I am pleased to present the Corporate Governance Statement as Chairman of the Board of Directors of essensys plc (“essensys”, “Company” or the “Group”). As Chairman, it is my responsibility to ensure that essensys has both sound corporate governance and an effective Board. Since the Company listed on AIM in May 2019, it has chosen to adopt the Quoted Companies Alliance’s Corporate Governance Code for Small and Mid-Size Quoted Companies (“QCA Code”), to the extent it is appropriate having regard to the Company’s size, board structure, stage of development and resources.

The Directors of essensys recognise the value of good corporate governance in every part of the business. The Board considers that compliance with the QCA Code will enable us to serve the interests of all our key stakeholders, including our shareholders, and will promote the maintenance and creation of long-term value in the Company. An overview of essensys’ compliance with the QCA Code principles as of the date of this statement is provided below. The Board is of the opinion that the Group complies with the QCA Code so far as practicable having regard to size, nature and current stage of the development of the Group.

essensys seeks to improve its corporate governance practices constantly.

Jon Lee,
Chairman

 

QCA Principles

1. ESTABLISH A STRATEGY AND BUSINESS MODEL WHICH PROMOTE LONG-TERM VALUE FOR SHAREHOLDERS

essensys’ software is designed and developed to serve the specific requirements of flexible workspace providers, removing operational complexity and enabling them to operate and scale more efficiently and the Group remains focussed on the flexible workspace sector, expanding its software and services offering and growing its customer base internationally. To maintain its position as the leading global provider of mission-critical software-as-a-service (“SaaS”) platforms and on-demand cloud services to the high growth flexible workspace industry, the Group’s business model and strategy is expected to lead to long-term growth through the acceleration of flexible workspace opportunity, investment in organic growth to capture market opportunity, and demand from existing and new customers.

The Board monitors exposure to key business risks and reviews the progress of the Group towards the achievement of its strategic goals, budgets and forecasts. Details of the Group’s strategy and business model can be found in the Strategic Report on page 12 of the Annual Report for the year ended 31 July 2023 (“Annual Report”) which is available on the Group’s website: https://essensys.tech/investors/company-documents.

The key challenges in executing the Group’s strategy are set out in the principal risks and uncertainties section on page 26 of the Annual Report.

2. SEEK TO UNDERSTAND AND MEET SHAREHOLDER NEEDS AND EXPECTATIONS

The Board is committed to providing shareholders with clear and transparent information on essensys’ financial position and strategy. Any published announcements, financial reports and key documents are publicly available and will be regularly updated on the Group’s website. Directors will meet with selected key shareholders and research analysts following the announcement of results and obtain appropriate feedback.

The Board reviews the success of shareholder engagement and takes appropriate steps to improve engagement based on shareholder feedback.

Actions taken to engage with shareholders during the year include investor roadshows and meetings with key investors and analysts. This provides the Board with the opportunity to express its vision for the Company and garner feedback on progress with regard to strategy.

The whole Board attends the AGM, which it regards as an opportunity to meet, listen and present to shareholders, and shareholders are encouraged to attend and ask questions. The Company’s Annual General Meeting (AGM) took place on 7 December 2023 and all proposed resolutions were passed comfortably. Shareholders were given the opportunity to submit questions to the Board in advance of the AGM via email, and a videoconferencing facility was made available for shareholders and directors to attend remotely. At the AGM, the Company utilises the Investor Meet Company platform to afford shareholders who are not able to attend physically the opportunity to engage with, participate, and ask the Chair and the Board questions. The results of the AGM are published on the Company’s website.

The Board continues to make itself available to shareholders on an ad hoc basis and encourages an open dialogue. Any queries should be directed to [email protected], and the Chief Executive Officer is principally responsible for such communication with shareholders.

3. TAKE INTO ACCOUNT WIDER STAKEHOLDER AND SOCIAL RESPONSIBILITIES AND THEIR IMPLICATIONS FOR LONG-TERM SUCCESS

essensys recognises that it is responsible not only to its shareholders, but to a wider group of stakeholders, both internally (members of staff) and externally (customers, suppliers, regulators and others). The Board recognises that the long-term success of the Company is reliant upon the efforts of employees, regulators and other key stakeholders. essensys acts with integrity and values people, from its members of staff to those who form the communities with which it engages. The Board has put in place a range of processes and systems to ensure there is close oversight and contact with its key resources and relationships.

The Board is regularly updated on wider stakeholder engagement feedback to stay abreast of stakeholder insights into the issues that matter most to them and to essensys’ business and the Board takes account of such feedback when in discussions relating to the Group’s strategy.

essensys provides a customer support service and delivers regular updates on product and capability improvements directly through customer engagement sessions. It measures and monitors its response time to queries to ensure that customer issues are dealt with promptly and appropriately. As part of its customer engagement process, customers are regularly surveyed as to their experiences. The Company has a whistleblowing policy in place in order to discourage unethical business conduct, thus ensuring its employees are protected. The Group’s Section 172 statement providing further information on the consideration of various stakeholders can be found on page 19 of the Annual Report.

