TERMS OF REFERENCE
MEMBERS OF THE BOARD OF DIRECTORS
Standard for BSEC Compliance as per CG Code
Now, therefore, in exercise of the power conferred by section 2CC of the Securities and Exchange Ordinance, 1969 (XVII of 1969), the Commission hereby repeals its earlier Notification No. SEC/CMRRCD/2006158/134/Admin/44, dated 07 August 2012, published in the official gazette on 30 August 2012 and the relevant Notification(s) on the same matter and, imposes the following further conditions, i.e., Corporate Governance Code to the consent already accorded by it, or deemed to have been accorded by it, or to be accorded by it in future, to the issue of capital by the companies listed with any stock exchange in Bangladesh:
Provided, however, that these conditions or Code are imposed on ‘comply’ basis; the companies listed with any stock exchange in Bangladesh shall comply with these conditions or Code in accordance with the condition No. 9.
The Conditions, i.e., Corporate Governance Code:
1. Board of Directors.——
(1) Size of the Board of Directors The total number of members of a company’s Board of Directors (hereinafter referred to as “Board”) shall not be less than 5 (five) and more than 20 (twenty).
MEMBERS OF THE BOARD OF DIRECTORS
The Board of Directors (the “Board”) of Meghna Cement Mills Limited (the “Company”) has adopted the following Terms of Reference (the “Code”) for the directors of the Company.
This Code is intended to focus the Board and each director to provide guidance to directors, to help them recognize and deal with ethical issues, provide mechanisms to report on any non-compliance, and help foster a culture of transparency and accountability. Each director must comply with the letter and spirit of this Code and be with immediate effect.
The principle of this code is based on principles in relation to sincerity, integrity, responsibility and corporate social responsibility. No code or policy can anticipate every situation that may arise. Accordingly, this Code is intended to serve as a source of guiding principles for the directors of this Company. Directors are encouraged to bring questions about particular circumstances that may implicate one or more of the provisions of this Code to the attention of the Chairman of Company and if required with the Audit Committee. Directors should read this Code in conjunction with the Company’s Employee Terms of Reference.
This Terms of Reference is formulated to enhance the corporate governance and corporate behavior with the intention of achieving the following aims:
i. To establish a standard of ethical behavior for directors based on trustworthiness and values that can be accepted, are held or upheld by any one person.
ii. To uphold the spirit of responsibility and social responsibility in line with the legislation, regulations and guidelines for administrating a company.
In the context of this code, a company director means any person who holds the position of director in a corporation irrespective of any designation used, including anyone who follows the directives and advice of a corporate director and who usually takes action, as well as an in-turn or substitute director. A director also includes both the executive and non-executive directors as well non-executive chairperson(s).
BOARD OF DIRECTORS
4. The BOARD
The board of directors is the highest governing authority within the management structure of the Company. The primary responsibility of the board of directors shall be to protect the shareholders’ interest, protect the Company’s assets and interests.
It is to formulate, approve and evaluate various policies, to select and approve appropriate compensation for the company’s Managing Director/Chief Executive Officer (CEO), and pay dividends, deal and recommend share/stock related, oversee visionary programs, approve the company’s financial statements, and oversee dividend matters, approve or discourage on the policy matters e.g., acquisitions and mergers etc.
4.1 Role of the Board
The role of the board as follows:
• Providing entrepreneurial leadership;
• Setting up the strategy;
• Ensuring the human and financial resources are available to achieve objectives,
• Reviewing management performance;
• Setting up the company’s values and standards;
• Ensuring that obligations to shareholders and other stakeholders are understood and met adequately.
4.2 Directors’ Responsibilities
The Board of Directors represents the interests of stockholders, as sponsors of the Company, in optimizing long-term value by overseeing management performance on the stockholders’ behalf. The Board’s responsibilities in performing this oversight function include a duty of care and a duty of loyalty. A director’s duty of care refers to the responsibility to exercise appropriate diligence in overseeing the management of the Company, making decisions and taking other actions. In case of meetings the directors are expected to the following:
i. Attend and participate in board and committee meetings:
a. Personal participation is essential. A director if absents himself from three consecutive meetings of the directors or from all meetings of the directors for a continuous period of three months, whichever is longer, without obtaining any leave of absence from the Board of Directors his position will be considered.
b. Directors may appoint an alternate to attend the meetings during his absence with prior consent of the Board and its Chairman.
c. Directors shall never appoint or assign anyone to participate by proxy.
d. The meetings are to be called when so instructed by the Directors.
