The Directors of Futura Medical plc recognise the importance of sound corporate governance and have chosen to apply the Quoted Companies Alliance Corporate Governance Code (the "QCA Code").
Futura Medical has adopted the QCA Corporate Governance Code (the “QCA Code”) as it considers that this is the most suitable framework for smaller listed companies. We continue to evaluate how we govern the Group on an ongoing basis, working for the best long-term interests of our shareholders in an open, transparent and ethical manner. The Board considers that this framework can grow with the Company, yet it is considered premature to plan for an evolution of the governance framework at this stage. If the Company undertakes significant transactions that would lead to growth, then the Board will consider the implication of this on the corporate governance structure at that point in time.
The principal methods of communicating our application of the QCA Code are this Annual Report and the Investor section of our website at www.futuramedical.com. The QCA Code sets out ten principles and in the Corporate Governance Report on pages 50 to 55 we have set out the Group’s application of the QCA Code, including, where appropriate, cross references to other sections of this Annual Report and to our website.
Last updated May 2023.
The strategy and business operations of the Group are set out in the Strategic Report section of the Annual Report. The full Board meets formally at least six times per year and informally as required. It is responsible for formulating and monitoring Group strategy, as well as complying with legal, regulatory and corporate governance matters. The strategy and business model and amendments thereto, are developed by the Chief Executive Officer and his senior management team and approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.
The Group’s overall strategic objective is to develop innovative products with compelling commercial potential in the pharmaceutical and consumer healthcare markets, leveraging our core skills in transdermal technology. This strategy is aligned with the well-publicised demographic changes of ageing populations, increasing prosperity, government initiatives to increase self-medication, pressures on payers and healthcare systems, the rapid growth of prescription and over the counter (“OTC”) opportunities in developing countries, the natural desire for an improved quality of life and our expectations that consumer healthcare spending will increase as a result. The objective is to develop products such that each on its own has the potential to generate significant annual revenues.
Now that MED3000 has had regulatory approval in the EU, the Group has chosen to realise monetary value via out-licensing deals with distribution partners. If resources permit, the Group may choose to advance other products through clinical development and approval in order to retain the full value of the product within the Group.
The Group operates in a high risk and heavily regulated sector and this is reflected in the principal risks and uncertainties set out on pages 24 to 26 of our Strategic Report. The key challenge to the successful development of this strategy is ensuring that there are sufficient financial resources that can be deployed in the short-term in advance of the products being able to generate financial rewards for the Group in the longer term.
The Group seeks to maintain a regular dialogue with both existing and potential new shareholders in order to communicate the Group’s strategy and progress and understand the needs and expectations of shareholders. Institutional shareholders and analysts have the opportunity to discuss general issues and provide feedback at meetings with the Company. In addition, all shareholders are encouraged to attend the Company’s Annual General Meeting now that face to face meetings can be held again without restrictions.
The Group is aware of its corporate and social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. In addition to shareholders, these include the Group’s employees, regulators, commercial partners, suppliers, patients involved in the Group’s clinical development activities as well as people affected by the conditions we seek to treat. The Group’s operations and working practices need to balance the needs of all of these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of the Group for the benefit of its members as a whole.
The Group endeavours to take feedback received from stakeholders by meeting regularly and responding accordingly. This feedback ensures that the Group can respond to new issues and opportunities that arise to further the Group in the delivery of its long-term strategy. Further information can be found on pages 28 and 29 of the 2022 Annual Report.
The Audit Committee and the Risk and Oversight Committee are responsible to the Board for risk management and internal controls and for ensuring that procedures are in place, and are being effectively implemented to identify, evaluate and manage the significant risks faced by the Group. The internal controls are designed to manage rather than eliminate risk and provide assurance against material misstatement or loss.
The Audit Committee is responsible for reviewing the effectiveness of these internal controls on an annual basis and the Risk and Oversight Committee (“ROC”) provides additional oversight of its operational compliance in respect of its assets. During 2022 the ROC provided oversight of the Company’s Medical Device Quality Management System (“QMS”) as defined in the Medical Device Quality Manual. The ROC meets at least once a year or more frequently if required and agenda items are driven by a management review which assesses compliance against the QMS and any issues arising out of the clinical trials that the Company is planning and undertaking.
