The Report On Corporate Governance For Mauritius Accounting Essay

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The Finance Act 2004 has been amended in July 2009 and it is now a requirement for PIEs to adopt Corporate Governance on a comply and explain basis in order to comply with FR Act Section 75

Extract of FR Act Section 75 (as amended)

Compliance by public interest entities

Where a public interest entity is required under any enactment to prepare a financial statement or report, it shall ensure that the financial statement or report is in compliance with the financial reporting requirements of this Act or any other relevant enactment, any regulations or rules made under this Act and with the IFRS.

Every public interest entity shall, subject to section 6A(5) of the Statutory Bodies (Accounts and Audit) Act, adopt corporate governance in accordance with the National Code of Corporate Governance.

Where a public interest entity does not adopt corporate governance under subsection (2), it shall explain its reasons in any financial statement or report referred to in subsection (1).

The Code of Corporate Governance for Mauritius

As per Section 8.4, there should be a separate corporate governance section in the annual report.

Reference is hereby made to the Report on Corporate Governance for Mauritius

Auditor's report and opinion

As per FR Act Section 39 (3)

Where, in the annual report of the entity, the directors disclose the extent of compliance with the Code of Corporate Governance, the auditor shall report whether the disclosure is consistent with the requirements of the Code.

The following is a summary of the important disclosure requirements on in the Annual Report. It is important to note that this is not a substitute of the Code of Corporate Governance for Mauritius


CCGM: The Code of Corporate Governance for Mauritius

RCGM: The Report on Corporate Governance for Mauritius

Comb. CODE: The Combined Code on Corporate Governance

DTR: Disclosure and Transparency rules

The requirement of reporting on Corporate Governance as per the Code of Corporate Governance for Mauritius has been cross referenced with requirement of reporting in The Combined Code on Corporate Governance issued by FRC UK and Disclosure and Transparency rules in UK


CCGM Sec.1, 1.1






Designated Institutions

The Code of Corporate Governance applies to the following business enterprises. In case of non-compliance, these enterprises shall disclose and explain the reasons for their noncompliance.

Companies listed on the official list of the Stock Exchange of Mauritius. All such companies shall comply with all the provisions of the Code.

Banks and non-banking financial institutions

All such companies shall comply with all the provisions of the Code.

The Bank of Mauritius and Financial Services Commission may further require that certain provisions of the Code be mandatory, and prescribe, for specific prudential reasons more stringent requirements in respect of corporate governance for companies under their regulation.

Large Public Companies

Large Public Companies have been defined as "individual companies or group of companies with an annual turnover of Rs 200 million and above".

State-owned enterprises, including statutory corporations and parastatal bodies

Large Private Companies

Large Private Companies have been defined as "individual companies or group of companies with an annual turnover of Rs 200 million and above".

CCGM Sec.2, 2.2







The board should have an appropriate balance of executive, non-executive and independent directors under the firm and objective leadership of a chairperson to ensure satisfactory performance within a framework of good governance to serve the interests of all the stakeholders of the company.

It is essential for the protection of shareholder interests (including minority interests) that the board has some directors who are independent from the company and from any dominant shareholder. All companies should have at least two independent directors on their boards, as defined in this Code.

All boards should have a strong executive management presence with at least two executives as members.

Companies should ensure that the word 'director' is not included in the job title of a person unless he/she is a director of the company.

There is no distinction between directors and alternate directors in terms of their duties and responsibilities. A person may be appointed as an alternate director to more than one director on the same board. However, he/she may only act as the alternate to two directors at any one time. In the case where the alternate director is also a director in his own right, he/she can only act as alternate to one director. The overriding principle is that no individual can exercise more than two votes at a board meeting.

Comb. CODE



Ch .2


Role and Function of the Chairperson

The chairperson can be any non-executive or independent non-executive director elected by his or her fellow directors.



Ch .3


Role and Function of the Chief Executive Officer

The title, function and role of the chief executive officer must be separate from that of the chairperson.







Remuneration of directors

Companies should include a transparent "Statement of Remuneration Philosophy" in their annual report and financial statements so that shareholders and stakeholders can comprehend the board's policy and motivation in determining remuneration for directors in accordance with specified benchmarks.

The statement should also incorporate the criteria used for remunerating executive directors approaching retirement.

Companies should disclose in their annual report details of remuneration paid to each director on an individual basis. Such remuneration should include salaries, fees, severance payments, share options and any other benefits whether received from or in respect of the company, or from or in respect of any subsidiary of the company, or any company on which the director serves as a representative of the company.

Furthermore, the disclosure should indicate the extent to which the individuals retain remuneration from a subsidiary or as a representative of the company and how much is paid over to the company of which the persons are directors.

In the case where there are fixed-term contracts for executive directors, this fact should be disclosed in the annual report, including the duration of the contract.

The remuneration of directors should be decided by the Remuneration Committee or the Corporate Governance Committee that has the responsibility for remuneration matters as set out in Section 3 of this Code.