4. EMBED EFFECTIVE RISK MANAGEMENT, CONSIDERING BOTH OPPORTUNITIES AND THREATS, THROUGHOUT THE ORGANISATION

The Board is responsible for determining the nature and extent of significant risks that may have an impact on essensys’ operations, and for maintaining an effective risk management framework.

The Board, assisted by the Audit Committee, reviews its internal control procedures and risk management mechanisms on an annual basis and assesses both for effectiveness. During the year, the Board implemented new risk management review processes, supported by the Audit Committee and, in the first half of FY23, by RSM Risk Assurance Services LLP (“RSM”) external risk management specialists who had supported the implementation of the risk management framework during FY22.

Under its risk management framework, the Board has carried out an assessment of the principal risks and uncertainties affecting essensys’ business, considered how these could affect operations, performance and solvency and what mitigating actions, if any, can be taken.

Whilst a review of risk-related matters is a regular item on the Board’s annual calendar of agenda items, risks and opportunities are continually considered when the Board is making decisions about the business and strategy of the Group. The principal risks and uncertainties affecting the Group and the mitigation actions or factors are set out on page 26 of the Annual Report.

As part of the overall review of the internal controls and risk management process, the Audit Committee also reviewed the Group’s internal audit processes and approved continuing to secure internal audit review services from RSM. The services and scope of RSM’s work are governed by a formal Internal Audit Charter supported by a three-year strategic internal audit plan. The Internal Audit Plan focuses on progressing internal controls recommendations proposed by the External Auditor and reviewing the assurance steps underpinning these controls. The Internal Audit Plan is tailored to the Group’s strategic priorities and risk profile.

5. MAINTAIN THE BOARD AS A WELL-FUNCTIONING, BALANCED TEAM LED BY THE CHAIR

The Directors 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 Chairman.

The Board considers that it has an appropriate balance and is currently comprised of two Executive and two Non-Executive Directors. Jon Lee is the Company’s independent Non-Executive Chairman and there is one other independent Non-Executive Director, namely Charles Butler. Mark Furness (Chief Executive Officer) and Sarah Harvey (Chief Financial Officer) are the Company’s Executive Directors. The Executive Directors work full time for the business.

Meetings are open and constructive, with every Director participating fully. Senior management are invited to meetings from time to time, providing the whole Board with the opportunity for direct enquiry and a thorough overview of the Group. The Board and the committees of the Board are provided with high quality information, in a timely manner, to facilitate proper assessment of the matters requiring a decision or insight. In order to be efficient, the Directors meet formally and informally both in person and by telephone or video conference at operational locations in the UK and overseas. The Chairman ensures that any feedback or suggestions for improvement on Board papers is provided to management.

The Board has delegated specific responsibilities to the Audit Committee and the Remuneration Committee to facilitate and improve the effectiveness of the Board, further details of which are provided under Principle 9 below. The Board does not consider it currently necessary to establish a Nomination Committee and as a result all matters relating to succession planning and Board composition will be managed by the full Board, or directly by the Chairman, as appropriate.

The Board is satisfied that the Chairman and all the Directors are able to commit the time necessary to fulfil their respective roles. For the financial year ended on 31 July 2023, thirteen Board meetings took place, which were attended by all Directors appointed at the time of each meeting. Four Audit Committee meetings took place during the period, attended by all appointed Committee members. There were three Remuneration Committee meetings during the period which were attended by all appointed Committee members.

When considering future Board appointments, prospective Non-Executive Directors will be requested to confirm they can make the required time commitment before accepting an appointment to the Board. Executive and Non-Executive Directors are subject to re-election intervals as prescribed in the Company’s Articles of Association.
The contracts or letters of appointment of all Directors are available for inspection at the Company’s registered office during normal business hours.

Directors’ conflict of interest
The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of the other commitments and interests of its Directors, and changes to these commitments and interests are reported to and, where appropriate, agreed with the rest of the Board.

6. ENSURE THAT BETWEEN THEM THE DIRECTORS HAVE THE NECESSARY UP-TO-DATE EXPERIENCE, SKILLS AND CAPABILITIES

The Directors are satisfied that the balance of Executive and Non-Executive Directors is appropriate and that no individual or group may dominate the Board’s decisions. The Board considers that each of the Directors has the experience and knowledge to constructively challenge the Group’s strategy and to provide the necessary guidance, oversight and advice to enable the Board to operate effectively. The Group believes that the current balance of skills in the Board as a whole reflects a broad range of commercial and professional skills. The Chairman and other Non-Executive Director communicate with each other as necessary and meet, informally, without the presence of the Executive Directors from time to time during the year. Additionally, they each maintain ongoing communications with Executives between formal Board meetings.

