Falcon Minerals : Corp Governance 2016 (39.9 k)

Principles and Recommendations

Compliance

Comply

Principle 1 - Lay solid foundations for management and oversight

1.1

Establish the functions reserved to the Board and those delegated to senior executives and disclose those functions.

The Board is responsible for the overall corporate governance of the Company.

The Board develops strategies for the Company, reviews strategic objectives and monitors performance against those objectives. The goals of the corporate governance processes are to:

1. maintain and increase shareholder value;

2. ensure a prudential and ethical basis for the Company's conduct and activities; and

3. ensure compliance with the Company's legal and regulatory objectives.

Consistent with these goals, the Board assumes the following responsibilities:

1. reviewing the corporate, commercial and financial performance of the Company on a regular basis;

2. acting on behalf of, and being accountable to, the shareholders; and

3. identifying business risks and implementing actions to manage those risks and corporate systems to assure quality.

The Company is committed to the circulation of relevant materials to the Directors in a timely manner to facilitate Directors' participation in Board discussions on a fully informed basis.

The Company intends to regularly review the balance of responsibilities between the Board and management to ensure that the division of functions remains appropriate to the needs of the Company.

Complies

1.2

1. Undertake checks before appointing a director

2. Shareholders are given relevant information prior to voting on whether or not to elect a new director

The Board undertakes checks before appointing a director. Directors confirm each year they are not disqualified from acting.

Directors appointed during the year must stand for election at the next AGM. Shareholders are provided relevant information about a director's character, experience, qualifications, etc prior to an election.

Complies Complies

1.3

Written agreements with all directors and senior executives

All directors have written terms of appointment

Complies

1.4

Company secretary accountable to board

The Company secretary reports directly to the board and advises the board in relation to corporate governance matters.

Complies

1.5

1. Establish a policy concerning diversity and disclose the policy or a summary of that policy.

2. Disclose in each annual report the measurable objectives for achieving gender diversity set by the Board in accordance with the diversity policy and progress towards achieving them.

3. Disclose in each annual report the proportion of women employees in the whole organization, women in senior executive positions and women on the board.

The policy should include requirements for the Board to establish measurable objectives for achieving gender diversity for the Board to assess annually both the objectives and progress in achieving them.

The composition of the Board is monitored (in respect of size, diversity and membership) to ensure that the Board has a balance of skill and experience appropriate to the needs of the Company. When a vacancy arises, the Board will identify candidates with appropriate expertise and experience and appoint the most suitable person taking into account the need for diversity in gender, age, ethnicity and cultural background.

The Company is currently not of a size that justifies the formal establishment of measurable diversity objectives.

There are no women in senior executive positions nor on the Board. However the proportion of women employees is 25% of the total workforce i.e. 1 out of 4.

Does not comply

1.6

Disclose a process for periodically evaluating performance of the board, its committees and individual directors

The Company does not have a formal process to evaluate the performance of the board

Does not comply

1.7

Disclose a process for periodically evaluation performance of senior executives

The Company does not currently have any senior executives who are not board members

Does not comply

Principle 2 - Structure the Board to add value

2.1

The Board should have a nomination committee

In view of the size of the Company and the nature of its activities, the Board has considered that establishing formally constituted committees for Board nominations would contribute little to its effective management. Accordingly the nomination of new Directors are reviewed by the Board as a whole and approved by resolution of the Board (with abstentions from relevant Directors where there is a conflict of interest).

Does not comply

2.2

The Company should have a board skills matrix

The Board has undertaken a review of the mix of skills and experience on the Board in light of the Company's principal activities and direction, and has considered diversity in succession planning. The Board considers the current mix of skills and experience of members of the Board is sufficient to meet the requirements of the Company.

The Company does not currently have a formal skills matrix.

Does not comply

2.3

The Company should list the names of independent directors, any interests and their length of service

The Company has disclosed the details of the directors in the Annual Report.

The Board assesses the independence of each director to ensure that those designated as independent do not have any alliance to the interests of management, substantial shareholders or other relevant stakeholders.

They must be free of any interest, position, association or relationship that might influence, or reasonably be perceived to influence, in a material respect, their capacity to bring an independent judgement to bear on issues before the Board and to act in the best interests of the company and its security holders generally.

Complies

2.4

A majority of the board should be independent directors

The Company considers its two non-executive directors to be independent. Both of these directors were previously employees of the Company, however the Board believes the passage of time that has lapsed since they were employed is sufficient to deem them independent. Mr Ron Smit is an executive director and not independent.

Complies

2.5

The roles of chair and chief executive officer should not be exercised by the same individual.

The Company has a separate Chairman and Managing Director.

Complies

2.6

The Company should have a program for inducting new directors and provide appropriate training

New directors are provided with an induction to the Company as per the Nomination Committee Charter.

A director development program has not been provided. However, the Directors keep themselves abreast of important developments to enable them to discharge their director obligations as effectively as possible.

Complies Partially

Principle 3 - Promote ethical and responsible decision making

3.1

Establish a code of conduct and disclose the code or a summary of the code.

The Company has a written code of conduct which sets out minimum standards necessary to guide the Board and employees in carrying out their duties and responsibilities.

Complies

Principle 4 - Safeguard integrity in financial reporting

4.1

The Board should establish an audit committee

The Company has an Audit Committee which met once during the year.

Complies

4.2

The Board should disclose whether it has received assurance from the chief executive officer and chief financial officer that the declaration provided in accordance with section295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating efficiently and effectively in all material respects in relation to the financial reporting risks.

In relation to the financial statements for the financial year ended 30 June 2016 and the half-year ended 31 December 2015, the company's CEO (who is also the acting CFO) and the Company Secretary have provided the Board with declarations, that in their opinion:

• the financial records of the company have been properly maintained;

• the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the company; and

• the financial statements have been founded on the basis of a sound system of risk management and internal control which is operating effectively.

Complies

4.3

Attendance of auditors at AGM

The audit partner from the Company's auditors attends the AGM and is available to answer any questions arising.

Complies