Given the current size and transparency of the operations of the Group, the Board has concluded that an internal audit function is not required and this will be continually reviewed as the Company grows. A summary of principal risks and uncertainties facing the Group, as well as mitigating actions, are set out on pages 24 to 26 of our Strategic Report.
Futura’s Board comprises three Non-Executive Directors and three Executive Directors. All of the Directors are subject to election by shareholders at the first Annual General Meeting after their appointment and will continue to seek re-election by rotation at least once every three years.
During the year under review, the Board comprised three Executive Directors, a Non-Executive Chairman and two Non-Executive Directors. Details of the Directors who served in the year can be found on page 41 of the 2022 Annual Report.
The Board is responsible to shareholders for the proper management of the Group and meets at least six times per year to set the overall direction and strategy of the Group, to review scientific, operational and financial performance and to advise on other strategic matters as they arise. All key operational and investment decisions are subject to Board approval. As COVID-19 restrictions were lifted in the second half of the year, the Board met three times in person and the other meetings were held by video conference. In addition, authority was delegated on an ad hoc basis to subcommittees to deal with statutory matters, such as the approval of the full year results and interim statement.
Non-Executive Directors’ letters of appointment stipulate that they are expected to devote such time as is necessary for the proper performance of their duties, being not less than 25 days per year. Non-Executive Directors are required to notify the Chairman before taking on any additional commitments that may impact the time available to devote to the Non-Executive Director role. The Board is satisfied that all Directors have continued to be effective and demonstrate commitment to their respective roles.
The Board considers itself independent. The QCA code suggests that a Board should have at least two independent Non-Executive Directors who currently sit on the Board of the Company and are regarded as independent under the QCA’s guidance for determining such independence.
The Non-Executive Directors receive their fees in the form of a basic cash fee and an equity-based fee which takes the form of nominal price share options under the Company’s Non-Executive Share Option Scheme. To avoid any incentive that may influence the Non-Executive Directors’ independence, the options grants are not deemed significant, either for any individual Non-Executive Director or in aggregate. The current remuneration structure for the Board’s Non-Executive Directors is deemed to be proportionate and in line with market rates. The Directors commit the time required to fulfil their duties.
The Board considers that all of the Non-Executive Directors are of sufficient competence and calibre to add strength and objectivity to its activities and bring significant experience in commercial, operational and financial development of the Group’s products.
The Board regularly reviews the composition of the Board to ensure that it has the necessary depth and breadth of skills to support the ongoing delivery of the Group’s long-term strategy and the Board is committed to ensuring diversity of skill, experience and gender.
Andrew Unitt joined the Board on 1 January 2022 and brings strong financial experience having spent eleven years at Boots plc, where he was Finance Director for four years of Boots Healthcare International, its over the counter medicines business.
Board members maintain their skillsets through practice in day-to-day roles, enhanced with attending specific training where required. This is a combination of in-house Company-arranged briefings and external courses.
The Board uses external advisers where necessary to enhance knowledge or to gain access to particular skills or capabilities. Accountants and lawyers are used for diligence work on specific projects. Both the Nominations Committee and the Remuneration Committee use recruitment and employment consultants and specialist advisers have been used by the Board to ensure compliance in specific areas.
The Chairman, in conjunction with the Company Secretary, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to the Group, its operational activities and the Directors’ responsibilities as members of the Board. During the course of the year, the Directors received updates from the Company Secretary on a number of corporate governance matters.
The Company Secretary provides information and advice on corporate governance and to individual Directors on any aspect of their role, particularly supporting the Chairman and those who chair Board Committees. The Company Secretary is also responsible for ensuring that Board procedures are followed, that the Company complies with company law and AIM Rules and that the Board receives the information it needs to fulfil its duties effectively
Internal evaluation of the Board, the Committees and individual Directors is undertaken on an annual basis and was recently completed in February 2023 in the form of peer appraisal, questionnaires and discussions led by the Chairman to determine their effectiveness and performance as well as the Non-Executive Directors’ continued independence. The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board, to identify any training and development needs and for succession planning.
The Board as a collective is evaluated on diversity, balance, governance and strategy and individual members are evaluated on a range of criteria such as leadership, strategy, governance, interpersonal skills and integrity. The performance of the Chairman was also evaluated in the same way and this was led by Senior Non-Executive Director Andrew Unitt.
The Chairman is responsible for the annual performance assessment of the Chief Executive Officer and the Chief Executive Officer reviews the performance of the other Executive Directors, the Finance Director/Chief Operating Officer and Head of R&D where performance against corporate objectives set at the start of the year is measured.