In addition to their general Board responsibilities, Non-Executive Directors are encouraged to participate in other Group meetings or in matters when their individual areas of expertise may be of value.

The Company Secretary ensures that all Directors are kept abreast of changes in relevant legislation and regulations, with the assistance of the Company’s other advisers where relevant, as well as helping the Chairman to maintain excellent standards of corporate governance.

In order to keep Director skill-sets up to date, the Board uses third parties to advise the Directors of their responsibilities including receiving advice from the Company’s external lawyers and NOMAD.

The Executive Directors will be subject to the Company’s performance and development review process through which their performance against predetermined objectives will be reviewed and their personal and professional development needs considered. The Directors will be encouraged to raise any personal development or training needs with the Chairman.

The Non-Executive Directors have a breadth and depth of skills and experience across many different sectors enabling them to provide the necessary guidance, oversight and advice for the Board to operate effectively.

Board composition is always a consideration in relation to succession planning. The Board will consider any Board imbalances for future nominations, including Board independence and gender balance.

7. EVALUATE BOARD PERFORMANCE BASED ON CLEAR AND RELEVANT OBJECTIVES, SEEKING CONTINUOUS IMPROVEMENT

The structure of the Board is reviewed periodically to ensure that it remains appropriate for the Company and Group.

During the year the Board conducted a formal internally-led board and committee evaluation process. All directors completed a confidential survey providing feedback on various aspects of the Board and Committee’s performance. Detailed feedback was provided to, and considered by, the Board and each Committee.

The survey sought Directors’ feedback on areas including:

• Effectiveness in setting strategy
• The Board’s approach to monitoring performance
• Information flows between the Board and Senior Management
• the format, conduct and effectiveness of meetings, and of the materials supporting those meeting
• appropriateness of the Board composition and sufficiency of skills to operate effectively;
• Board size and composition; and The contribution of individual directors

The evaluation findings indicated that the Board, its committees, the Chairman and each of the Directors continued to work effectively. The feedback received provided a useful insight into areas that the Board was doing well, together with areas where the work of the Board could be developed. Areas for further discussion were identified, and a follow up review was led by the Chairman to further develop the performance of the Board for the year ahead.

The Company considers succession planning in respect of the Board and other members of the Group’s senior management, as appropriate, as part of its routine reviews of Board effectiveness, and succession planning is reviewed on an ongoing basis alongside the evaluation of the capabilities of the senior management team and the Directors.

Performance review of the Executive Directors is undertaken by the Remuneration Committee who make recommendations to the Board on matters relating to the performance and remuneration of the Executive Directors. The Non-Executive Directors meet, without the Chairman present, to evaluate the Chairman’s performance, taking into account input from all the Directors.

8. PROMOTE A CORPORATE CULTURE THAT IS BASED ON ETHICAL VALUES AND BEHAVIOURS

The Board promotes a corporate culture that is based on sound ethical principles and behaviours. The Board recognises that the tone set by its decisions regarding strategy and risk may impact the corporate culture of the Group as a whole and on the way that employees and other stakeholders behave, which in turn will impact the performance of the Company.

The Group operates in a manner that encourages an open and respectful dialogue with employees, customers and other stakeholders and the Board considers that sound ethical values and behaviours are crucial to the ability of the Group to achieve its corporate objectives. The Group is committed to the highest standards of personal and professional ethical behaviour, and this must be reflected in every aspect of the way in which the Group operates. The Board places great importance on this aspect of corporate life and seeks to ensure that all that the Group does supports these high standards. The Group promotes a healthy, transparent and communicative culture through consistent messaging and regular employee engagement activities. The Group conducts employee surveys and has established an Employee Consultation Group to obtain employee feedback. Feedback from employee surveys and the Employee Consultation Group are reported to the Board.

The Group has a whistleblowing policy which emphasises the importance to the business that any fraud, misconduct or wrongdoing by staff or officers of the Group is reported and properly dealt with. The policy applies to all employees and officers of the Group. Other individuals performing functions in relation to the Group, such as agency workers and contractors, are encouraged to use it. Any fundamental breach of the Company’s policies, including those within the Employee Handbook would be reported to the Board.

essensys is accredited to ISO 9001 (Quality Management System) and ISO 27001 (Information Security Management System). The Group has a robust operational risk management process which involves a broad range of Group personnel thus ensuring that all employees understand its importance.

The terms of reference of the Audit Committee include:

• reviewing the adequacy of the Company’s whistleblowing arrangements;
• reviewing the Company’s systems and controls for the prevention of bribery and fraud; and
• receiving reports on non-compliance.

The Group’s policies are provided to staff upon joining the business and training is provided at the induction course to ensure that all employees within the business are aware of the importance of following Company procedures. Each employee is required to sign an agreement to confirm that they will comply with the policies.

