Unlocking Britain's Energy Potential

Corporate Governance

The Board of Directors support high standards of corporate governance and the guidance set out in the UK Corporate Governance Code. As an AIM listed company, IGas Energy plc is not obliged to comply with The UK Corporate Governance Code published in April 2016 (the “Code”) but instead uses its provisions as a guide, only as considered appropriate to the circumstances of the Company.

The Board and its committees

The Board of the Company consists of three Executive Directors and four Non-executive Directors; with Mr Bryant, Mr McTighe and Mr McDowell being considered to be independent. The Senior Independent Non-executive Director is John Bryant and biographies of all the Directors can be found here.

The Board retains full and effective control over the Group. The Board meets regularly, at least eight times a year, to consider reports on the operational and financial performance of the Group and to decide on matters reserved unto itself, which include reviewing and approving the Group’s strategy, budgets, major items of capital expenditure and senior personnel appointments.

The Directors have established three separate committees each chaired by a Non-executive Director as follows:

Audit Committee

The Committee comprises only Non-executive Directors; being chaired by Cuth McDowell and having as other members John Bryant and Mike McTighe. Meetings are aligned with the Group’s financial reporting calendar and in the nine months ended 31 December 2015 the Committee met on five occasions. The Chief Executive Officer and the Chief Financial Officer are invited to attend each meeting of the Committee and participated in all of the meetings during the period. The external auditors are also invited to attend meetings of the Committee as appropriate and also meet the Committee without the presence of management at least annually.

Summary of the Committee’s responsibilities

The Committee’s responsibilities include the following:

• The Committee reviews reports from management and the Group’s auditors relating to the Group’s Annual Report and Accounts and the interim results announcements. The Committee advises the Board on whether the annual report and interim announcement are fair, balanced and understandable and provide the information necessary for IGas’ stakeholders to assess performance against the Group’s strategy;

• The Committee reviews compliance with legal requirements, accounting standards and the AIM Rules and ensures that effective systems of internal financial and non-financial controls (including for the management of risk and whistle-blowing) are maintained. However, the ultimate responsibility for reviewing and approving the annual report and accounts remains with the Board of Directors; and

• The Committee keeps under review the external auditors’ independence and considers the nature, scope, and results of the auditor’s work and develops a policy on and reviews (reserving the right to approve) any non-audit services that are provided by the external auditors. The Committee is responsible for making recommendations to the Board of Directors on their appointment and remuneration.

Key areas of focus in the nine months ended 31 December 2015

The Committee’s particular areas of focus during the period were as follows:

• Review of the 2014/15 Annual Report and of the significant risks identified which included the going concern assessment, including covenant compliance; accounting for the Dart acquisition; impairment of oil and gas properties; and reserves and resources disclosures;

• Review of the six months ended 30 September 2015 interim results announcements and the 2015 Annual Report and review of the significant risks which included the going concern assessment, including covenant compliance and concluding on the material uncertainty; finalisation of accounting for the Dart acquisition; impairment of oil and gas properties; accounting for the INEOS farm out and purchase agreement; and recoverability of goodwill; and

• Review of the external auditor’s reappointment and proposing to the Board that the audit contract would be re-tendered following completion of the audit of the nine months ended 31 December 2015.

Remuneration Committee

The Committee comprises only Non-executive Directors, being chaired by John Bryant and having as other members Mike McTighe and Cuth McDowell. The Committee met on five occasions in the nine months ended 31 December 2015. The Chief Executive Officer is invited to attend meetings. In accordance with the Committee’s terms of reference, no Director may participate in discussions relating to their own terms and conditions of service or remuneration.

Summary of the Committee’s responsibilities

The Committee’s responsibilities include the following:

• Making recommendations to the Board of Directors on the Company’s policy on the remuneration of the Chairman, Executive Directors and other senior executives (as are delegated to the Committee to consider);

• Determining, within agreed terms of reference, the remainder of the remuneration packages for each of them, including pension rights, any compensation payments and the implementation of executive incentive schemes.

• Monitoring the level and structure of remuneration for Senior Management;

• Reviewing the design of share incentive plans for approval by the Board and determining the policy on annual awards to Executive Directors and Senior Executives; and

• Reviewing progress made against performance targets and agreeing incentive awards.

