Significant Direct Shareholders (or Beneficial Owners)

The report should list significant shareholders (or beneficial owners, typically > 5% of shares held directly or indirectly), the percentage held, and percent of voting rights. This should also include share options, pledged shares and other securities arrangements. It should also note when significant shareholders are management or board members..

Indirect or “Deemed” Ownership

Disclosure on ownership and control should also include arrangements that provide indirect control or deemed ownership. including:

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  Shareholder agreements to vote shares in line with those of a substantial shareholder;
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  Special voting rights;
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  Multi-voting shares and the voting rights they grant to major shareholders;
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  Control-enhancing or anti-takeover mechanisms, such as voting caps and poison pills;
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  Special shareholder rights (golden share) to block certain major decisions or to appoint one or more board members directly (common in state-owned enterprises).

Groups and Control Chains

The report should indicate whether the company is part of a group and, if so, how it fits in. It should also disclose the various intermediaries, if any, through which a controlling shareholder holds control.

Controlling Shareholders

The report should disclose the identity of controlling shareholders (individual, family, or group), how much shares they control, and how control is held. It should also address the role of controlling shareholders (e.g. founders, providers of capital, management).

=> Succession: Controlled companies should disclose their succession policy as it relates to controlling shareholders, through inheritance or a family governance body, or policies of corporate group or state-owned companies.

Board Nomination and Other Minority Shareholder Rights

The report should include information on mechanisms that allow minority shareholders to nominate members of the board, including:

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  Cumulative voting, where a shareholder can cast all its votes for a single board nominee
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  Block voting, where a large number of shareholders vote their shares in a single block;
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  Super majority, where certain transactions require approval by a large majority of shareholders;
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  Majority of minority, where certain transactions require approval from the majority of minority shareholders.

The report should also make clear the rights attached to various types of shares and whether the rights were exercised.

Change of Control

The report should describe company policy on treatment of minority shareholders in the event of a change of control. This includes tag-along rights, where the buyer must offer to purchase the shares of minority shareholders or meet other requirements.

Remuneration Policy

The report should describe the company’s policy on executive compensation and, when applicable, details on pay-for-performance plans, including the areas of performance (financial, operational, sustainability) and whether compensation is delayed or conditional or subject to “claw back” (recovery of money already disbursed).

The report should describe the process to establish the remuneration policy, and the role of the board (or specialized committee) and shareholders in reviewing and approving executive compensation. It should also disclose any discretion used in setting actual compensation.

Actual Remuneration

The report should contain actual remuneration data, in tabular form, for each board member, the chief executive officer, and other key executives. The table should include:

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  Salary
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  Cash bonuses
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  Stock and stock-based awards
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  Pension accrual
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  Other monetary and in-kind benefits

Delayed compensation (e.g. share-based) should be accounted for when granted, with a note when the award vests. Conditional compensation (based on future conditions) is not included in compensation totals, but it should be indicated in the supporting information.

Policy and Management Process

The report should describe the company’s oversight and management systems for related-party transactions, including:

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  Policy on RPTs
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  How potential RPTs are identified and vetted
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  How RPTs are approved, including the role of the board (and  committees), and shareholders and whether different transactions have different approval procedures
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  How to manage a situation where a board member is conflicted or there is a conflicts of interest resulting from RPTs
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  Third-party evaluations

Details on RPTs

For all material RPTs concluded or contemplated during the past year, the report should disclose the following information:

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  Name of the party and how it is related (parent, subsidiary, associate, joint venture, management);
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  Amount and type of the transaction (sale of goods, services, loan);
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  Any outstanding balances, contingencies, or bad debts related to the transaction.

For significant transactions, it might be useful to include additional details:

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  Terms of the transaction (interest rate, cost, length of services)
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  Reasonableness (market benchmarks, transaction process such as competitive tender)
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  Third-party evaluation of the transaction

What are RTPs?

According to IAS 24, a related-party transaction is “a transfer of resources, services, or obligations between related parties, regardless of whether a price is charged.”

Examples include :

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  Sale, purchase of goods or materials;
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  Sale or purchase of property or assets;
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  Lease of property or assets;
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  Provision or receipt of services;
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  Transfer of intangible items (R&D, trademarks, license);
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  Provision, receipt, or guarantee of financial services (loans, deposit)

Who are related parties?

A related party is a person or an entity that is related to the reporting entity.

Examples include :

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  A board member, senior executive, controlling shareholder, or their immediate family members (parents, siblings, uncles, aunts, in-laws, cousins, and step-children)
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  Another company linked by ownership or investment, including joint venture;
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  A company pension plan or entity linked to the company pension plan;
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  A company where a board member or senior executive has joint control or significant influence.