CHAIRMAN'S CORPORATE GOVERNANCE STATEMENT
As the current Chairman of the Board of Directors of Engage XR Holdings plc (Engage XR, XR, We, or the Company/Group as the context requires), it is my responsibility to ensure that Engage XR has both sound corporate governance and an effective Board. The responsibilities of the Chairman of Engage XR include leading the Board effectively, overseeing the Company's corporate governance model, and ensuring that good information flows freely between Executives and Non-Executives in a timely manner.
Engage XR has adopted the Quoted Companies Alliance Corporate Governance (QCA Code) in line with the London Stock Exchange's changes to the AIM Rules, requiring all AIM-listed companies to adopt and comply or explain non-compliance with a recognised corporate governance code. This report follows the structure of these guidelines and explains how we have applied the guidance. We will continue to provide annual updates on our compliance with the QCA Code. The Board considers that the Group complies with the QCA Code so far as it is practicable having regard to the size, nature and current stage of development of the Company, and discloses any areas of non-compliance in the text below. XR understands that application of the QCA Code supports the Company's medium to long-term success whilst managing risks, as well as providing an underlying framework of commitment and transparent communications with stakeholders.
The following key governance matters occurred during the year:
- Kenny Jacobs was appointed as Non-Executive Director of the Company
- Harry Kloor, Non-executive Director stepped down from the Board
- Frank Poore was appointed as Non-Executive Director of the Company
- Tony Hamway, Non-executive Director stepped down from the Board; and
- Shareholders approved a resolution to change the Company's name to Engage XR Holdings plc.
The information below was last updated on 04 November 2021.
1. Establish a strategy and business model which promotes long-term value for shareholders
The Board has concluded that the highest medium and long-term value can be delivered to its shareholders by the adoption of a single strategy for the Company - to establish ENGAGE as the world's leading digital education and corporate training platform. This core objective aims to provide students, educators and corporate trainers globally with an alternative to attending bricks and mortar institutes or expensive onsite simulated training. Further details can be found on the Focus & Strategy page on the Company's website and in the Annual Report.
The Company intends to deliver shareholder returns through capital appreciation and, ultimately, distribution via dividends. The principal challenge to delivering capital appreciation is uncertainty in relation to the performance of Immersive VR Education Limited, although the Board takes steps to mitigate these risks. Further challenges to XR's strategy and long-term goals are highlighted in the Risk Management section below and can also be found in our 2020 Annual Report.
2. Seek to understand and meet shareholder needs and expectations
The Company places great importance on the need for effective communication and constructive dialogue with investors and the media. To ensure that existing and potential investors and contacts can track its progress and obtain news and updates as soon as available, it encourages registration to the Company's news alert service, as well as providing communications through Interim and Annual Reports. The Company's website, is used for both financial and general news relevant to shareholders. The Chair, Richard Cooper, acts as a liaison for shareholders, although queries through the Company's website are directed to the COO, Sandra Whelan, who monitors and liaises with shareholders on minor queries. The Executive Directors also meet shareholders and other investors/potential investors regularly within the results cycle, and the whole Board aims to attend the AGM. The AGM provides an opportunity to meet, listen and present to shareholders, and shareholders are encouraged to attend. All 2021 AGM resolutions were passed comfortably. Although shareholder attendance was restricted from attending the 2021 AGM due to Covid-19, shareholders were given the opportunity to submit questions to the Board via email so that engagement between the Board and its stakeholders was not impeded. Shareholders were encouraged to appoint the chair of the AGM as proxy to enable them to exercise their voting rights.
In addition, the Company is open to receiving feedback from key stakeholders and will take action where appropriate.
3. Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board recognises that the long-term success of the Company is reliant upon the efforts of employees, contractors, suppliers, regulators and many other stakeholders. The Board has put in place a range of processes and systems to ensure that there is close oversight and contact with its key resources and relationships. The Company aims to be very responsive to all stakeholder queries, monitoring message boards on various platforms (emails, social media) for all products on a daily basis, responding with technical assistance or product information as requested within 24 hours.
