Corporate Governance

As an AIM listed group, Nektan plc (‘Nektan’) is now required to follow the provisions of a recognised corporate governance code. The Directors have therefore chosen to apply the Quoted Companies Alliance Corporate Governance Code (the QCA Code”), this is set out in further detail below.

Role of the board

The Board comprises 3 directors, including the non-executive Chairman, 1 executive Director and 1 non-executive Director. The Board meets regularly to consider strategy, performance and the framework of internal controls.

The Board has been formed so that it has effective composition, size and commitment to adequately discharge its responsibilities and duties given the size and scale of operations of the Company. The Director appointments are based on the specific skills required by the Company and the Board combines a group of Directors with diverse backgrounds that combine to provide the resources and expertise to drive the continuing development of the Group and advance its commercial objectives.

Board committees

The Directors have established an Audit Committee, a Remuneration Committee and a Nominations Committee with formally delegated rules and responsibilities. Each of the committees currently comprises the Non-executive Directors and meets at least twice a year.

Audit committee

The Audit Committee meets at least twice a year and is responsible for ensuring that the Group’s financial performance is properly monitored, controlled and reported. The Audit Committee is responsible for the scope and effectiveness of the external audit and compliance by the Group with statutory and other regulatory requirements. It meets at least once per year without the Executive Directors being present. The Audit Committee is comprised of Jim Wilkinson (Chairman) and Sandeep Reddy. Jim Wilkinson is deemed to have recent and relevant financial experience and is the Audit Committee financial expert.

Remuneration committee

The Remuneration Committee determines and agrees with the Board the framework or broad policy for the remuneration of the Directors and determines the total individual remuneration package of each Executive Director, including bonuses, incentive payments and share options, with due regard to the interests of shareholders. The Remuneration Committee ensures that contractual terms are fair to the individual and the Company and determines the structure and targets for any performance-related pay schemes operated by the Company. The Remuneration Committee is comprised of Sandeep Reddy (Chairman) and Jim Wilkinson.

Nominations committee

The Nominations Committee is responsible for reviewing the size, structure and composition of the Board and for identifying and nominating for the approval of the Board, candidates to fill Board vacancies as and when they arise. The Nominations Committee gives full consideration to succession planning in the course of its work, taking into account the challenges and opportunities facing the Group, and the skills and expertise needed on the Board. The Nominations Committee is comprised of Jim Wilkinson (Chairman).

Risk management and internal controls

The Board has ensured there has been an ongoing process for identifying, evaluating and managing the significant risks faced by the Group. The Board considers the principal risk factors likely to impact the financial position and prospects of the Group, including any changes thereto. The identified risks are monitored through the day to day operations with the involvement of the relevant parties. This monitoring process is guided by a risk template set out in the Group’s separate Overview of Strategic Risk Management.

The Group’s internal control procedures continue to be reviewed, progressively developed and formalised to ensure that they sufficiently meet the requirements of the Group. Executive members of the Board are involved daily in all aspects of the business and attend regular management meetings at which performance against plan and business prospects are reviewed.

The Bribery Act 2010 (‘Bribery Act’) which came into force in the UK on 1 July 2011 prescribes criminal offences for individuals and businesses relating to the payment of bribes and, in certain cases, a failure to prevent the payment of bribes. The Group therefore has established procedures designed to ensure that no member of the Group engages in conduct for which a prosecution under the Bribery Act may result.

External Auditors

The Audit Committee meets periodically to review the adequacy of the Group’s internal control systems, accounting policies and compliance with applicable accounting standards and to consider the appointment of external auditors and audit fees.

As a matter of best practice and in accordance with International Standard on Auditing 260, the auditors have held discussions with the Audit Committee on the subject of auditor independence and have confirmed their independence.

The Quoted Company Alliance (QCA) Code

The Directors recognise the importance of good corporate governance and have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’). The QCA Code was developed by the QCA in consultation with a number of significant institutional small company investors, as an alternative corporate governance code applicable to AIM companies. The underlying principle of the QCA Code is that “the purpose of good corporate governance is to ensure that the company is managed in an efficient, effective and entrepreneurial manner for the benefit of all shareholders over the longer term”. The Directors anticipate that whilst the Company will continue to comply with the QCA Code, given the Group’s size and plans for the future, it will also endeavour to have regard to the provisions of the UK Corporate Governance Code as best practice guidance to the extent appropriate for a company of its size and nature. To see how the Company addresses the key governance principles defined in the QCA Code please refer to the below table. Further information on compliance with the QCA Code will be provided in the Company’s next annual report and accounts for the year ending 30 June 2018.

