As at the date of Admission of the ordinary shares of the Company to trading on the London Stock Exchange (13 November 2013), the Company will comply with the UK Corporate Governance Code except as set out below.
The Company’s Board (the “Board”) will also take account of institutional shareholder governance rules and guidance on disclosure and shareholder authorisation of corporate events. The Board intends to meet at least six times a year and may meet at other times as required or otherwise at the request of one or more of its Directors. The UK Corporate Governance Code recommends that a UK listed company’s chairman be independent on appointment. The Board considers that the Chairman of the Merlin Entertainments Group was independent on appointment. The Chairman’s role is to ensure good corporate governance. His responsibilities include leading the Board, ensuring the effectiveness of the Board in all aspects of its role, ensuring effective communication with shareholders, setting the Board’s agenda and ensuring that all Directors are encouraged to participate fully in the activities and decision-making process of the Board.
The UK Corporate Governance Code recommends that at least half the members of the board of directors (excluding the chairman) of a UK listed company should be independent in character and judgment and free from relationships or circumstances which are likely to affect, or could appear to affect, their judgment. The Board has concluded that its Non-Executive Directors, Charles Gurassa, Ken Hydon and Miguel Ko, are independent Non-Executive Directors for UK Corporate Governance Code purposes and that their appointments as independent Non-Executive Directors are in the best interests of Shareholders.
As the Board will consist of the Chairman, two Executive Directors, three independent Non-Executive Directors and three Non-Executive Directors who are not considered to be independent by virtue of their relationships with Merlin’s major shareholders, Blackstone, KIRKBI and CVC respectively, the Company does not, at the date of Admission, comply with this recommendation of the UK Corporate Governance Code. As the Board will have three experienced independent Non-Executive Directors as well as a Chairman (who was independent on appointment), the Board is satisfied that no individual will dominate the Board’s decision taking, no undue reliance will be placed on particular individuals and the Board will be capable of operating effectively on and after Admission. The Company intends to become fully compliant with the UK Corporate Governance Code during the course of 2014. It is the Company’s current intention that each of the Directors will stand for re-election on an annual basis. Except as set out in this paragraph, the Company intends to comply with the UK Corporate Governance Code in all respects. The Board will report to shareholders on compliance with the UK Corporate Governance Code in accordance with the Listing Rules of the United Kingdom Listing Authority.
The UK Corporate Governance Code also recommends that the Board should appoint one of the independent Non- Executive Directors as the Senior Independent Director and Charles Gurassa has been appointed to fulfil this role. The Senior Independent Director will be available to shareholders if they have concerns which contact through the normal channels of Chairman, Group Chief Executive Officer or Group Chief Financial Officer has failed to resolve or for which such contact is inappropriate. The Board has established Nomination, Remuneration, Audit and Health, Safety and Security Committees with formally delegated duties and responsibilities, and written terms of reference. From time to time, separate committees may be set up by the Board to consider specific issues when the need arises.
Terms of Reference - Main Board
The Nomination Committee assists the Board in discharging its responsibilities relating to the composition of the Board. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and experience on the Board, the size, structure and composition of the Board, retirements and appointments of additional and replacement directors (other than those appointed by Blackstone, CVC Holdco and KIRKBI) and will make appropriate recommendations to the Board on such matters.
The UK Corporate Governance Code provides that a majority of the members of the Nomination Committee should be independent non-executive directors. As the Company’s Nomination Committee will consist of the Chairman and three further independent Non-Executive Directors, the Company will comply with the UK Corporate Governance Code recommendation that a majority of the members of the Nomination Committee should be independent non-executive directors. The chairman of the Nomination Committee is Sir John Sunderland. The Nomination Committee will meet formally at least once a year and otherwise as required. It has responsibility for considering the size, structure and composition of the Board and the retirement and appointment of directors and will make appropriate recommendations to the Board in relation to these matters.
Terms of Reference - Nomination Committee
The Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Company’s policy on executive remuneration, determining the individual remuneration and benefits package of each of the executive directors and recommending and monitoring the remuneration of senior management below Board level. The UK Corporate Governance Code provides that the Remuneration Committee should comprise at least three independent non-executive directors. As the Company’s Remuneration Committee will consist of three independent Non-Executive Directors, the Company will comply with this UK Corporate Governance Code recommendation. The chairman of the Remuneration Committee is Charles Gurassa, the Senior Independent Director.
The Remuneration Committee will meet formally at least twice each year and otherwise as required. The Remuneration Committee considers all material elements of remuneration policy, remuneration and incentives of executive directors and senior management with reference to independent remuneration research and professional advice in accordance with the UK Corporate Governance Code and makes recommendations to the Board on the framework for executive remuneration and its cost. The Board is then responsible for implementing the recommendations and agreeing the remuneration packages of individual directors. The Remuneration Committee is also responsible for making recommendations for the grants of awards under the Plans. In accordance with the Remuneration Committee’s terms of reference, no director may participate in discussions relating to his own terms and conditions of remuneration. Non-Executive Directors’ and the Chairman’s fees will be determined by the full Board.
Terms of Reference - Remuneration Committee
The Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting, external and internal audits and controls, including reviewing the Company’s annual financial statements, reviewing and monitoring the extent of the non-audit work undertaken by external auditors, advising on the appointment of external auditors and reviewing the effectiveness of the Company’s internal audit activities, internal controls and risk management systems. The ultimate responsibility for reviewing and approving the annual report and accounts and the half yearly reports remain with the Board.
The UK Corporate Governance Code recommends that the audit committee should comprise at least three independent non-executive directors, and that at least one member should have recent and relevant financial experience. As the Company’s Audit Committee will consist of three independent Non-Executive Directors, the Company will comply with this UK Corporate Governance Code recommendation. Ken Hydon is considered by the Board to have recent and relevant financial experience and is chairman of the Audit Committee.
No members of the Audit Committee have links with the Company’s external auditors. The Audit Committee will formally meet at least three times each year and otherwise as required. The Group Chief Executive Officer, the Group Chief Financial Officer, other directors and representatives from the finance function may attend and speak at meetings of the Audit Committee.
Terms of Reference - Audit Committee
Health, Safety and Security Committee
The Health, Safety and Security Committee assists the Board in ensuring that risks including health, safety and security are managed effectively and proactively throughout the Group. The Health, Safety and Security Committee consists of the Chairman of the Board (who chairs the Committee), the Senior Independent Non-Executive Director, at least 2 further Independent Non-Executive Directors, the Group Chief Executive Officer, the Group Chief Financial Officer, the Managing Director-Resort Theme Parks Operating Group, the Managing Director-Midway Attractions Operating Group and the Group Health, Safety & Security Director.
Terms of Reference - Health, Safety and Security Committee