Introduction
Corporate governance is the systems under which an organisation is guided, managed and measured. Good corporate governance is important to promote market and investor confidence. Ultimate responsibility for corporate governance of Vital resides with the Board of Directors of the Manager. The Board acknowledges strong corporate governance and stewardship as fundamental to the strong performance of Vital and, accordingly, their commitment is to the highest standards of business behaviour and accountability. It is with these objectives in mind that the Board has adopted its current framework, which, in the Board’s opinion materially comply with the NZX Corporate Governance Best Practice Code (NZX Code) and the Financial Markets Authority corporate governance principles and guidelines, unless otherwise stated.
A strong, independent Board
The Manager is committed to having an effective Board providing a balance of independent skills, knowledge, experience and perspectives. The Constitution of the Manager provides for there to be not more than seven Directors, nor less than three Directors. All the members of the Board are Non-Executive Directors. All bring a significant breadth and depth of expertise and have the composite skills to optimise the financial and portfolio performance of Vital and returns to unitholders.
The Board does not impose a restriction on the tenure of any Director as it considers that such a restriction may lead to the loss of experience and expertise from the Board. Appointment Unitholders have the opportunity to nominate two of the Independent Directors of the Manager required by the NZX Listing Rule 3.3.1.(c). Unitholders are able to nominate and vote on one Independent Director of the Manager each year. The nominee receiving the most votes will be approved as a Director of the Manager by the Manager’s shareholders, and will hold the position for a two-year term.
Board committee structure operating under formal charters
Consistent with NZX guidelines, the Board uses a number of committees to assist in the delivery of its duties and responsibilities. Board committees assist with the execution of the Board’s responsibilities to unitholders. Each committee operates under a charter agreed by the Board, setting out its role, responsibilities, authority, relationship with the Board, reporting requirements, composition, structure and membership.
Audit Committee
The Board has established an Audit Committee, which is responsible for overseeing the financial and accounting responsibilities of Vital. The minimum number of members on the Audit Committee is three. All members must be Directors, the majority must be Independent Directors and at least one member must have an accounting or financial background. The members of the Audit Committee are Claire Higgins (Chair), Andrew Evans and Bernard Crotty.
The Audit Committee assists the Board in fulfilling its corporate governance and disclosure responsibilities with particular reference to financial matters, and internal and external audit, and is specifically responsible for:
- Recommending to the Board the appointment/removal of Vital’s external auditor
- Supervising and monitoring external audit requirements
- Reviewing annual and interim financial statements prior to submission for Board approvals
- Reviewing and approving quarterly distributions with recommendation of the same for Board approvals
- Reviewing the performance and independence of the external auditor
- Monitoring compliance with the Unit Trusts Act 1960, Financial Reporting Act 2013, Companies Act 1993 and the NZX Listing Rules
In addition to the formal charter under which it operates, the Audit Committee has also developed a Charter of Audit Independence, which sets out the procedures that need to be followed to ensure the independence of the Trust’s external auditor.
Due Diligence Committee
From time to time the Board establishes Due Diligence Committees (DDC) to report on the due diligence process in relation to any potential transaction for Vital of material size or complexity. An example would be a material portfolio acquisition or equity capital raising. A DDC will normally include all Directors, relevant management staff and external consultants appropriate for the transaction.
Remuneration Committee
The NZX Code recommends that a Remuneration Committee be established to benchmark remuneration packages for Directors and senior employees and that the information be disclosed to investors. A key feature of the external management structure that Vital operates under is that all employment expenses are the responsibility of the Manager, not Vital. Consequently, a Remuneration Committee is not considered necessary by the Board at this time.