Comb. CODE


Sec 8.4








Board Committees

Board committees should, as far as possible, only comprise members of the board. It may be necessary, where certain board committees fulfil a specialised role, to co-opt specialists as permanent members of such committees but this should be the exception rather than the rule and they should comprise a minority on the committee. Such coopted persons should contract not to disclose confidential information.

All companies should have, at a minimum, an audit committee and a corporate governance committee. The Corporate Governance Committee should include in its terms of reference the key areas normally covered by a Nomination Committee and a Remuneration Committee (unless these have been separately constituted).

In establishing board committees, the board must determine their terms of reference, life span, role and function.

The terms of reference for each committee should cover:

􀂉objectives, purpose and activities


􀂉delegated authorities including extent of power to make decisions and/or

recommendations (if any)


􀂉reporting mechanism to the board

􀂉agreed procedure for seeking independent outside professional advice when necessary.


A secretary should be appointed for each committee and minutes of each meeting recorded.


Comb. CODE

Sec 8.4











Risk Management, Internal Control and Internal Audit

Risk Management

Risk management should include the reporting, consideration and the taking of appropriate action on the risk exposure of the organisation in at least the following areas of risk:



􀂉human resources


􀂉business continuity




However, in complex organisations it is recommended that the board constitutes a Board Risk Committee.

The Board Risk Committee should be composed of the chief executive and other suitably qualified directors.

Reporting and Disclosure

In any report containing a Statement of Directors' Responsibilities for Internal Control required under Chapter 2 paragraph 9 below, the directors shall also include a statement acknowledging the responsibility of the board for risk management and the processes in place within the organisation for risk management.

The statement on the risk management processes shall, as a minimum, disclose the following:

􀂉the structures and process in place for the identification and management of risk;

􀂉the methods by which internal control and risk management are integrated together;

􀂉the methods by which the directors derive assurance that the risk management process are in place and effective;

􀂉a brief description of each of the key risks identified by the organisation and the way in which each of these key risks is managed.


Sec 8.4













5.2 Internal Control

3Reporting and Disclosure

The board shall ensure that any report delivered as an annual report under the Mauritius Companies Act 2001 includes, or has appended to it, a statement which acknowledges the directors' responsibilities for internal control and describes the methods by which this responsibility is discharged.

The Statement of Directors' Responsibilities for Internal Control shall be signed by two or more directors as representatives of the board.

The Statement of Directors' Responsibilities for Internal Control may be included in a general statement of directors' responsibilities for corporate governance or combined with a statement of directors' responsibilities for preparation of accounts.

The description of the methods used by the board to discharge its responsibility for internal control must, as a minimum, include a description of the following:

􀂉the systems and processes in place for implementing, maintaining and monitoring of the internal controls;

􀂉the process by which the board derives assurance that the internal control systems are effective;

􀂉the frequency of reviews; 9

􀂉the information required under Chapter 3, paragraphs 16 and 17 below in respect of internal audit;

􀂉any significant areas not covered by the reviews including joint ventures, subsidiaries or associates;

􀂉the process applied to any significant problems disclosed in the annual report or financial statements.

Where the board cannot make any of the disclosures required above in relation to internal control or risk management, it must state this fact and provide a suitable explanation.



Ch. 3





Internal Audit

Reporting and Disclosure

The Statement of Directors' Responsibilities for Internal Control shall state whether or not the board has established an internal audit function.

Where no internal audit function exists, the board must describe:

􀂉the methods it uses to provide assurance on the operation and effectiveness of internal controls and risk management;

􀂉the frequency of review for the need to establish an internal audit function and the date of the last review.

Where an internal audit function exists, the following information shall be disclosed:

􀂉an outline of the structure and organisation of the internal audit function;

􀂉the reporting lines within the organisation both administratively and for delivery of internal audit reports.

􀂉a description of the areas, systems and processes covered by internal audit including assurance on risk management and non-financial matters;

􀂉any significant enterprise areas of the organisation not covered by internal audit including joint ventures, subsidiaries and associates;

􀂉any restrictions placed over the right of access to the records, management or employees of the organisation.

The information provided under paragraph 18 above may be included within the Statement of Directors' Responsibilities for Internal Controlor as part of a general statement of disclosure in respect of risk management or corporate governance.


Comb. CODE








In accordance with legal requirements there should be separate disclosure of the amount paid for non-audit services as opposed to audit services.

A detailed description of non-audit services rendered by the external auditor should be provided in the annual report of the company, stating particulars of the nature of the services and amounts paid for each of the services described. Where appropriate, it might be useful for the annual corporate governance statement to provide additional explanation or justification for these services.


Comb. CODE





Sec.7, 4



Integrated Sustainability Reporting

Every company should regularly (at least annually) report to its stakeholders on its policies and practices as regards:



􀂉health and safety

􀂉social issues

Safety, Health and Environment

Companies should develop and implement safety, health and environment policies and practices to at least comply with existing legislative and regulatory frameworks.

Companies should be familiar with relevant provisions of the labour laws, the Occupational Safety, Health and Welfare Act, the Environment Protection Act and any other legislation applicable to the relevant industry.

