Netel Technology (Holdings) Ltd.
Flat C, 9/F Max Share Centre,
373 King's Road,
North Point, Hong Kong.
+852 2907 3777
+852 2510 0266
Coporate Governance Report
Corporate Governance Report 2008
The Company periodically reviews its corporate governance practices to ensure that they continue to meet the requirements of the Code, and acknowledges the important role of its Board in providing effective leadership and direction to the Company’s business, and ensuring the transparency and accountability of the Company’s operations.
The key corporate governance principles and practices of the Company are summarized as follows:
CORPORATE GOVERNANCE PRACTICES
The Code on Corporate Governance Practices as set out in Appendix 15 of the GEM Listing Rules provide for code provisions (the “Code Provisions”) and recommended best practices with respect to:
1) The corporate governance principles of the company emphasise a quality Board, sound internal controls, transparency and accountability to all shareholders. Throughout the financial year ended 31 May 2008, the Group has compiled with the code provisions in the Code on Corporate Governance Practices (the Code) as set out in Appendix 15 of the GEM Listing Rules, except for the code provision A.2.1 and A.4.1 stipulated in the following paragraphs. The code provision A.2.1 stipulates that the roles of Chairman and Chief Executive Officer (“CEO”) should be separated and should not be performed by the same individual. The division of responsibilities between the Chairman and Chief Executive Officer should be clearly established and set out in writing.
Mr. James Ang is both the Chairman and CEO of the Company who is responsible for managing the Board and the Group’s business. Mr. Ang has been the Chairman and CEO since the establishment of the Company. The Board considers that, with the present board structure and scope of business, there is no imminent need to separate the roles into two individuals. However, the Board will continue to review the effectiveness of the Group’s corporate governance structure to assess whether the separation of the position of Chairman and CEO is necessary.
Under the code provision A.4.1, non-executive Directors should be appointed for a specific term and subject to re-election. However, all the independent non-executive Directors of the Company are not appointed for specific terms but are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Article of Association of the Company. The Company considers that sufficient measures have been taken to ensure good corporate governance practices of the Company in this aspect of the code.
CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS
The Company has adopted the rules set out in Rules 5.48 to 5.67 (where applicable) of the GEM Listing Rules as the code for dealing in securities of the Company by the Directors (the “Code”). The Company has made specific enquiry of all Directors of the Company, and the Directors have confirmed compliance with the Code during the year ended 31 May 2008.
Specific employees who are likely to be in possession of unpublished price-sensitive information of the Group are also subject to compliance with the same Code. No incident of non-compliance was noted by the Company for the year ended 31 May 2008.
BOARD OF DIRECTORS
The Board comprises three executive Directors and three independent non-executive Directors. Each Director has relevant experiences, competence and skills appropriate to the requirement of the business of the Company.
The Directors of the Board members of the Company during the year ended 31 May 2008 and up to the date of this report were as follows:
Mr. James Ang (Chairman)
Mr. Wei Ren (Appointed on 30 May 2008)
Ms. Yau Pui Chi, Maria
Independent Non-Executive Directors (“INEDs”)
Mr. Chiang Kin Kon (Appointed on 20 May 2008)
Mr. Wong Kwok Fai (Appointed on 20 May 2008)
Mr. Yeung Kam Yuen, Roderick (Resigned on 04 August 2008)
Ms. Tam May Yuk (Appointed on 03 April 2008)
Mr. Li Chi Wing (Resigned on 02 May 2008)
Mr. Chan Chun Chung, William (Resigned on 31 May 2008)
The Board is responsible for directing the Group to success and enhancing shareholders’ value by formulating the Group’s overall strategy, key objectives and policies. The Board monitors and oversees the operating and financial performance of the Group pursuant to these objectives.
The Board has established two Board Committees, namely the Audit Committee and the Remuneration Committee,to oversee particular aspects of the Company’s affairs and to assist in the execution of certain aspects of the Board’s responsibilities.
The Board has also delegated the day-to-day management and operation of the Group’s business to the management team.