All employees within the Group are valued members of the team, and the Company seeks to implement provisions to retain and incentivise all its employees. The Group offers equal opportunities regardless of race, gender, gender identity or reassignment, age, disability, religion of sexual orientation. The Company has a policy to conduct annual employee reviews, seeking to understand any issues within the workforce. Employees are incentivised through team building days out and various employee wellness schemes and plans such as the flexible hours scheme, which was introduced successfully in 2019.
The Company has close, ongoing relationships with a broad range of its stakeholders and provides them with the opportunity to raise issues and provide feedback to the Company. The Company conducts customer reviews, which broaden communication and the opportunity for feedback, as well as holding weekly internal management meetings whereby all aspects of the business are discussed and any issues that arise are actioned by the following week. Furthermore, the Company holds weekly product meetings to ensure that all employee feedback regarding product creation, implementation and processes are taken on board, changed and/or improved, where necessary. The Company has adopted an agile method whereby products follow a two-week sprint process to ensure a smooth process.
Engage XR is looking at helping and contributing to the local community. In 2021 the Company sponsored a local basketball team struggling for funding due to a reduction in fundraising activities arising from the impact of Covid-19 and also donated to a local wildlife sanctuary.
The Group also has no significant environmental impact but will continue to monitor and will take action if this changes in the future.
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board recognises the need for an effective and well-defined risk management process, and it oversees and regularly reviews the current risk management and internal control mechanisms. The 2020 Annual Report also outlines the key risks to the business, see pages 7-8.
The Company has a risk register which identifies risks, evaluates the risk level (level of impact and the probability of the risk materialising), and the principal person responsible for each risk.
The Board has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems. The Audit Committee has delegated responsibility for ensuring that the financial performance of the Company is properly monitored and reported.
The risk assessment matrix below sets out and categorises some of the Company's key risks and outlines the controls that are in place. This matrix is updated as changes arise in the nature of the risks or the controls that are implemented to mitigate them, and the Board reviews risks on a regular basis. The following principal risks and controls to mitigate them, have been identified:
|Technology Risk||Fast moving market that is subject to changing trends and technological advances.||Being behind market leaders or the provision of non-standard material for which there is a limited target audience, consequently reducing potential for profit/revenue.||The Company regularly conducts market research to be aware of upcoming trends, and it aims to achieve ‘first mover' advantage in the Engage XR sector to manage this risk.|
|Business performance||Company may not perform as expected.||Adverse consequences such as management distraction, disposal and reduced profit.||This risk is managed through a number of measures: authorisation of purchases and capital requirement; ensuring the appropriate management team is in place; budget and business planning; monthly reporting and variance analysis; financial controls; key performance indicators; and regular forecasting.|
|Financial Risk||Adequate financial and business controls.||Error or fraud, leading to a loss in reputation, business partners and customers.||The Company exercises financial and business control through a combination of: qualified and experienced financial personnel; dual signatories; performance analysis; budgeting and cash flow forecasting; local audit to international standards; and clearly defined approval limits.|
|COVID-19||Manufacturing shortages as many components are manufactured in China.||Stock shortages causing limited sales as for example the Facebook/Oculus headset was limited to one product per person. Delay in deployment of programmes as there is not enough stock available for enterprise users.||The Company will seek to expand its manufacturing base.|
|Data Protection Risk||Loss of customer personal information||Loss of reputation, fines and potential litigation||Payment processing handled by reputable third party (Stripe); GDPR policies in place and made available to new and existing users; best practise policy and procedure in place for storing user personal data|
|Critical Person Risk||Loss of key management or development staff||Operational impact of loss of key staff could see a delay in product / service delivery||The nature and operation of the board ensures that issues are disseminated to all board members in a timely manner which would help address the loss of any key staff. Keyman insurance policy is also in place for the CEO.|
The Board currently considers that there are no risk factors that are considered High Risk Areas.