e. Meeting of directors in general transact the following issues:
i. Management of the business of the company;
ii. Transfer, transmission, allotment and forfeiture of shares;
iii. Authorization of the use of-the seal;
iv. Passing accounts for payment;
v. Recommendation of dividends;
vi. Declaration of interim dividends;
vii. Appointment of officials; etc.
ii. Remain properly informed about the Company’s business and affairs:
a. Directors should review and devote appropriate time to studying board materials,
b. The directors shall have clear and strong role in the company affairs as follows:
i. constructive challenge and help in developing proposals on strategy;
ii. scrutiny of management’s performance in meeting agreed goals and objectives and the monitoring of performance reports;
iii. satisfying themselves on the integrity of financial information and that controls and risk management systems are robust and defensible;
iv. determining appropriate levels of remuneration for executive directors;
v. appointing and removing executive directors and succession planning.
c. The directors should meet regularly, as a body, with the chairman, at least once in every three months and four times a year at the least.
d. They should meet on under the leadership of the Chairman to appraise the performance of the company.
iii. Make inquiries:
Directors, if necessary, should make inquiries about potential problems that come to their attention and follow up until they are reasonably satisfied that management is addressing them appropriately. A director’s duty of loyalty refers to the responsibility to act in good faith and in the Company’s best interests, not the interests of the director, a family member or an organization with which the director is affiliated. Directors should not use their positions for personal gain. The duty of loyalty may be relevant in cases of conflict of interest, and corporate opportunities.
4.3 Conflict of Interest
Directors must avoid any conflicts of interest between the director and the Company. Any situation that involves, or may reasonably be expected to involve, a conflict of interest with the Company, should be disclosed promptly to the Chairman of the Board or the Chairman of the Audit Committee. A “conflict of interest” can occur when a director’s personal interest is adverse to – or may appear to be adverse to – the interests of the Company as a whole. Conflicts of interest also arise when a director, or a family member, receives improper personal benefits as a result of his or her position as a director of the Company. This Code does not attempt to describe all possible conflicts of interest which could develop. Some of the more common conflicts from which directors must refrain, however, are set out below.
i. Relationship of Company with third-parties:
Directors may not engage in any conduct or activities that are inconsistent with the Company’s best interests or that disrupt or impair the Company’s relationship with any person or entity with which the Company has or proposes to enter into a business or contractual relationship.
ii. Compensation from non-Company sources:
Directors may not accept compensation (in any form) for services performed for the Company from any source other than the Company.
iii. Personal use of Company’s assets:
Directors may not use Company’s assets, labor or information for personal use unless approved by the Board or as part of a compensation or expense reimbursement program available to all directors.
4.4 Corporate Opportunities
Directors are prohibited from:
a. taking for themselves personally opportunities related to the Company’s business;
b. using the Company’s property for personal gain,
c. competing with the Company for business opportunities, provided, however, if the Company’s disinterested directors determine that the Company will not pursue an opportunity that relates to the Company’s business, a director may do so.
Directors should maintain the confidentiality of information entrusted to them by the Company and any other confidential information about the Company that comes to them, from whatever source, in their capacity as a director, except when disclosure is authorized or legally mandated.
For purposes of this Code, “confidential information” includes all non-public information relating to the Company.
4.6 Compliance with the relevant laws and fair dealing
a. Directors shall comply, and oversee compliance by employees, officers and other directors, with the laws, rules and regulations as applicable to the Company, including insider trading laws.
b. Directors shall oversee fair dealing by employees and officers with the Company’s customers, suppliers, competitors and employees.
4.7 Encouraging of the ethical behavior
Directors should promote ethical behavior and take steps to ensure the Company:
a. encourages employees to talk to supervisors, managers and other appropriate personnel when in doubt about the best course of action in a particular situation;
b. encourages employees to report violations of laws, rules, regulations or the Company’s policies or Terms of Reference to appropriate personnel;
c. informs employees that the Company will not allow retaliation for reports made in good faith.
4.8. Compliance procedures & waivers
Directors should communicate any suspected violations of this Code promptly to the Chairman of the Board or the Chairman of the Audit Committee. Violations will be investigated by the Board or by a person or persons designated by the Board and appropriate action will be taken in the event of any violations of the Code. Any waivers of this Code may only be granted by the Board or the Audit Committee after disclosure of all material facts by the director seeking the waiver. Waivers will only be granted in exigent circumstances and will be disclosed promptly to stockholders.
