Swedish code for corporate governance

Corporate governance

Nilörngruppen applies the principles of good corporate governance to promote trust among all stakeholders, thereby increasing competitiveness. Among other things, this means that operations are organised in an efficient manner with clear rules for delegation, that the financial, environmental and social reporting is characterized by transparency, and that the Company in all respects is a responsible company.

Nilörngruppen is listed on Nasdaq OMX Nordic Small Cap since 4 April 2018 and follows the rules of The Swedish Code for Corporate Governance (”The Code”). The principles applied by Nilörngruppen for corporate governance are based on Swedish legislation, primarily the Companies Act and The Annual Accounts Act, as well as NASDAQ Stockholm AB’s (Stockholmsbörsen) rules and regulations. Nilörngruppen’s Board of Directors has drawn up this corporate governance report in accordance with these rules.

Described below is how the Group is governed, step by step, from the owners to the operative activities and how corporate governance was conducted in the Nilorn Group during 2019.

 

The Swedish code of corporate governance

Deviations from the code

Rule: Nomination committee

Explanation: Nilörngruppen does not have an appointed nomination committee, since the ownership structure is clear, with Traction owning a majority of the votes and also because there are no other owners with a significant ownership stake. However, shareholders are always welcome to submit comments and/or suggestions on the composition of the Board of Directors to the Chairman of the Board, Petter Stillström (telephone +46-(0)8-506 289 00).

 

Articles of association

In addition to legislation, rules and recommendations, the Articles of Association constitute a central document for the governance of the Company. The Articles of Association are adopted by the Annual General Meeting of shareholders and contain some basic information on the Company, such as the kind of business the company is to conduct, the size of the share capital, the number of shares issued, the size of the Board of Directors and how the Annual General Meeting is to be convened. The complete Articles of Association are available at Nilörngruppen’s website www.nilorn.com.

Responsibility for management and control of the Group is shared among the shareholders at the Annual General Meeting and the CEO, which is in accordance with the Swedish Companies Act, other legislation, the Board of Directors and the CEO, which occurs in accordance with the Swedish Companies Act, other legislation and regulations, rules in force for stock market companies, the Articles of Association, the internal rules of procedure of the Board Directors and other internal control instruments.

 

Shareholders

At year-end 2019 Nilörngruppen had 4,815 shareholders (3 717). The t en largest shareholders at year-end owned 58.65 percent of the capital and 76.47 percent of the votes and the largest owner, AB Traction via subsidiaries, owned 24 percent of the capital and 57 percent of the votes.

 

Annual general meeting

The highest decision-making body is the general meeting of shareholders, where all shareholders have the right to participate. The general meeting of shareholders has the right to decide on all matters not contrary to Swedish law. At the general meeting of shareholders, shareholders exercise their right to vote to decide on the composition of the Board of Directors, auditors, and other central issues such as adoption of the Company’s balance sheet and statement of income, allocation of results, and decide on discharge from responsibility for the Board of Directors and the President. Shareholders may turn to the Board of Directors to raise an issue to be dealt with at the general meeting of shareholders, or to the Chairman of the Board of Directors with suggestions to nominate directors.

 

Annual general meeting 2019

Nilörngruppen’s Annual General Meeting was held on May 15, 2019 in Borås. Complete information about the 2019 regularly scheduled Annual General Meeting is available at the website www.nilorn.com.

 

Annual general meeting 2020

The Annual General Meeting will be held at 5 :00 p.m. on May 14, 2020 at the head office in Borås.

 

The board of directors and its independence

The Board of Directors of Nilörngruppen is bound by the requirements for independence set forth in The Code. The main features of the requirement for independence are that only one member of management may be a member of the Board of Directors and that at least two of the directors elected by the general meeting of shareholders who are independent relative to the Company and its management must also be independent relative to the Company’s major shareholders.

The Board of Directors shall consist of not less than three and a maximum of six directors. Since the 2019 Annual General Meeting the Board of Directors has had four members. At the 2019 Annual General Meeting Petter Stillström, Vilhelm Schottenius, Blenda Lagerkvist and Johan Larsson were re-elected. All directors with the exception of Petter Stillström are independent relative to the Company and its major owners. Petter Stillström is the CEO and a major owner of AB Traction.

