APPLICATION OF CORPORATE GOVERNANCE PRINCIPLES
The board (the "Board") of directors (the "Directors") of the Company is committed to enhancing the Group's corporate governance standards by improving corporate transparency through effective channels of information disclosure.
The Board believes that good corporate governance is beneficial for maintaining close and trustful relationships with its employees, business partners, shareholders and investors.
The Company has applied the principles of the Code Provisions under the Corporate Governance Code (the "Code") contained in Appendix 14 of the Rules Governing the Listing of Securities (the "Listing Rules") on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") throughout the year ended 31 December 2015, save for the deviation discussed below. The following sections set out the principles in the Code as they have been applied by the Company, including any deviations therefrom, for the year under review.
BOARD OF DIRECTORS
It is the duty of the Board to create value to the shareholders of the Company, establish the Company's strategic direction, set the Company's objectives and plan in accordance therewith, and provide leadership and ensure availability of resources in the attainment of such objectives. The Board endeavors to manage the Company in a responsible and effective manner, and strive to ensure that each of the Directors carries out his duty in good faith and in compliance with the memorandum and articles of association of the Company (the "Articles of Association"), the applicable laws and regulations, and acts in the best interests of the Company and its shareholders at all times.
The Board and the management of the Company (the "Management") have clearly defined responsibilities under various internal control and checks-and-balance mechanism. The Board has delegated certain responsibilities to the Management, including implementation of decisions of the Board and organization and direction of the day-to-day operation and management of the Company in accordance with the management strategies and plans approved by the Board; preparation and monitoring of annual business plans and operating budget; and control, supervision and monitoring of capital, technical and human resources. The Board will review these arrangements on a periodic basis to ensure that they remain appropriate to the needs of the Group.
The Board currently comprises eight Directors, five of whom are executive Directors, and three are independent non-executive Directors ("INEDs"). The composition of the Board is set out as follows:
Mr. GUO Deying (Chairman of the Board and CEO)
Mr. JIANG Chao
Mr. LI Bin Mr. LI Wang (resigned on 18 January 2016)
Mr. JIA Yueting (appointed on 17 August 2015)
Mr. LIU Hong (appointed on 17 August 2015)
Independent Non-Executive Directors
Mr. CHAN King Chung
Dr. HUANG Dazhan
Mr. XIE Weixin
The biography of the Directors are set out in the "Directors and Senior Management" on pages 26 to 28 of this Annual Report.
To the best knowledge of the Company, none of the Directors has any relationship (including financial, business, family or other material or relevant relationship) with any other Director or chief executive.
The Company has arranged for appropriate liability insurance to indemnify the Directors for their liabilities arising out of corporate affairs. The insurance coverage is reviewed annually.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Code Provision A.2.1 of the Code stipulates that the roles of chairman and chief executive officer should be separate and should not be performed by the same individual. Currently, Mr. GUO Deying is the chairman of the Board and the chief executive officer of the Company. The Board considers that this structure will not impair the balance of power and authority between the Board and the Management and believes that this structure enables the Group to make and implement decision promptly and efficiently. In addition, the Board is of the view that, in view of the current scale of operations of the Group, the separation of the roles of the chairman and chief executive officer of the Company may hinder administrative efficiency and is neither suitable to the Group nor in the interests of the Company's shareholders as a whole.
INDEPENDENT NON-EXECUTIVE DIRECTORS ("INEDS")
The INEDs have the same duties of care, skill and fiduciary duties as the executive Directors. They are expressly identified as such in all corporate communications that disclose the names of the Directors. The INEDs have expertise in respective areas of accounting, business management and possess in-depth industry knowledge. With their professional knowledge and experience, the INEDs have advised the Company on its operation and management; participated in the meetings of the audit committee of the Company (the "Audit Committee"), the meetings of the remuneration committee of the Company (the "Remuneration Committee") and the meetings of the nomination committee of the Company (the "Nomination Committee"). The INEDs have contributed to provide checks and balance to protect the interests of the Company and its shareholders as a whole, and to promote the development of the Company.
