the implementation of codes of conduct. The Audit Committee also supervises the Group’s submission of financial information and a number of other audit-related issues, and assesses the efficiency of the work of the Chair of the Board of Directors.
Activities in 2016
Three meetings of the Audit Committee were held in 2016. The main issues that the Audit Committee oversaw during the year were the preliminary review of IFRS financial statements and internal control and risk management (including the audit plan).
The Audit Committee also supervised the internal and external audit procedures, and the implementation of the annual tax strategy within the course of the year. The Audit Committee also made recommendations to the Board of Directors with regards to internal control efficiency and interim dividend distribution.
The Remuneration Committee comprises four Directors and is expected to meet at least once per year. Currently, the Remuneration Committee is chaired by Mr. Gary S. Yamamoto; its other members are Mr. Nikolay N. Yamburenko, Mr. Philippe Delpal and Mr. Vladimir V. Lukyanenko. The Remuneration Committee is responsible for, amongst other matters, determining and reviewing the Group’s remuneration policies. The remuneration of independent Directors is a matter for the Chair of the Board of Directors and the Executive Directors. No Director or manager may be involved in any decisions regarding their own remuneration.
Activities in 2016
Two meetings of the Remuneration Committee were held in 2016. The main matter reviewed by the Remuneration Committee was the Group’s Long-Term Incentive Program. Ernst & Young were engaged in developing the Long-Term Incentive Program.
The Remuneration Committee adopted decisions and made recommendations to the Board of Directors regarding the Long-Term Incentive Program, in accordance with international best practice.
External Audit of Financial Statements
Every year the Company/Group appoints an external auditor who is responsible for the auditing and inspection of the consolidated financial statements of the Company/Group in compliance with IFRS. The external auditor also prepares reviews of the consolidated interim financial information of the Company/Group in compliance with IFRS requirements. The external auditor of the Company/Group is selected from leading audit firms after a thorough review of their respective proposals. Following the review, the Audit Committee gives its recommendations to the Board of Directors regarding the candidacy of the external auditor and the level of the auditor’s compensation and advises the Board of Directors on other terms and conditions of the contract with the auditor. In 2016, based on the recommendation of the Audit Committee, the Board of Directors selected Deloitte (Cyprus) to conduct the audit of the financial statements of the Company/Group for the year ending 31 December 2015. Deloitte remains appointed for the 2016 audit.
Strategy and Investments Committee
The Strategy and Investments Committee comprises four directors, one of whom is independent. The Committee is expected to meet at least once each year. Currently, the Strategy and Investments Committee is chaired by Mr. Nikolay N. Yamburenko and the other members are Mr. Gary S. Yamamoto, Mr. Yury N. Skrynnik and Mr. Vladimir V. Lukyanenko.
The Strategy and Investments Committee is responsible for considering, amongst other matters: (i) strategic business combinations; (ii) acquisitions, mergers, disposals and similar strategic transactions involving the Company; and (iii) fundamental investments of the Company.
Activities in 2016
Two meetings of the Strategy and Investments Committee were held in 2016. The main matter reviewed by the Committee was the Group Strategy up to 2022.
The total compensation of the Chairman of the Board was Euro 270,115 for the year ended 31 December 2016.
The total compensation of the independent Directors, as set out in the Group’s consolidated statement of profit or loss and other comprehensive income, was Euro 235,000 for the year ended 31 December 2016.