There is currently three of the non-executive Directors on the Board, all of whom are independent. All the non-executive Directors have been appointed for no specific term and they are subject to retirement by rotation in accordance with the Company’s Articles of Association and thus submit themselves, on a rotation basis, for re-election by shareholders.
APPOINTMENT, RE-ELECTION AND REMOVAL OF DIRECTORS
The Board as a whole is responsible for the appointment of its own members. The Board does not establish a Nomination Committee and is not considering to establish the same in view of the small size of the Board. The Chairman of the Board is responsible for identifying appropriate candidate and proposing qualified candidate to the Board for consideration.
All directors appointed to fill a casual vacancy should be subject to election by shareholders at the first general meeting. The Board will review profiles of the candidates recommended by the Chairman and make recommendation the appointment, re-election and retirement of the Directors. Candidates are appointed to the Board on the basis of their skill, competence and experience that they can contribute to the Company.
The Company believes that members of the Board, individually and collectively, have satisfactorily discharged duties and will review the need for Nomination Committee at a later time.
The Board met six times in last year to discuss relevant business and strategy of the Company. The discussion also covered the financial performance, new products and services to be deployed by the company and also suggestion to further improve the operation.
The members of the Board fully complied with the required standard with respect to the securities dealings of the Company and there was no event of non-compliances.
During regular meetings of the Board, the Directors discuss and formulate the overall strategies of the Group, monitor financial performances and discuss the annual, interim and quarterly results, set annual budgets as well as discuss on the corporate directions.
The Chairman ensures that management will supply the Board and its committees with all relevant information in a timely manner. They may make further enquiries if in their opinion it is necessary or appropriate to request for further information.
ATTENDANCE RECORD AT BOARD AND AUDIT COMMITTEE MEETINGS
The individual attendance record of each Director at the meetings of the Board and Audit Committee during the year ended 31 May 2008 is set out below:
|Number of Meetings|
|Mr. James Ang||6/6||Not applicable|
|Mr. Wei Ren (Note 2)||0/0||Not applicable|
|Ms. Yau Pui Chi, Maria||6/6||Not applicable|
|Mr. James Ang||6/6||Not applicable|
|Independent Non-Executive Directors|
|Mr. Chiang Kin Kon (Note 3)||0/0||0/0|
|Mr. Wong Kwok Fai (Note 4)||0/0||0/0|
|Ms. Tam May Yuk (Note 5)||1/1||1/1|
|Mr. Li Chi Wing (Note 6)||6/6||4/4|
|Mr. Yeung Kam Yuen, Roderick (Note 7)||0/6||0/4|
|Mr. Chan Chun Chung, William (Note 8)||6/6||4/4|
1. The counting of attendance for existing Directors started the joining date of Directors or committee members. The counting of attendance for former Directors ended upon his ceasing to be a Director or committee member.
2. Mr. Wei Ren was appointed as an executive Director with effect from 30 May 2008.
3. Mr. Chiang Kin Kon was appointed as an independent non-executive Director with effect from 20 May 2008.
4. Mr. Wong Kwok Fai was appointed as an independent non-executive Director with effect from 20 May 2008.
5. Ms. Tam May Yuk was appointed as an independent non-executive Director with effect from 03 April 2008.
6. Mr. Li Chi Wing resigned as an independent non-executive Director with effect from 02 May 2008.
7. Mr. Yeung Kam Yuen, Roderick resigned as an independent non-executive Director with effect from 04 August 2008.
8. Mr. Chan Chun Chung, William resigned as an independent non-executive Director with effect from 31 May 2008.
The Board complied with Rules 5.01 and 5.02 of the GEM Listing Rules relating to the appointment of all the three independent non-executive Directors. Each of the independent non-executive Directors has made an annual confirmation of independence pursuant to Rule 5.09 of the GEM Listing Rules. The Company is of the view that all independent non-executive Directors meet the independence guidelines set out in Rule 5.09 of the GEM Listing Rules.
