The Directors recognise the importance of sound corporate governance and the Directors intend to observe the requirements of the AIC Code so far as practicable.

Consideration statement

 CIP Merchant Capital Limited (the “Company” or “CIP”) has joined the Association of Investment Companies (“AIC”) and has therefore elected to comply with the provisions of the AIC Code of Corporate Governance (“AIC Code”). The AIC Code sets out a framework of best practice in respect of governance of investment companies and a copy of the AIC Code can be viewed at the Company’s registered office upon request. The AIC Code has been endorsed by the Financial Reporting Council as an alternative means for members to meet their obligations in relation to the UK Corporate Governance Code.

The Financial Sector Code of Corporate Governance issued by the Guernsey Financial Services Commission (“GFSC”) (the “GFSC Code”) provides a framework that applies to all entities licensed by the GFSC or which are registered or authorised as a collective investment scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended). Companies reporting against the UK Corporate Governance Code or the AIC Code are deemed to comply with the GFSC Code.

The Board of the Company has considered the principles and recommendations of the AIC Code by reference to the AIC Corporate Governance Guide for Investment Companies (the “AIC Guide”). The AIC Code, as explained by the AIC Guide, addresses the principles set out in the UK Corporate Governance Code, as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company.  The Board considers that reporting against the principles and recommendations of the AIC Code, by reference to the AIC Guide, will provide shareholders with clear and appropriate information on the Company’s corporate governance.

The Company has complied with the recommendations of the AIC Code to the extent deemed reasonable and practical by the Board of the Company, taking into account the guidance in the AIC Guide.

We have set out below the provisions of the AIC Code to which the Company does not adhere and an explanation of the Board’s rationale for taking this approach, which predominantly relates to the fact that the Company is an externally managed investment company. In particular, the fact that all of the Company’s day-to-day management and administrative functions are outsourced to third parties means that the Company has no executive directors, employees or internal operations.

The Company has therefore not complied with and reported on the following areas of the AIC Code:

  • the role of the chief executive – CIP is an investment company which outsources all of its day-to-day management and administrative functions to third parties, and therefore it has no executive directors, employees or internal operation.
  • executive directors’ remuneration – CIP is an investment company which outsources all of its day-to-day management and administrative functions to third parties, and therefore it has no executive directors, employees or internal operation.
  • the need for an internal audit function – CIP is an investment company which outsources all of its day-to-day management and administrative functions to third parties, and therefore it has no executive directors, employees or internal operation.
  • The policy on tenure – CIP will disclose the policy on tenure in the audited financial statements, which has not yet been published due to the first financial year being 31 December 2018.

 

 

The Board has established an Audit Committee and Management Engagement Committee, with formally delegated duties and responsibilities as described below.

 

Audit Committee

The Audit Committee will be responsible for monitoring the integrity of the Company’s financial statements, reviewing significant financial reporting issues, reviewing the effectiveness of the Company’s internal control and risk management systems and overseeing the relationship with the external auditor (including advising on their appointment, agreeing the scope of the audit and reviewing the audit findings). The Audit Committee will monitor the need for an internal audit function following Admission.

 

The Audit Committee will comprise all of the Independent Directors, being Adrian Collins, John Falla and Robert King, with John Falla acting as the chair of the committee. The Audit Committee will meet at least three times a year at appropriate times in the reporting and audit cycle and otherwise as required. The Audit Committee will also meet with the Company’s external auditor as required.

 

Management Engagement Committee

The Company has established a management engagement committee which comprises all of the Independent Directors, being Adrian Collins, John Falla and Robert King, with Robert King acting as the chair of the committee. The management engagement committee will meet at least once a year. The management engagement committee’s main function is to review and make recommendations on any proposed amendment to the Investment Management Agreement and keep under review the performance of the Investment Manager and other service providers.

 

Share Dealing Policy

The Company has adopted a share dealing policy for the Board and certain employees in accordance with the provisions of MAR and the AIM Rules, and the Company will take all reasonable steps to ensure compliance by the Board and any relevant “applicable employees” (as defined in the AIM Rules) with such code.