Key areas of focus in the nine months ended 31 December 2015

The Committee’s particular areas of focus during the period were as follows:

• Review of long-term incentive plans, engaging with an advisor and ultimately approving a newly created Executive Director Retention Plan and the issue of awards to the Chief Executive Officer and Chief Operating Officer;

• Approving the creation of a Management Retention Plan and the issue of awards to senior management in line with the adopted plan; and

• Review of performance in the nine months ended 31 December 2015 and recommending to the Board the level of bonus payments to be made for the period and that they should be satisfied by issuing shares rather than cash payments.

Nomination Committee

The Committee is chaired by the Chairman of the Board, Francis Gugen, and its other member is the Senior Independent Non-executive Director, John Bryant. The Chief Executive Officer of the Company is invited to attend meetings of the Committee when the Committee is discussing matters related to executive management and such other matters as the Committee chairman deems appropriate. The Committee meets as required during the year.

Summary of the Committee’s responsibilities

The Committee’s responsibilities include the following:

• Considering the size, structure and composition of the Board of Directors, retirements and appointments of additional and replacement Directors and making appropriate recommendations to the Board of Directors;

• Making recommendations to the Board regarding membership of the audit and remuneration committees; and

• Ensuring that plans are in place for orderly succession to the Board of Directors and senior management positions, so as to maintain an appropriate balance of skills and experience within the Group and the Board of Directors.

Key areas of focus in the nine months ended 31 December 2015

The principal activities of the Committee during the period were as follows:

• The appointment of Stephen Bowler as new Chief Executive Officer in May 2015, following the resignation of Andrew Austin;

• The search for a new Chief Financial Officer following the appointment of Stephen Bowler as Chief Executive Officer. This resulted in the appointment of Julian Tedder as Chief Financial Officer in September 2015 and his appointment to the Board;

• Following the recent appointments to the Board described above the Committee undertook a review of skills of the Board and concluded that the mix was appropriate at the current time; and

• Succession planning was reviewed in the year and work in this area will continue in 2016.

Internal control

The Board acknowledges that it is responsible for establishing and maintaining the Group’s system of internal controls and reviewing its effectiveness. The procedures that include, inter alia, financial, operational, health & safety, compliance matters and risk management (as detailed in the Strategic Report) are reviewed on an on-going basis.

The Group’s internal control procedures include the following:

• Board approval for all significant projects, including corporate transactions and major capital projects;

• The Board receives and reviews regular reports covering both the technical progress of projects and the Group’s financial affairs to facilitate its control;

• There is a comprehensive budgeting and planning system for all items of expenditure with an annual budget approved by the Board.

Risk assessment and evaluation is an integral part of the annual planning cycle;

• The Group has in place internal control and risk management systems in relation to the Group's financial reporting process and the Group's process for preparing consolidated accounts. These systems include policies and procedures to ensure that adequate accounting records are maintained and transactions are recorded accurately and fairly to permit the preparation of consolidated financial statements in accordance with IFRS; and

• The Audit Committee reviews draft annual and interim reports before recommending their publication to the Board. The Audit Committee discusses with the Chief Executive Officer, Chief Financial Officer and external auditors the significant accounting policies, estimates and judgments applied in preparing these reports.

The internal control system can only provide reasonable and not absolute assurance against material misstatement or loss. The Board has considered the need for a separate internal audit function but, bearing in mind the present size and composition of the Group, does not consider it necessary at the current time.

UK Bribery Act

IGas has reviewed the appropriate policies and procedures to ensure compliance with the UK Bribery Act. The Company continues to actively promote good practice throughout the Group and has initiated a rolling programme of anti-bribery and corruption training for all relevant employees.

Relations with shareholders

Communications with shareholders and bondholders are considered important by the Directors. The primary contact with shareholders, bondholders, investors and analysts is through the Chief Executive Officer. The other Executive Directors, however, regularly speak to investors and analysts during the year. Company circulars and press releases have also been issued throughout the year for the purpose of keeping investors informed about the Group’s progress.