The Company has received an annual confirmation of independence from each of the INEDs pursuant to Rule 3.13 of the Listing Rules and on this basis, considers that all INEDs are independent as at the date of this Annual Report.
Under Code Provision A.4.1 of the Code, non-executive Directors should be appointed for specific terms, subject to re-election. Currently, all INEDs are appointed for a period of one year subject to renewal and retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles of Association.
During the year ended 31 December 2015, the Board held four meetings. Besides the Annual General Meeting ("AGM") held on 23 May 2015 and the Extraordinary General Meeting ("EGM") held on 10 March 2015, no other general meeting was held during the year ended 31 December 2015.
Attendance of individual Directors at the Board meetings in 2015 is as follows:
|Name of directors||Board Meetings||AGM||EGM|
|Mr. GUO Deying (Chairman)||4/4||0/1||0/1|
|Mr. JIANG Chao||4/4||1/1||1/1|
|Mr. LI Wang (resigned on 18 January 2016)||4/4||0/1||0/1|
|Mr. LI Bin||4/4||0/1||0/1|
|Mr. JIA Yueting (appointed on 17 August 2015)||2/2||0/0||0/0|
|Mr. LIU Hong (appointed on 17 August 2015)||2/2||0/0||0/0|
|Independent Non-executive Directors|
|Mr. CHAN King Chung||4/4||1/1||0/1|
|Dr. HUANG Dazhan||3/4||0/1||0/1|
|Mr. XIE Weixin||4/4||0/1||0/1|
Code Provision E.1.2 of the Code specifies that the chairman of the board should attend the annual general meeting. Mr. GUO Deying, the chairman of the Board, was absent from the annual general meeting held on 23 May 2015 due to his prior business engagement. Mr. JIANG Chao, an executive Director and the elected chairman of that meeting, was available to answer questions in that meeting.
The written terms of reference of the Remuneration Committee are in compliance with the Code. The primary duties of the Remuneration Committee include (without limitation):
The Remuneration Committee is made up of all of the INEDs, namely, Mr. CHAN King Chung (Chairman), Dr. HUANG Dazhan, and Mr. XIE Weixin.
The Remuneration Committee had two meetings in 2015 which were attended by all the members of the Remuneration Committee, which were consulted by Mr. GUO Deying, the chairman of the Company, to review the remuneration packages of Directors and senior management of the Group and share option scheme. The attendance record of each member of the Remuneration Committee is set out below:
|Name||Number of meetings attended|
|Mr. CHAN King Chung (Chairman)||2/2|
|Dr. HUANG Dazhan||2/2|
|Mr. XIE Weixin||2/2|
No Director took part in any discussion about his or her own remuneration.
PROVISION OF INFORMATION TO DIRECTORS
To assist the Directors in the discharge of their respective duties, the Company will provide every Director with a comprehensive induction program on the first occasion of his appointment, in which the Director will be provided with information on the Company's organisation and business, including the membership, duties and responsibilities of the Board, the various Board committees and the Management; corporate governance practices and procedures; and the latest financial information of the Company. Such information shall be supplemented with visits to the Company's key plant sites and meetings with key members of the Management.
Throughout their tenure, the Directors will be provided with updates on the business of the Company, latest developments of the Listing Rules and other applicable legal and regulatory requirements, corporate social responsibility matters and other changes affecting the Company from time to time.