This does not imply that companies should only seek to abide by minimum legal requirements. They should instead aim for best practice in line with the company's corporate values and long term objectives.


FRC advise that the company has a policy on carbon reduction schemes in order to be in line with international needs towards green environment.

The company is advised to report on what is being done or /and what is planned to be done towards carbon reduction. The terminology that can be used in "Carbon Reduction Reporting".

CCGM, Sec 8



Communication and Disclosure

Annual Report

Annual reports should present a comprehensive and objective assessment of the activities of the company so that all stakeholders can obtain a full and fair view of its performance.

The directors should report on the following matters in their annual report:


􀂉it is the directors' responsibility to prepare financial statements that fairly present the state of affairs of the company as at the end of the financial year and the profit or loss and cash flows for that period;

􀂉the external auditors are responsible for reporting on whether the financial statements are fairly presented;

􀂉adequate accounting records and an effective system of internal controls and risk management have been maintained;

􀂉appropriate accounting policies supported by reasonable and prudent judgements and estimates have been used consistently;

􀂉applicable accounting standards have been adhered to or, if there has been any departure in the interest of fair presentation, this must not only be disclosed and explained but quantified;

􀂉the Code of Corporate Governance has been adhered to, or if not, to give reasons where there has not been compliance.

Comb. CODE

CCGM Sec.8


Corporate Governance Report

There should be a separate corporate governance section in the annual report. Amongst other items, the company should disclose the following:

􀂉Cascade holding structure up to and including the ultimate holding company.

This should include the names of common directors at each level and the shareholding percentages at each intermediate level.

The aspiration is for full disclosure, including societe's etc, up to the ultimate beneficial owner.

􀂉List of shareholders holding more than 5% of the company.

􀂉Dividend policy

􀂉Directors' profile, and the category into which they fall. The number of other directorships (in listed companies) held should also be disclosed.

Finally, the number of shares held by the director, both directly and indirectly in the company should be disclosed.


􀂉A profile of each member of the senior management team.

􀂉Related party transactions between the company or any of its subsidiaries or associates and a director, chief executive, controlling shareholder or companies owned or controlled by a director, chief executive or controlling shareholder. (In the case of banks the regulator may set different disclosure provisions.)

􀂉With regard to directors dealings in the shares of their own company, a statement should be made to the effect that the directors follow the principles of the model code on securities transactions by directors as detailed in Appendix 6 of the Mauritius Stock Exchange listing rules. Disclosure of shares purchased and sold over the period should be made.

􀂉Material clauses of the company's constitution (i.e. ownership restrictions, preemption rights etc)

􀂉Important aspects of any shareholders' agreement which affects the governance of the company by the board (for example if a third party is allowed to nominate some directors or if there is an agreement to rotate the chairmanship between partners.)

􀂉Important aspects or terms of any management agreement which third parties may have with the company or its subsidiaries, particularly those where the third party is a director or a company owned or controlled by a director.

􀂉From 2005, total detailed remuneration per director should be disclosed as set out in Section 2 clause 2.8 of the Code. If in the interim the company decides to report director remuneration by band, then it should be reported in accordance with clause 2.8.2. of the Code.

􀂉Statement of remuneration philosophy in accordance with Section 2 clause 2.8.1 of the Code.

􀂉Main terms of reference of board committees as well as the composition of committees. The number of times in the year the board and committees met, plus attendance details for directors, must also be disclosed.

􀂉Identification of key risks for the company, including a brief discussion of how they are managed.

􀂉Details of all share option plans.

􀂉A detailed timetable specifying important events including reporting dates, dividend declaration and payment dates, and Meetings of Shareholders etc.

􀂉Share price information. Directors should demonstrate concern and interest with respect to the share price.

􀂉Its policies and practices as regards social, ethical, safety, health and environmental issues as set out in clause 7.2. to 7.6 above.


Sec 2.2

Sec 3.2

Sec 5.1.7

Sec 7.2

Sec 7.6

CCGM Sec.8





Political Contributions

It is the responsibility of the board to decide whether the company should make donations to political parties or causes.

It goes without saying that any political funding should be within the law and in the interests of the company.

In the event that the directors decide that it is appropriate to provide funds for political parties or causes, then the aggregate sum contributed to political parties/causes should be declared in the annual report.

Charitable Donations

It is the responsibility of the board to decide whether the company should make any charitable donations. In the event of the company making any such donations, the aggregate amount should be declared in the annual report.


As an aspiration, companies are encouraged to give the funding details of the causes (political and charitable) that the company supports.


Sec. 9



Relationship with Shareholders

It is the duty of the board to keep shareholders informed regarding material events affecting the company, especially if an event could have an effect on the share price.

Each director should be elected (or re-elected as the case may be) every year at the Meeting of Shareholders and a brief CV of each director standing for election or reelection should accompany the notice contained in the annual report. Each director should be elected by a separate resolution.


Prepared by FRC

14 January 2010