9. MAINTAIN GOVERNANCE STRUCTURES AND PROCESSES THAT ARE FIT FOR PURPOSE AND SUPPORT GOOD DECISION- MAKING BY THE BOARD

The Board generally meets formally once a month and otherwise as required. The Board has delegated specific responsibilities to the Audit and Remuneration Committees. Each committee reports to the Board and has written terms of reference setting out its duties, authority and reporting responsibilities. The terms of reference are regularly reviewed to ensure that they remain appropriate and to reflect any changes in legislation, regulation or best practice. The reports of the Audit and Remuneration Committees are set out on pages 42 and 44 of the Annual report, respectively.

The Chairman’s principal responsibilities are to ensure that the Company and its Board are acting in the best interests of shareholders, and leadership of the Board is undertaken in a manner which ensures that the Board retains integrity and effectiveness, with the right Board dynamic and ensuring that all important matters, in particular strategic decisions, receive adequate time and attention at Board meetings.

The CEO has, through powers delegated by the Board, the responsibility for leadership of the management team in the execution of the Group’s corporate strategies and for the day-to-day management of the business. The CEO can be assisted in his duties by the other Executive Directors. The CEO is also the principal contact for liaison with shareholders and, together with the CFO, all other stakeholders.

The independent Non-Executives Directors are tasked with constructively challenging the decisions of executive management and satisfying themselves that the systems of business risk management and internal financial controls are robust. The Executive Directors seek regular counsel from the Non-Executive Directors outside of Board meetings.

There is a formal schedule of “Matters Reserved for the Board” which include matters relating to:

• strategic aims and objectives and approval of budgets;
• structure and share capital;
• financial reporting and controls and dividend policy;
• maintenance of a sound system of internal controls and risk management;
• banking and financing arrangements;
• significant contracts;
• communication with shareholders; and
• changes to Board structure and composition.

The appropriateness of the Board’s structures and processes is reviewed through the ongoing Board evaluation process and on an ad hoc basis by the Chairman (see Principle 7). The governance structures are expected to evolve in parallel with the Company’s objectives, strategy and business model.

Board Committees

The Board has established an Audit Committee and a Remuneration Committee with delegated duties and responsibilities.

Audit Committee

Charles Butler, Non-Executive Director, is Chairman of the Audit Committee. The other member of the Committee is Jon Lee. The Audit Committee is responsible for ensuring that the financial performance, position and prospects for the Group are properly monitored, controlled and reported on and for meeting the auditors and reviewing their reports relating to accounts and internal controls. A report by the Chairman of the Audit Committee is included on page 42 of the Annual Report.

Remuneration Committee

The Remuneration Committee is chaired by Jon Lee and its other member is Charles Butler. The Remuneration Committee is responsible for reviewing the performance of Executive Directors and determining the remuneration and basis of service agreements. The Remuneration Committee also determines the payment of any bonuses to Executive Directors and the grant of options. When considering such matters, the Committee is mindful of the broader context of remuneration across the Group, in the Company’s sector and in terms of market trends and investor expectations. A report by the Chairman of the Remuneration Committee is included on page 44 of the Annual Report.

10. COMMUNICATE HOW THE COMPANY IS GOVERNED AND IS PERFORMING BY MAINTAINING A DIALOGUE WITH SHAREHOLDERS AND OTHER RELEVANT STAKEHOLDERS.

The Board is committed to maintaining effective communication and having constructive dialogue with its shareholders and other stakeholders. The Company intends to have ongoing relationships with both its private and institutional shareholders (through meetings and presentations) as well as shareholder analysts, and for them to have the opportunity to discuss issues and provide feedback at meetings with the Company. The Company communicates progress with shareholders and stakeholders throughout the year by publishing announcements via a Regulatory Information Service, its Annual and Interim Report and Accounts (including the section 172 statement), and through update meetings as necessary.

At essensys’ 2023 AGM, all resolutions were passed comfortably, with over 95% support for each resolution from proxy votes. However, the Board maintains that in line with corporate governance good practice, if there is a resolution passed at a general meeting with more than 20% votes against it, the Company will seek to understand the reason for the result and, where appropriate, take suitable action.

The Group’s website is kept up to date with appropriate governance material, and contains details of relevant developments, press and corporate news and presentations. The results of shareholder votes are notified on the Group’s website where a significant proportion of votes are cast against a resolution at any general meeting, and in such an instance the Company will include an explanation of what actions it intends to take to understand the reasons behind that vote result, and, where appropriate, any different action it has taken, or will take, as a result of the vote.

The latest Corporate Documents (including Annual Reports) can be found here: https://essensys.tech/investors/company-documents/. Investors have access to current information about the Company through the Company’s website, www.essensys.tech.

 

Last reviewed on 5 April 2024