CONTINUOUS PROFESSIONAL DEVELOPMENT
All Directors are encouraged to participate in continuous professional development to develop and refresh their knowledge and skills. The Company has arranged in-house trainings for Directors in the form of seminar and provision of training materials. A summary of training received by Directors during the year ended 31 December 2015 according to the records provided by the Directors is as follows:
Name of directors
|Training on corporate governance,
and other relevant topics
|Mr. GUO Deying||✓|
|Mr. JIANG Chao||✓|
|Mr. LI Wang (resigned on 18 January 2016)||✓|
|Mr. LI Bin||✓|
|Mr. JIA Yueting (appointed on 17 August 2015)||✓|
|Mr. LIU Hong (appointed on 17 August 2015)||✓|
|Independent Non-executive Directors|
|Mr. CHAN King Chung||✓|
|Dr. HUANG Dazhan||✓|
|Mr. XIE Weixin||✓|
SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted a code of conduct for securities transactions and dealings (the "Code of Conduct") based on the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 of the Listing Rules (the "Model Code"). The terms of the Code of Conduct are no less exacting than the standards in the Model Code, and the Code of Conduct applies to all relevant persons as defined in the Model Code, including all the Directors, all other employees of the Company, and director and employees of a subsidiary or holding company of the Company who, because of such office or employment, are likely to be in possession of unpublished price sensitive information in relation to the Company or its securities. Specific enquiry has been made of all the Directors who have confirmed in writing their compliance with the required standards set out in the Model Code and the Code of Conduct during the year under review.
The Audit Committee, comprising all of the INEDs, namely, Mr. CHAN King Chung (Chairman), Dr. HUANG Dazhan and Mr. XIE Weixin, has reviewed the accounting principles and practices adopted by the Company and has discussed the auditing, internal control and financial reporting matters.
In 2015, the Audit Committee held three meetings. The attendance record of each member of the Audit Committee is set out below:
|Name||Number of meetings attended|
|Mr. CHAN King Chung (Chairman)||3/3|
|Dr. HUANG Dazhan||3/3|
|Mr. XIE Weixin||3/3|
The Audit Committee has carefully reviewed and discussed the Company's half-yearly and annual results for the year under review and system of internal control and has made recommendations for improvement. The Audit Committee has carried out and discharged its duties set out in Code.
CORPORATE ACCOUNTABILITY AND INTERNAL CONTROL
The Board is responsible for the Group's internal control system and has the responsibility for reviewing its effectiveness. The Directors have reviewed and considered that the financial statements have been prepared in conformity with the generally accepted accounting standards in Hong Kong, and reflected amounts that are based on the best estimates and reasonable, informed and prudent judgement of the Board and the Management with an appropriate consideration to materiality.
The Board has reviewed and is satisfied with the effectiveness of the Group's internal control system and believes that, such system is sufficient in providing reasonable assurances that the Group's assets are safeguarded against loss from unauthorized use or disposition, transactions are properly authorized and proper accounting records are maintained. Such system is designed to provide reasonable, but not absolute, assurance against material misstatement or loss, and to manage rather than eliminate risks of failure in the Group's operational system.
The Board also reviews, at least annually, the adequacy of resources, staff qualifications and experience of the Group's accounting and financial reporting function, internal audit function, risk management functions, and their training programmes and budget.
CORPORATE GOVERNANCE FUNCTIONS
The Board also assumes the corporate governance functions and is responsible for: developing and reviewing the Company's policies on corporate governance; reviewing and monitoring training and continuous professional development of Directors and senior management; reviewing and monitoring the Company's policies and practices on compliance with legal and regulatory requirements; developing, reviewing and monitoring the Company's code of conduct; and reviewing the Company's compliance with the Code and disclosure in this Corporate Governance Report. Besides, the Company has set up three committees including the Nomination Committee, the Remuneration Committee and the Audit Committee. Each committee has its specific terms of reference with reference to the Code.
DIRECTORS' RESPONSIBILITIES FOR FINANCIAL REPORTING IN RESPECT OF FINANCIAL STATEMENTS
The Directors have acknowledged their responsibilities for preparing the financial statements of the Company for the year ended 31 December 2015. The Directors' responsibilities for preparing the financial statements of the Company for the year ended 31 December 2015 are set out in the Report of the Directors on page 41 of the Annual Report. The Directors are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Company's ability to continue as a going concern.