An internal audit function is not yet considered necessary or practical due to the size of the Company and the day to day control exercised by the Executive Directors. However, the Board will continue to monitor the need for an internal audit function. The Board has established appropriate reporting and control mechanisms to ensure the effectiveness of its control systems. The Board regularly reviews the mechanisms of internal control it has implemented, assessing for effectiveness.
5. Maintain the Board as a well-functioning, balanced team led by the Chair
The Board comprises the CEO, David Whelan, the COO, Sandra Whelan, the CFO, Séamus Larrissey, three Independent Non-Executives, Kenny Jacobs, Richard Cooper and Frank Poore, and one Non-Independent Non-Executive Director Praveen Gupta. Praveen Gupta is not considered to be independent as a representative of a major shareholder in the Company, HTC. Richard Cooper is the Company's Chair. Biographical details of the Directors can be found on the Company website. The letters of appointment of all Directors are available for inspection at the Company's registered office during normal business hours. All the Non-Executive Directors are expected to dedicate at least 2 days per month to the Company. The number of meetings of the Board and its Committees is included in the 2020 Annual Report. One third of the Board are subject to re-election at each AGM.
Meetings are open and constructive, with every Director participating fully. Senior management can also be invited to meetings, providing the Board with a thorough overview of the Company.
The Board is satisfied it has a suitable balance between independence on the one hand, and knowledge of the Company on the other. All Directors are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational, enabling the Board to discharge its duties and responsibilities effectively.
The Board aims to meet six times in the year and a calendar of meetings and principal matters to be discussed is agreed at the beginning of each year. In order to be efficient, the Directors meet formally and informally both in person and by telephone. Board and Committee document authors are made aware of proposed monthly deadlines through the calendar of meetings assembled at the beginning of the year. Board papers are collated, compiled into a Board Pack, and circulated at least one week before meetings, allowing time for full consideration and necessary clarifications before the meetings.
The Company has Audit and Remuneration Committees. The Board believes that the Committees have the necessary skills and knowledge to discharge their duties effectively.
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 Non-Executive Directors have both a breadth and depth of skills and experience to fulfil their roles. The Company believes that the current balance of skills across the Board as a whole reflects a very broad range of personal, commercial and professional skills, providing the ability to deliver the Company's strategy for the benefit of shareholders over the medium and long-term. The Non-Executive Directors meet without the presence of the Executive Directors during the year, and also maintain ongoing communications with Executives between formal Board meetings.
Biographical details of the Directors can be found on the Company's website.
In addition to their general Board responsibilities, the Directors, including the Non-Executives, are encouraged to be involved in specific workshops or meetings, in line with their individual areas of expertise. This allows skill sets to be kept up to date. Seamus Larrissey is the Company’s registered Company Secretary and ONE Advisory Limited is engaged by the Company to ensure that Board procedures are followed and that the Company complies with all applicable rules, regulations and obligations governing its operation, as well as helping the Chairman maintain excellent standards of corporate governance. If required, the Directors are entitled to take independent legal advice and if the Board is informed in advance, the cost of the advice will be reimbursed by the Company. The Company’s Nomad is consulted on all matters and all Directors have access to independent professional advice, if required.
Neither the Board nor its Committees have sought external advice on a significant matter
The Board shall review annually the appropriateness and opportunity for continuing professional development whether formal or informal.
7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
At present, this aspect of the Code is not complied with as the Board has undergone a period of substantial change and growth. The Company aims to undertake a full evaluation of the Board and its Committees in the next financial year. In the frequent Board meetings/calls, Directors can discuss any areas where they feel a change would benefit the Company, and the Company Secretary and other Company advisers remain on hand to provide impartial advice. The Board will keep this under review as the Company develops.
The Board has elected not to establish a Nominations Committee, preferring instead that the Board should, itself, deal with such matters, including succession planning and the balance of the Board. The Company operates on a retirement by rotation policy, and one third of Board are subject to re-election at each AGM.