 

Tasks of the board of directors

The tasks of the Board of Directors are governed by law and recommendations and by the rules of procedure of the Board of Directors. The Board of Directors review the rules of procedure annually and adopts them by a decision of the Board of Directors. The rules of procedure regulate the distribution of responsibility between the Board of Directors and the President, the President’s powers, the meeting schedule and reporting. The Board of Directors meetings deal with budgets, interim reports, the annual accounts, the business situation, capital expenditures and business establishment. The Board of Directors also receive reports on a monthly basis reports on the Company’s financial position. At the regularly scheduled Board of Directors meetings reports are also submitted about the day-to-day operations of the Group’s companies, with in-depth analysis and proposals for action. Also dealt with are issues concerning long-term business strategy and structural and organisational issues. As the Board of Directors consists of Swedish directors only, Swedish is spoken at meetings and all documentation is in Swedish. Normally, five to ten board of directors’ meetings are held each year. During 2019 the Board of Directors held seven regularly scheduled meetings and one statutory meeting after the Annual General Meeting. The Chief Financial Officer of the Group serves as board secretary. The Chairman maintains regular contact with the President and follows the Group’s business and development.

One time per year the Chairman of the Board of Directors initiates an evaluation of the work of the Board of Directors. Each director answers a questionnaire. The answers are compiled and the results discussed at a board meeting. The Board of Directors continuously evaluates the work of the President by following the development of the business towards the set goals.

 

Audit committee

The Board of Directors has considered the matter of establishing a separate audit committee but has decide that the Board of Directors in its entirety shall handle these matters, thus constituting an audit committee. The audit committee receives continuous information about internal controls and compliance, checking of reported values, estimates, assessments and other matters that may affect the quality of financial reporting. The results of the Group’s internal controls are reported continuously to the audit committee, which in turn issues guidelines for the work going forward. The audit committee prepares and decides on audit issues as well as quality assurance of the Company’s internal governance and control with respect to:

  • Financial reporting
  • Risk management and risk control
  • Compliance
  • Other internal governance and control

The Company’s auditors are in charge of examining how well the overall rules for internal control are complied with in the Group’s companies. The auditors also report on their findings with respect to internal control. Following the review of the auditors, the Company’s auditors prepare an audit memorandum for the Board of Directors with comments on the individual companies and the Group as a whole. The auditors also personally report their findings following their review and their evaluation of the Company’s internal control and application of accounting policies during one Board of Directors meeting.

 

Renumeration committee

The remuneration committee consists of Petter Stillström and Vilhelm Schottenius. Remuneration of the Chief Executive Officer and other members of senior management shall consist of a market-based fixed salary. Variable compensation such as bonuses may be allowed, where justified, to make possible recruitment and retention of key individuals and to stimulate improvements in sales and results. Variable remuneration shall be based on pre-determined and measurable criteria such as earnings and sales development. The variable remuneration may not exceed 100 percent of the fixed remuneration. There shall be no separate fee for members of senior management for board-of-directors work in Group companies. Pension benefit shall be equal t o the ITP plan, or when relating to members of senior management outside Sweden, pension benefits that are customary in the country in question. Severance pay does not occur within the Group.

 

Terms of employment for the CEO

Compensation to the CEO consists of a fixed salary and a bonus maximized to twelve monthly salaries. Refer to Note 7. No Board of Directors fee is paid to the President. Pension benefits amount to 25 percent of the fixed salary. For the CEO, a mutual notice period of 12 months applies.

 

Compensation to the board of directors

The General Meeting of Shareholders decides on fees to the directors elected by the General Meeting of Shareholders. The distribution of fees between the Chairman and other directors is shown in Note 7 of the annual report. No additional compensation has been paid to any director.

 

Auditor

The Group applies international reporting standards, International Financial Reporting Standards (IFRS), when preparing the Group’s financial reporting. Auditing of the annual report, the consolidated financial statements and the accounting, the management by the Board of Directors and the President is performed in accordance with generally accepted auditing standards in Sweden.

 

Operational management of the business

The Board of Directors of Nilörngruppen appoints the President of the Parent Company, who also serves as Chief Executive Officer. Written instructions establish how responsibilities are divided between the CEO and the Board of Directors. The CEO’s responsibility for day-to-day operations includes ongoing investments and divestments, personnel, financial and accounting issues, day-to day contacts with the Company’s stakeholders, such as authorities and the financial market, and to ensure that the Board of Directors gets the information needed to make well-founded decisions The CEO reports to the Board of Directors. The CEO has appointed a management group consisting of two persons:

  • Chief Financial Officer
  • Asia manager

Group management is responsible for implementation of the Group’s overall strategy, ongoing business management, design and compliance with policy and risk management, financing issues and other matters incumbent upon a management group. Other issues dealt with may be corporate acquisitions and group-wide projects. The management group meets regularly to drive and follow up on current projects and business issues.

 

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