The Nomination Committee comprises one executive Director and two independent non-executive Directors, namely Mr. GUO Deying (the Chairman of the Committee), Mr. CHAN King Chung and Mr. XIE Weixin as members. The principal duties of the Nomination Committee include reviewing the Board composition, developing and formulating relevant procedures for nomination and appointment of Directors and senior management, making recommendations to the Board on the appointment and succession planning of Directors and senior management, and assessment of the independence of the independent non-executive Directors.
The Nomination Committee carries out the process of selecting and recommending candidates for directorship and senior management by making reference to the skills, experience, professional knowledge, personal integrity and regulations. An external recruitment agency may be engaged to carry out the recruitment and selection process when necessary. The Nomination Committee held two meeting during the year ended 31 December 2015. The attendance record of the Nomination Committee meeting is set out below:
|Name||Number of meetings attended|
|Mr. GUO Deying (Chairman)||2/2|
|Mr. XIE Weixin||2/2|
|Mr. CHAN King Chung||2/2|
The Nomination Committee recommended the re-appointment of the Directors standing for re-election at the next forthcoming annual general meeting of the Company.
BOARD DIVERSITY POLICY
The Board has adopted a "Board Diversity Policy" in relation to the nomination and appointment of new Directors, which sets out: the selection of board candidates shall be based on a range of diversity perspectives with reference to the Company's business model and specific needs, including but not limited to gender, age, race, language, cultural background, educational background, industry experience and professional experience.
The above measurements were also reviewed and adopted when the Nomination Committee reviewed the composition of the Board. After assessing the suitability of the directors' skills and experience to the Company's business, the Nomination Committee confirmed that the existing Board was appropriately structured and no change was required.
All Directors have access to the advice and services of the Company Secretary. The Company Secretary reports to the Board, and is responsible for ensuring that Board procedures are followed and for facilitating information flows and communications among Directors as well as with Shareholders and the management, Mr. JIANG Chao was appointed as the Company Secretary of the Company and he have complied with the training requirement of the Listing Rules during the year.
Ernst & Young has been appointed as the External Auditors of the Group for the year under review. An amount of approximately HK$3.8 million was charged by Ernst & Young for its audit services provided to the Group in 2015 (2014: HK$3.5 million). The responsibilities of the external auditors with respect to financial reporting are set out in the section headed "Independent Auditors' Report" on page 42 of this report. During the year, HK$1.3 million (2014: HK$0.4 million) was incurred as remuneration to Ernst & Young for the provision of non-audit services to the Group which represented tax advisory services.
COMMUNICATION WITH SHAREHOLDERS AND SHAREHOLDERS' RIGHTS
The Company recognizes the importance of good communications with all shareholders and investors. The Company's annual general meeting is a valuable forum for the Board to communicate directly with the shareholders. The Company provides information relating to the Company and its business in its annual and interim reports and also disseminates such information electronically through its website www.coolpad.com.hk and the website of the Stock Exchange. All shareholders of the Company are given a minimum of 21 days' notice of the date and venue of such annual general meeting. The Company supports the Code's principle to encourage shareholders' participation.
Pursuant to the Article 58 of the Articles of Association, any one or more Shareholders holding at the date of deposit of the requisition not less than one tenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the company secretary of the Company, to require an extraordinary general meeting to be called by the Board for the transaction of any business specified in such requisition, and such meeting shall be held within two months after the deposit of such requisition. If within 21 days of such deposit the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves) may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as a result of the failure of the Board shall be reimbursed to the requisitionist(s) by the Company.
The Group values feedback from the Shareholders on its effort to promote transparency and foster investor relationships. Comments and suggestions are always welcomed. Specific enquiries and suggestions by shareholders can be sent in writing to the Board or the Company Secretary at the Company's registered address or by e-mail to the Company's email address at [email protected]
During the year under review, the Company has not made any changes to its Memorandum and Articles of Association. An updated version of the Company's Memorandum and Articles of Association is available on the websites of the Company and the Stock Exchange.
updated as per Annual Report 2015
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