Corporate Governance

Corporate governance is the system by which companies are directed and managed. It influences how the objectives of the Company are set and achieved, how risk is monitored and assessed, and how performance is optimised. Good corporate governance structures encourage companies to create value (through entrepreneurism, innovation, development and exploration) and provide accountability and control systems commensurate with risks involved.

Good corporate governance will evolve with the changing circumstances of a company and must be tailored to meet these circumstances. Mindax Limited is a junior exploration company.

The Company’s Board and management are committed to a high standard of corporate governance practices, ensuring that the Company complies with the Corporations Act 2001, Australian Securities Exchange (ASX) Listing Rules, Company Constitution and other applicable laws and regulations.

However, at this stage of the Company’s corporate development, implementation of the ASX Corporate Governance Principles and Recommendations, whilst wholeheartedly supported, is not practical in every instance given the modest size and simplicity of the business. The principles and recommendations and details of the current and evoloving governance practices are identified in the following pages.

Principle 1: Lay solid foundations for management and oversight

The Board has the responsibility of protecting the rights and interests of shareholders and enhancement of long-term shareholder value. To fulfill this role, the Board is responsible for:

the corporate governance of the Company;
the overall strategic direction and leadership of the Company;
approving and monitoring management implementation of objectives and strategies;
reviewing the performance against stated objectives by receiving regular management reports on the business situation, opportunities and risks;
reviewing and approving business plans, the annual budget and financial plans including available resources and major capital expenditure initiatives;
monitoring financial performance including approval of the annual and half-year financial reports and liaison with the Company’s auditors; and
overseeing the operation of the Company’s system for compliance and risk management reporting to shareholders.

Principle 2: Structure the Board to add value

The Company has a four member Board comprising one executive director and three non-executive directors, including the Chairman. The roles of Chairman and Managing Director are not combined. All directors reside in Australia. Mr Bromley is not considered independent by virtue of his executive role in the Company, neither is Mr Smith or Mr George by virtue of financial remuneration received on a consulting basis during the year or post financial year end. Mr Tsang is a substantial shareholder of the company and is therefore not considered independent. The Board has considered its materiality threshold and deemed it too small to have a majority of independent directors on the Board.

The full Board currently hold a number of scheduled meetings each year, plus strategy meetings and any extraordinary meetings at such other times as may be necessary to address significant matters as they arise.

Standing Board meeting agenda items include the Managing Director’s report, financial reports, strategic matters, governance and compliance.

Board members possess complementary business disciplines and experience aligned with the Company objectives. The experience and qualifications of directors are noted in the Directors’ Report.

Where any director has a personal interest in a matter, the director is not permitted to be present during discussions or to vote on the matter. The enforcement of this requirement ensures that the interest of shareholders, as a whole, are pursued and not jeopardised by a lack of a majority of independent directors.

Having regard to the structure of the Board and of senior management, it is considered appropriate by the Board to effectively utilise Mr Smith, Mr Tsang and Mr George’s skills as consultants to provide crucial peer review of the corporate, legal and commercial aspects of the Company’s operations.

Mr George acts as Chairman of the Company and while not satisfying the ‘independence test’ set out in the ASX’s Corporate Governance Principles and Recommendations, it is considered Mr George’s appointment is in the best interests of the Company and is without conflict given its size.

The Board formed an Audit committee (commenced December 2004) and a Remuneration committee (commenced December 2004) comprising Mr Smith and Mr George, with Mr Smith Chairman of both. Mr Tsang formally joined the Remuneration Committee on 20 August 2008.

Details of the directors’ qualifications and attendance at such committee meetings are set out in the Directors’ Report.

The Company will give consideration at an appropriate juncture in the Company’s development, for the creation of a Nomination committee. The current size of the full Board permits it to act as the nomination committee and to regularly review membership. The Board will give consideration to appointment of specialist and independent directors when the activities and scale of operation of the Company warrant such appointments.

The Board intends to formally introduce a formal process of self assessment of its collective performance, the performance of individual directors and of Board committees. Due to the scheduling of Board meetings and the Company’s size, such formal process was not finalised, and as such, a performance evaluation had not taken place during the financial year ended 30 June 2009.

Principle 3: Promote ethical and responsible decision making

The Company actively promotes ethical and responsible decision-making. As at 30 June 2009, the Company had not established a formal code of conduct that address practices necessary to maintain confidence in the Company’s integrity, or a code that takes into account the Board’s legal obligations and the reasonable expectations of its stakeholders. However the Company is now in the process of developing such code. In addition, it is a condition of each employee’s employment contract that they uphold minimum standards of generally accepted ethical conduct.

Dealing in company shares
The Board formally instituted a Company requirement in December 2004 that limits the purchase or disposal of shares by directors, officers and employees to the period of 2 to 16 days after release of quarterly reports.

Mindax has a policy agreed to by the Board members, other company officers and employees that any proposed trade in the Company’s securities is to be firstly advised to the Managing Director (MD). Once the MD has given approval, the relevant person may execute the trade. Such policy clearly mitigates the risk of breaching the insider trading provisions and gives the MD control to restrict trading if the MD may be privy to sensitive information before the other company officers and personnel are, or the MD has knowledge that certain sensitive information (eg exploration results) are due for receipt within a short term timeframe.

Directors, officers and employees with any non-public sensitive information are prohibited from purchasing or disposing of Company shares, in accordance with the Corporations Act 2001.

Directors must advise the Company of any transactions conducted by them in the shares of the Company, in accordance with the Corporations Act 2001 and ASX Listing Rules.

Principle 4: Safeguard integrity in financial reporting

The Audit committee is responsible for reviewing and reporting to the Board on the Company’s financial reports and external audit processes.