Jim Wilkinson, Non-executive Chairman

This disclosure was last reviewed and updated on 26 September 2018

The Principles of the Quoted Company Alliance (QCA) Code Deliver Growth

QCA Code PrincipleApplication (as set out by QCA)what we do and why

1. Establish a strategy and business model which promote long-term  value for shareholders

The board must be able to express a shared view of the company’s purpose, business model and strategy. It should go beyond the simple description of products and corporate structures and set out how the company intends to deliver shareholder value in the medium to long-term.  It should demonstrate that the delivery of long-term growth is underpinned by a clear set of values aimed at protecting the company from unnecessary risk and securing its long-term future.

Nektan’s strategy is explained fully within the Company’s Strategic Report section within the Company’s Report and Accounts for the year ended 30 June 2017.

  • Continuing the growth trajectory within our core B2C business through supporting existing partners, new partners and international expansion.
  • Growing our B2B business
  • Our US business, which focuses on the land-based in-venue market, becoming financially self-sufficient.

The key challenges to the business and how these are mitigated are included within the Principal Risks section of the Strategic Report of the Company’s Report and Accounts for the year ended 30 June 2017.

2. Seek to understand and meet shareholder needs and expectations

Directors must develop a good understanding of the needs and expectations of all elements of the company’s shareholder base.

The board must manage shareholders’ expectations and should seek to understand the motivations behind shareholder voting decisions.

Nektan encourages two-way communication with both its institutional and private investors and responds promptly to all queries received. The Chairman, CEO and CFO talk regularly with the Group’s major shareholders and ensures that their views are communicated fully to the Board.

The Board recognises the Company’s AGM as an important opportunity to meet private shareholders. The Directors are available to listen to the views of shareholders informally immediately following the AGM.

Where voting decisions are not in line with the Company’s expectations, the Board will engage with those shareholders to understand and address any issues.

3. Take into account wider stakeholder and social responsibilities and their implications for long-term success

Long-term success relies upon good relations with a range of different stakeholder groups both internal (workforce) and external (suppliers, customers, regulators and others). The board needs to identify the company’s stakeholders and understand their needs, interests and expectations.

Where matters that relate to the company’s impact on society, the communities within which it operates or the environment have the potential to affect the company’s ability to deliver shareholder value over the medium to long-term, then those matters must be integrated into the company’s strategy and business model.

 Feedback is an essential part of all control mechanisms. Systems need to be in place to solicit, consider and act on feedback from all stakeholder groups.

Nektan operates in the highly regulated real money gaming sector and holds a Gibraltar gambling operating license as a well as a UK license from the UK Gambling Commission.  Nektan also complies with local anti-money laundering legislation and codes of practice.

Nektan wants all players using its sites to gamble responsibly and as such has information on all sites on this including access to helplines, cooling off periods, self-exclusion procedure, parental controls, etc.

Nektan’s employees receive regular feedback and performance reviews as well as performance related remuneration and are encouraged to give feedback which is evaluated by management.

4. Embed effective risk management, considering both opportunities and threats, throughout the organisation

The board needs to ensure that the company’s risk management framework identifies and addresses all relevant risks in order to execute and deliver strategy; companies need to consider their extended business, including the company’s supply chain, from key suppliers to end-customer.

Setting strategy includes determining the extent of exposure to the identified risks that the company is able to bear and willing to take (risk tolerance and risk appetite).

The Risk Management section in our Report and Accounts for the year ended 30 June 2017 details risks to the business and how these are mitigated.

The Board considers risk to the business at every Board meeting. The Company formally reviews and documents the principal risks to the business at least annually.

Both the Board and senior managers are responsible for reviewing and evaluating risk and the Executive Directors meet at least monthly to review ongoing trading performance, discuss budgets and forecasts and new risks associated with ongoing trading.

5. Maintain the board as a well- functioning, balanced team led by the chair

The board members have a collective responsibility and legal obligation to promote the interests of the company, and are collectively responsible for defining corporate governance arrangements. Ultimate responsibility for the quality of, and approach to, corporate governance lies with the chair of the board.

The board (and any committees) should be provided with high quality information in a timely manner to facilitate proper assessment of the matters requiring a decision or insight.