8. Promote a corporate culture that is based on ethical values and behaviours
The Board recognises that its decisions regarding strategy and risk will impact the corporate culture of the Company as a whole and that this will impact the performance of the Company. The Board is aware that the tone and culture set by the Board will greatly impact all aspects of the Company as a whole and the way that employees behave. The corporate governance arrangements that the Board has adopted are designed to ensure that the Company delivers long term value to its shareholders, and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board.
A large part of the Company's activities are centred upon an open and respectful dialogue with employees, clients and other stakeholders. Therefore, the importance of sound ethical values and behaviours is crucial to the ability of the Company to successfully achieve its corporate objectives. The Board places great importance on this aspect of corporate life and seeks to ensure that this flows through all that the Company does. The Directors consider that at present the Company has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge.
All of the Company's policies are made available to all employees and are included in an employee handbook. These are ‘Must Read Policies' which employees are required to read and acknowledge the policies and which Sandra Whelan, COO, monitors and updates where necessary. The Company also has an Anti-Bribery and Corruption Policy in place to ensure the highest standards of personal and professional ethical behaviour are adhered to. Additionally, as the Company conducts regular employee reviews and internal meetings and has a general close-knit working environment, the Directors are able to determine the extent to which ethical values and behaviours are recognised and respected.
The Company has adopted, with effect from the date on which its shares were admitted to AIM, a code for Directors' and employees' dealings in securities which is appropriate for a company whose securities are traded on AIM and ESM and is in accordance with the requirements of the Market Abuse Regulation. The Directors seek to align their interests with shareholders.
9. Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board
The Board is committed to, and ultimately responsible for, high standards of corporate governance, and has adopted the QCA Code. We review our corporate governance arrangements regularly and expect to evolve these processes over time, in line with the Company's growth. The Board delegates responsibilities to Committees and individuals as it sees fit, with the Chair being responsible for the effectiveness of the Board, and the Executive Directors being accountable for the management of the Company's business and primary contact with shareholders, clients and partners.
The Chair is responsible for shareholder communications, the leadership of the Board and ensuring its effectiveness in all aspects of its role, including creating the right Board dynamic and ensuring that all important matters, in particular strategic decisions and corporate governance arrangements, receive adequate time and attention at Board meetings.
The Executive Directors are responsible for the day-to-day running of the business, the leadership of the management team and the development and execution of corporate strategy. The Non-Executive 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 Board has adopted appropriate delegations of authority which set out matters reserved to the Board. These are as follows:
- Strategy and Management
- Structure and Capital
- Financial Reporting and Controls
- Internal Controls
- Board Membership and other Appointments
- Delegation of Authority
- Corporate Governance Matters
- Approval of Policies
The Board delegates authority to two Committees to assist in meeting its business objectives whilst ensuring a sound system of internal control and risk management. The Committees meet independently of Board meetings.
The Audit Committee has 2 members, Richard Cooper (Chair) and Praveen Gupta . The CFO and external auditors attend meetings by invitation. The Audit Committee is responsible for making recommendations on the appointment of auditors and the audit fee, and for ensuring that the financial performance of the Company is properly monitored and reported. In addition, the Audit Committee will receive and review reports from management and the auditors relating to the interim report, the annual report and accounts and the internal control systems of the Company. The Audit Committee shall meet not less than twice each financial year.
No separate Audit Committee report is presented to shareholders as the Board does not consider at present that this would improve the quality of communication with Shareholders given the simple structure of the Company. The Board will continue to review this approach.
The Remuneration Committee has 2 members, Richard Cooper (Chair) and Kenny Jacobs. The members are all Independent Non-Executive Directors. Other members of the Board may attend the Committee's meetings at the request of the Committee Chairman. The Remuneration Committee is responsible for the review and recommendation of the scale and structure of remuneration of the Executive Directors, the company secretary and such other members of the executive management as it is designated to consider, including any bonus arrangements or the award of share options with due regard to the interests of the Shareholders and the performance of the Company. The Remuneration Committee shall meet not less than twice a year.