The Managing Director and Company Secretary provide a certification to the Board on the integrity of the Company’s external financial reports. This reporting structure was adopted for the financial year ended 30 June 2009.

The Managing Director and Company Secretary are not specifically required to provide additional certification that the financial statements are founded on sound risk management systems and that compliance and control systems are operating efficiently and effectively.

The Board considers that risk management and internal compliance and control systems are sufficiently robust for the Board to place reliance on the integrity of the financial statements without the need for an additional certification by management.

Audit processes and policies

The audit committee consists of the following non-executive directors:

Mr George;
Mr Smith.

Details of the directors’ attendance at audit committee meetings are set out in the directors’ report. The Board is also responsible for the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the Company. A charter (terms of reference) is being formulated and evolving.

The responsibilities include:

reviewing and approving statutory financial reports and all other financial information distributed externally;
monitoring the effective operation of the risk management and compliance framework;
reviewing the effectiveness of the Company’s internal control environment including compliance with applicable laws and regulations;
the nomination of the external auditors and the review of the adequacy of the existing external audit arrangements;
considering whether non-audit services provided by the external auditor are consistent with maintaining the external auditor’s independence; and
review and monitor related party transactions and assess their propriety.

The minutes of all committee meetings are circulated to all directors.

The external auditor, BDO Kendalls Audit & Assurance (WA) Pty Ltd (“BDO Kendalls”) has engagement terms refreshed annually and has indicated its independence to the Board. BDO Kendalls were appointed as auditors in December 2003.

Principle 5 & 6: Make timely and balanced disclosures and respect the rights of shareholders

The Board adopts communications strategies and practices to promote communication with shareholders, in language capable of interpretation, and to encourage effective participation at General Meetings. The external auditor will attend the meeting to respond to specific questions from shareholders relating to the conduct of the audit and the preparation and content of the auditor’s report.

The Company Secretary has been nominated as the person responsible for communications with the Australian Securities Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-coordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

The Board aims to ensure that shareholders are informed of all major developments affecting the Company’s state of affairs. Information is communicated to shareholders as follows:

reports distributed to all shareholders; and
notices of all meetings to shareholders.

The Board encourages full participation of shareholders at the General Meetings to ensure a high level of accountability and identification with the Company’s strategy and goals. Important issues are presented to shareholders as single resolutions.

Shareholders are requested to vote on the appointment of directors, the granting of options and shares to directors and changes to the Constitution. Copies of the Constitution are available to any shareholder upon request.

Material information is lodged immediately with the ASX and on acknowledgement, disseminated by posting to the website.

Timely and balanced disclosure

The Board supports the Australasian Investor Relations Association “Best Practice Guidelines for Communication between Listed Entities and the Investment Community”. The Board endorses a culture in favour of continuous disclosure and recognises the benefits of consistency to be achieved through a dedicated authorised spokesperson.

Material information is lodged immediately with the ASX and on acknowledgement disseminated by posting to the website. A strict protocol is practiced for all investors/ analyst/ media meetings, group briefings and conference calls.

Principle 7: Recognise and manage risk

The Company has identified material business risks associated with its day-to-day operations and the possible impacts on the Company as a consequence. This is recorded in the Company’s internal register and is continuously being developed and updated. The Company aims to review its’ risk management policies on a quarterly basis to mitigate material risks identified from eventuating and to ensure a sound internal control system is in place.

The Managing Director is required to report to the Board if any material business risks that significantly impact on the business have arisen since the last Board meeting and if an effective internal control policy is in place and has been followed (as applicable). The Board declares that it has received assurance from the Managing Director that a sound and effective risk management and internal control had been adhered to during the financial year ended 30 June 2009.

As part of the Company’s internal risk management policies, the Managing Director and company secretary have recently completed a formal review identifying risk areas and internal controls required to mitigate such risk. The report relating thereto has been circulated to the Board concluding that an effective internal control system is in place. Such review will occur on an ongoing basis.

In summary, the Company’s internal risk management policies are designed to ensure strategic, operational, legal, reputational and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Company’s business objectives.

Considerable importance is placed on maintaining a strong control environment. There is an organization structure with clearly drawn lines of accountability and delegation of authority. The Board actively promotes a culture of quality and integrity.

Principle 8: Remunerate fairly and responsibly

The remuneration committee consists of the following non-executive directors:

Mr George;
Mr Smith; and
Mr Tsang.

Details of these directors’ attendance at remuneration committee meetings are set out in the directors’ report. The Remuneration committee advises the Board on remuneration and incentive policies and practices generally and makes specific recommendations in relation to compensation arrangements for executive and non-executive directors and in respect of all equity based remuneration plans.

The remuneration policy states that executive directors may participate in share option schemes with the prior approval of shareholders. Other executives may also participate in employee share option schemes, with any option issues normally being made in accordance with thresholds set in plans approved by shareholders. The Board however, considers it appropriate to retain the flexibility to issue options to executives outside of approved employee option plans in appropriate circumstances. The Company has not distinguished the structure of non-executive directors’ remuneration from that of executive director due to its size.

The committee also assumes responsibility for overseeing management succession planning, including the implementation of appropriate executive development programmes and ensuring adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior promotions.

Access to professional advice

Issues of substance are considered by the Board with external advice from its professional advisers as required. The Board’s individual members can seek independent professional advice at the Company’s expense in carrying out their duties.

SUMMARY

Mindax Limited has adopted or is in the process of adopting the following policies and charters: Board Charter, Code of Conduct, Security Trading Policy, Audit Committee Charter, Continuous Disclosure Policy, Shareholder Communication Policy and Remuneration Committee Charter.

The Company is non-compliant with respect to the Directors being considered independent for reasons stated. Similarly the Company does not have a Nomination Committee. Other corporate practices continue to evolve.