The board should have an appropriate balance between executive and non-executive directors and should have at least two independent non- executive directors. Independence is a board judgement.

The board should be supported by committees (e.g. audit, remuneration, nomination) that have the necessary skills and knowledge to discharge their duties and responsibilities effectively.

Directors must commit the time necessary to fulfil their roles.

The Company is controlled by the Board of Directors. Jim Wilkinson, the Non-executive Chairman, is responsible for the running of the Board and Gary Shaw, the Interim Chief Executive, has executive responsibility for running the Group’s business and implementing Group strategy.

All Directors receive regular and timely information regarding the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of Board meetings. In addition, minutes of the meetings are circulated to the Board of Directors. All Directors are able to take independent professional advice in the furtherance of the duties, if necessary, at the Company’s expense.

The Board comprises one Executive Director and two Non-Executive Directors, including the Non-Executive Chairman.

The Board recognises that the Board structure has not been compliant with the QCA Code since the resignation of both the Company’s previous CEO and a previous non-Executive Director in 2017 and is in the process of recruiting replacements to both.

The Board is supported by the Audit, Remuneration and Nominations Committees.  The Committees’ roles and members are available on the Company’s website.

6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities

The board must have an appropriate balance of sector, financial and public markets skills and experience, as well as an appropriate balance of personal qualities and capabilities. The board should understand and challenge its own diversity, including gender balance, as part of its composition.

The board should not be dominated by one person or a group of people. Strong personal bonds can be important but can also divide a board.

As companies evolve, the mix of skills and experience required on the board will change, and board composition will need to evolve to reflect this change.

The Nominations Committee of the Board oversees the process and makes recommendations to the Board on all new Board appointments.  Where new Board appointments are considered, the search for candidates is conducted, and appointments are made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board, including gender.  The Nominations Committee also considers succession planning.

The Board of Directors combined have extensive experience in the management of numerous companies at different stages of their development, including companies in the online gaming sector.

The Board is currently searching for a Chief Executive Officer and Gary Shaw is currently performing this role on an interim basis.  In addition, the Board intends to recruit a new Non-Executive Director.

Where required, Directors are able to participate in further training at the Company’s expense.

7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement

The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors.

The board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team.

It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable.

To date, the Board has not had a formal effectiveness review, but intends to carry one out once the roles which are currently being recruited are filled.

Going forward, appraisals will be carried out each year with all Executive Directors.

8. Promote a corporate culture that is based on ethical values and behaviours

The board should embody and promote a corporate culture that is based on sound ethical values and behaviours and use it as an asset and a source of competitive advantage.

The policy set by the board should be visible in the actions and decisions of the chief executive and the rest of the management team.

Corporate values should guide the objectives and strategy of the company.

The culture should be visible in every aspect of the business, including recruitment, nominations, training and engagement. The performance and reward system should endorse the desired ethical behaviours across all levels of the company.

The corporate culture should be recognisable throughout the disclosures in the annual report, website and any other statements issued by the company.

Nektan takes its ethical values very seriously and, in particular, being in the gaming sector the areas of promoting responsible gaming and preventing underage gaming.  Staff undergo regular training and processes are in place to ensure correct practice.

9. Maintain governance structures and processes that are fit for purpose and support good decision- making by the board

The company should maintain governance structures and processes in line with its corporate culture and appropriate to its:

  • size and complexity; and
  • capacity, appetite and tolerance for risk

The governance structures should evolve over time in parallel with its objectives, strategy and business model to reflect the development of the company.

The Corporate Governance Statement in the Company’s Report & Accounts for the year ended 30 June 2017 details the Company’s governance structures and why they are appropriate and suitable for the Company.

10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

A healthy dialogue should exist between the board and all of its stakeholders, including shareholders, to enable all interested parties to come to informed decisions about the company.

In particular, appropriate communication and reporting structure should exist between the board and all constituent parts of its shareholder base. This will assist:

  • the communication of shareholders’ views to the board; and
  • the shareholders’ understanding of the unique circumstances and constraints faced by the company.

It should be clear where these communication practices are described (annual report or website).

The Company encourages two-way communication with both its institutional and private investors and responds promptly to all queries received. The Chairman, CEO and CFO talk regularly with the Group’s major shareholders and ensures that their views are communicated fully to the Board.

The Board recognises the Company’s AGM as an important opportunity to meet private shareholders. The Directors are available to listen to the views of shareholders informally immediately following the AGM.

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