4.9. Vacation of Office of Director
The office of a director shall be vacated in the following grounds –
a. the director fails to obtain within 60days of his appointment or at any time thereafter ceases to hold, the qualification shares, if any, necessary for his appointment;
b. the director is found to be of unsound mind by a competent court;
c. the director is adjudged an insolvent;
d. the director fails ails to pay calls made on him in respect of shares held by him within 60 days from the date of such calls being made; or
e. the director absents himself from three consecutive meeting of the directors or from all meetings of the directors for a continuous period of three months, whichever is longer, without leave of absence from the Board of Directors; or
f. he/she enters into any contract for the sale, purchase or supply of goods and materials with the company without the consent of the directors.
5.0 RETIREMENT OF DIRECTORS BY ROTATION
Articles of this company has provided the provisions of retirement of directors by rotation which the directors are to follow along with the regulatory provisions in this regard. Every year in the annual general meeting not less than one third of the whole number of directors shall retire by rotation. The retirement to be executed in the following manner:
a. In every AGM, one third of the directors (except the independent directors) or if such number is not three or multiple thereof, then the number nearest to one third shall retire.
b. The one third of the directors will be determined on the basis of their tenure in the office and the longest serving directors will retire by rotation. If two or more persons have the same length period in the office, then the persons whose name appears in the directors register first to be retired.
c. A retiring director is eligible to seek reelection.
d. The company at its general meeting at which a director will retire may fill in the vacated office by electing a person.
e. If at any meeting, the election of directors cannot take place, the meeting shall stand adjourned for the same day and same time next week and be held in the same place for the purpose.
f. At the adjourned meeting, if the office of the vacating directors is not filled in the vacating directors or such of them as have not had their places filled in shall be deemed to have been reelected.
6.0 DIRECTORS’ REPORT TO SHAREHOLDERS
The Board of Director shall prepare and present its reports to the shareholders of the Company in accordance with guidelines under section 184 of the Companies Act, 1994. However, the following additional statements are further to be incorporated in the Directors’ Report as per the directives issued by the BSEC:
(i) Industry outlook and possible future developments in the industry.
(ii) Segment-wise or product-wise performance.
(iii) Risks and concerns.
(iv) A discussion on Cost of Goods sold, Gross Profit Margin and Net Profit Margin.
(v) Discussion on continuity of any Extra-Ordinary gain or loss.
(vi) Basis for related party transactions- a statement of all related party transactions should be disclosed in the annual report.
(vii) Utilization of proceeds from public issues, rights issues and/or through any others instruments.
(viii) An explanation if the financial results deteriorate after the company goes for Initial Public Offering (IPO), Repeat Public Offering (RPO), Rights Offer, Direct Listing, etc.
(ix) If significant variance occurs between Quarterly Financial performance and Annual Financial Statements the management shall explain about the variance on their Annual Report.
(x) Remuneration to directors including independent directors.
(xi) The financial statements prepared by the management of the issuer company present fairly its state of affairs, the result of its operations, cash flows and changes in equity.
(xii) Proper books of account of the issuer company have been maintained.
(xiii) Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment.
(xiv) International Accounting Standards (IAS)/Bangladesh Accounting Standards (BAS)/Intonational Financial Reporting Standards (IFRS)/Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there-from has been adequately disclosed.
(xv) The system of internal control is sound in design and has been effectively implemented and monitored.
(xvi) There are no significant doubts upon the issuer company’s ability to continue as a going concern. If the issuer company is not considered to be a going concern, the fact along with reasons thereof should be disclosed.
(xvii) Significant deviations from the last year’s operating results of the issuer company shall be highlighted and the reasons thereof should be explained.
(xviii) Key operating and financial data of at least preceding 5 (five) years shall be summarized.
(xix) If the issuer company has not declared dividend (cash or stock) for the year, the reasons thereof shall be given.
(xx) The number of Board meetings held during the year and attendance by each director shall be disclosed.
(xxi) The pattern of shareholding shall be reported to disclose the aggregate number of shares (along with name wise details stated below) held by;
a) Parent/Subsidiary/Associated Companies and other related parties (name-wise details);
b) Directors, Chief Executive Officer, Company Secretary, Chief Financial Officer, Head of Internal Audit and their spouses and minor children (name- wise details);
d) Shareholders holding ten percent (10%) or more voting interest in the company (name wise details).
(xxii) In case of the appointment/re-appointment of a director the company shall disclose the following information to its shareholders:
a) a brief resume of the director;
b) nature of his/her expertise in specific functional areas;
c) names of companies in which the person also holds the directorship and the membership of committees of the board.