The review in February 2023 concluded that the Directors were satisfied with Board operations and processes with no major issues raised.
The Nominations Committee continues to monitor the requirement for succession planning.
The Board recognises that its decisions regarding strategy and risk will impact on the culture of the Group as a whole and that this will impact the performance of the Group. The Board seeks to maintain the highest standards of integrity in the conduct of the Group’s operations. An open culture is encouraged within the Group with regular communications with staff regarding progress and staff feedback regularly sought. The Board assessment of the culture within the Group at the present time is one where there is respect for all individuals, there is open dialogue within the Group and there is a commitment to provide the best service possible to all the Group’s customers which include commercial partners and patients and clinicians who are participating in our clinical development programmes.
The Board has overall responsibility for promoting the success of the Group. The Executive Directors have day-to-day responsibility for the operational management of the Group’s activities. The Non-Executive Directors are responsible for the overall operational management of the Group’s activities and for bringing independent and objective judgement to Board decisions.
There is a clear separation of the roles of Chief Executive Officer and Non-Executive Chairman. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-Executive Directors are properly briefed on matters. The Chairman has overall responsibility for corporate governance matters in the Group and chairs the Nominations Committee. The Chief Executive Officer has responsibility for implementing the strategy of the Board and managing the day-to-day business activities of the Group. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with.
The Audit Committee normally meets two to three times per year and has responsibility for, amongst other things, reviewing the annual report and accounts and interim statements involving, where appropriate, the External Auditor. The Committee also approves the External Auditor’s fees and ensures the Auditor’s independence as well as focusing on compliance with legal requirements and accounting standards. It is also responsible for ensuring that an effective system of internal control is maintained. The ultimate responsibility for approving the annual financial statements and interim statements remains with the Board.
The Finance Director and Chief Operating Officer, and the External Auditor attend meetings by invitation only. The Audit Committee meets privately (without any other Board member present) with the External Auditor at least once per year.
The Group’s Auditor is Grant Thornton UK LLP based at 20 Valpy Street, Reading, Berkshire, RG1 1AR and was appointed in 2019 as part of a tender process. The senior statutory auditor is Jonathan Oakey.
The Remuneration Committee, which meets as required, but at least once per year, has responsibility for making recommendations to the Board on the compensation of senior executives and determining, within agreed terms of reference, the specific remuneration packages for each of the Executive Directors. It also supervises the Group’s share incentive schemes and sets performance conditions for share options granted under the schemes. The Independent Non-Executive Directors and the Non-Executive Chairman sit on the Committee, and the Chief Executive Officer attends by invitation only.
The Directors’ remuneration can be found in the Remuneration Committee Report on pages 32 to 35.
The Directors believe that the disclosures in that report constitute sufficient disclosure to meet the requirements of the QCA Code for a Remuneration Committee Report. Consequently, a separate Directors’ Remuneration Report is not presented in the Group’s Annual Report. However, the Committee will continue to review guidance in relation to the contents of remuneration reports and ensure the reporting evolves as the Committee considers appropriate.
The Nominations Committee, which meets as required, has responsibility for reviewing the size and composition of the Board, the appointment or replacement of Directors, the monitoring of compliance with applicable laws, regulations and corporate governance guidance and making appropriate recommendations to the Board.
The Independent Non-Executive Directors and the Non-Executive Chairman sit on the Committee, and the Chief Executive Officer attends by invitation only.
The independent Non-Executive Director(s) and the Non-Executive Chairman sit on the Committee, and the Chief Executive Officer attends by invitation only.
The terms of reference for the above committees can be found in the Investors section of our website www.futuramedical.com.
The Board also oversees the Group’s share dealing code and its whistle-blowing policies and procedures.
The Group places a high priority on regular communication with its shareholders and aims to ensure that all communications concerning the Group’s activities are clear, fair and accurate. The website is regularly updated and users can register to be alerted when announcements or details of presentations and events are posted onto the website.
The Group’s financial reports can be found in the Investors section of our website at www.futuramedical.com.
Notice of General Meetings of the Company and results of voting on all resolutions in future general meetings can be found in the RNS section of our website at www.futuramedical.com.
The results of voting on all resolutions in future general meetings will be posted to the Group’s website after the relevant meeting.