SUPPLY OF AND ACCESS TO INFORMATION AND ACCESS TO LEGAL AND OTHER PROFESSIONAL ADVICE
To allow the Directors, in particular, all the independent non-executive Directors to make informed decisions and properly discharge their duties and responsibilities; the Company Secretary ensures the relevant Board papers are sent to all the Directors in a timely manner. All Board papers and minutes are also made available for inspection by the Directors and the Committees. All Directors, in particular, the independent non-executive Directors are informed and authorized to seek any information it requires from any employee and obtain outside legal or other independent professional advice at the cost of the Company if they consider necessary to discharge their duties as Directors of the Company.
REMUNERATION OF DIRECTORS AND SENIOR MANAGEMENT
The Company has established Remuneration Committee with specific terms of reference which deals clearly with its authorities and duties. The Remuneration Committee currently consists of two independent non-executive Directors and an executive Director; Ms. Yau Pui Chi, Maria, an executive Director, is the Chairman of the Remuneration Committee and other members are Mr. Wong Kwok Fai, an independent non executive Director, and Mr. Chiang Kin Kon, an independent non executive Director. The majority members of the Remuneration Committee are independent non-executive Directors of the Company.
The role and function of Remuneration Committee is to oversee Board remuneration matters, including recommend the Board the Company’s policies and structure for the remuneration of the Directors and senior management,determine the remuneration packages of all executive Directors and senior management, review compensation to Directors and senior management in connection with any loss or termination of their office or appointment and to ensure that no Director or any of his associates is involved in deciding his own remuneration.
During the year under review, no meeting was held by the Remuneration Committee.
ACCOUNTABILITY AND AUDIT
The Directors are responsible for the preparation of financial statements for each financial period which gives a true and fair view of the state of the affairs of the Group and of the results and cash flow for that period. In preparing the financial statements for the year ended 31 May 2008, the Directors have selected suitable accounting policies and applied them consistently by adopting appropriate Hong Kong Financial Reporting Standards.
The Board is responsible for maintaining sound and effective internal systems for the Company to safeguard its assets and shareholders’ interests.
The Board reviews the internal control system of the Group annually and will take any necessary and appropriate action to maintain adequate internal control system to safeguard Company’s equity. The effectiveness of the internal control system was discussed on annual basis with the Audit Committee.
The Company has established an Audit Committee with specific terms of reference explaining its role and authorities delegated by the Board. The Audit Committee currently consists of three independent non-executive Directors, Mr. Chiang Kin Kon, Mr. Wong Kwok Fai, and Ms. Tam May Yuk who together have sufficient accounting and financial management expertise, and business experience to carry out their duties.
The duties of Audit Committee are included reviewing the Group’s financial control, internal control and risk management, review and monitor the integrity of financial statements and reviewing annual, interim and quarterly financial statements and report before submission to the Board. The Audit Committee meets with the external auditors and the management of the Group to ensure that the audit findings are addressed properly.
The Audit Committee has reviewed the annual, interim and quarterly results of the Company for the year ended 31 May 2008, and were content that the accounting policies of the Group are in accordance with the generally accepted accounting practices in Hong Kong.
Lau & Au Yeung C.P.A. Limited has been appointed by the shareholders annually as the external auditors of the Group since 2002. For the year ended 31 May 2008, the fees charged to accounts of the Group for Lau & Au Yeung statutory audit amounted to approximately HK$320,000, in addition approximately HK$100,000 was charged for other services. The non-statutory audit services mainly consist of special audits.
Communication with shareholders could enhance the confidence of investors. The primary communication channel between the Company and its shareholders include the publication of annual, interim and quarterly reports, announcements, circulars, annual general meeting and other general meetings. The Group’s website provides regularly updated Group information to shareholders. Enquires on matters relating to shareholdings and the business of the Group are welcome, and are dealt with in an informative and timely manner.
The Group encourages all shareholders to attend annual general meeting which provides a useful forum for shareholders to exchange views with the Board.