No separate Remuneration Committee report is presented to shareholders as the Board does not consider at present that this would improve the quality of communication with Shareholders given the simple structure of the Company. The Board will continue to review this approach. Details of Directors Remuneration is, however, included in the 2020 Annual Report.
Compliance matters are included in a regular report put together by ONE Advisory Limited and presented to the Board for discussion at every meeting.
The Board has elected not to establish a Nominations Committee, preferring instead that the Board should, itself, deal with such matters, including succession planning and the balance of the Board. Therefore, the Board will review Board composition.
The Chair and the Board continue to monitor and evolve the Company's corporate governance structures and processes, and maintain that these will evolve over time, in line with the Company's growth and development.
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. The Company intends to have ongoing relationships with both its private and institutional shareholders as well as shareholder analysts, and for them to have the opportunity to discuss issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company's Annual General Meeting, except where COVID-19 restrictions do not permit same. The Board maintains that, if there is a resolution passed at a GM with 20% votes against, the Company will seek to understand the reason for the result and, where appropriate, take suitable action. The results of the 2021 AGM can be found on the Company's website.
The latest Corporate Documents (including Annual Reports) can be found on the Company's website.
Investors also will have access to current information on the Company though its website.
The Company is subject to the Takeover Rules of the Irish Takeover Panel.
The Takeover Rules comprise rules made by the Irish Takeover Panel under the powers granted to it by the 1997 Act and by the European Communities (Takeover Bids (Directive 2004/25/EC)) Regulations 2006, as amended ("Regulations").
The Panel is designated under the Regulations as the competent authority for the purpose of Article 4(1) of the Directive.
The Regulations, which were made by the Minister for Enterprise, Trade and Employment, came into operation on 20 May 2006.
Regulation 4(1) of the Regulations applies the 1997 Act, subject to the Regulations, to each company a takeover bid (as defined in the Regulations) in respect of which the Panel has jurisdiction to supervise under the Regulations. Under Regulation 4(3), references to a "relevant company" in the 1997 Act include references to each company a bid for which the Panel has jurisdiction to supervise.
The Rules, of which there are 41, have been made principally to ensure that takeovers (including takeover bids as defined in the Regulations) and other relevant transactions comply with the principles ("General Principles") set out in the Schedule to the 1997 Act.
The General Principles are set out below. All of the General Principles, with the exception of General Principle 7, derive from the Directive.
All holders of the securities of an offeree of the same class must be afforded equivalent treatment; moreover, if a person acquires control of a company, the other holders of securities must be protected.
The holders of the securities of an offeree must have sufficient time and information to enable them to reach a properly informed decision on the offer; where it advises the holders of securities, the board of the offeree must give its views on the effects of implementation of the offer on employment, conditions of employment and the locations of the offeree's places of business.
The board of an offeree must act in the interests of the company as a whole and must not deny the holders of securities the opportunity to decide on the merits of the offer.
False markets must not be created in the securities of the offeree, of the offeror or of any other company concerned by the offer in such a way that the rise or fall of the prices of the securities becomes artificial and the normal functioning of the markets is distorted.
An offeror must announce an offer only after ensuring that he or she can fulfil in full any cash consideration, if such is offered, and after taking all reasonable measures to secure the implementation of any other type of consideration.
An offeree must not be hindered in the conduct of its affairs for longer than is reasonable by an offer for its securities.
A substantial acquisition of securities (whether such acquisition is to be affected by one transaction or a series of transactions) shall take place only at an acceptable speed and shall be subject to adequate and timely disclosure.
The Rules also provide an orderly framework within which takeovers are conducted. They are not concerned with the financial or commercial advantages or disadvantages of a takeover, which are matters for the companies concerned and their shareholders. Nor are the Rules concerned with issues such as competition and mergers policies, which are regulated under different legislation.
Page last updated: 23 November 2021