Board and Board Committees

The Board of Directors

The Board of the Company is responsible for the Group’s system of corporate governance. At 30 June 2009 the Board comprised five Directors: an Executive Chief Executive Officer, Dr MJ Flynn; a Chief Financial Officer, Mr JAP Randall and three Non‑Executive Directors including the Non‑Executive Chairman.

Mr G Cook is Non‑Executive Chairman and Ms P Freer is the Senior Independent Director.

Details of Directors’ service contracts are given in the Directors’ Remuneration Report on page 36.

All the Directors have access to advice and services of the Company Secretary, who is responsible for ensuring that Board procedures and applicable regulations under the Company’s Articles of Association or otherwise are complied with. Each Director is entitled, if necessary, to seek independent professional advice at the Company’s expense.

Board Meetings

The Board of Directors meets at least bi‑monthly and has a defined schedule of matters reserved for its decision. It is responsible for the overall Group strategy, approval of major capital expenditure projects, and consideration of major financing matters of the Group. The Board met six times during the year. All Board members attended each meeting. Mr RS Harris attended both meetings prior to his resignation.

Board Committees

The Board Committees, which are comprised solely of Non‑Executive Directors, operate within clearly defined terms of reference and report regularly to the Board. The terms of reference of the Board committee’s are available for inspection on the Company’s registered website (www.sinclairpharma.com) and at the AGM (for 15 minutes prior to the meeting and during the meeting).

Audit Committee and auditors

The audit committee is composed entirely of independent Non‑Executive Directors and is chaired by Mr G Cook and comprises Ms P Freer and Mr J‑C Tschudin. The committee’s main responsibility is to review any reports from management and the auditors regarding the financial statements or the internal control systems implemented throughout the Group along with consideration of both interim and annual financial statements. It will also make recommendations to the Board on the appointment of the auditors and their audit fee. The Board considers that the members of the Audit Committee possess recent and relevant financial experience. The audit committee has unrestricted access to the Group’s auditors. Meetings are also attended, by invitation, to the Chief Executive, the Chief Financial Officer and the Finance Director. The audit committee met three times during the year. Each meeting was attended by all current members.

The terms of reference of the audit committee include the following responsibilities:

• monitoring the integrity of the financial statements of the Company, and any formal announcements relating to the Company’s financial reporting performance, and reviewing financial reporting judgments contained in them;
• reviewing the Company’s internal financial controls and reviewing the Company’s internal control and risk management systems;
• establishing and reviewing the Company’s ‘whistle‑blowing’ arrangements;
• review and challenge where necessary the Company’s financial statements, before submission to the Board;
• making recommendations to the Board, for it to be put to shareholders for their approval in the AGM, in relation to the appointment, re‑appointment and removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor;
• Reviewing the need for a separate internal audit function;
• reviewing and monitoring the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant professional and regulatory requirements;
• developing and implementing policy on engagement of the external auditor to supply non‑audit services, taking into account relevant ethical guidance regarding the provision of non‑audit services by the external audit firm;
• to review the consistency and application of accounting policies;
• to establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls and auditing matters;
• to meet with the external auditors at least twice each year; and
• to review any auditors management letters and management’s responses.

The Group’s auditors, PricewaterhouseCoopers LLP, provide non‑audit services in addition to the provision of audit services. In the year ending 30 June 2009, non‑audit services provided by PricewaterhouseCoopers LLP comprised advice with regard to taxation, International Financial Reporting Standards compliance, financial due diligence and other miscellaneous services. Where appropriate the partner managing the provision of non‑audit services is different from the partner managing audit services and as such the Board believes the auditors remain objective and independent. The Board also considers the level of fees charged by PricewaterhouseCoopers LLP is not disproportionate or inappropriate to the size of the business and considers the Company therefore compliant with provision C3.2 of the Combined Code with regard to independence and objectivity.

Nomination Committee

The nomination committee is chaired by Mr G Cook and comprises Ms P Freer and Mr J‑C Tschudin. The committee is responsible to the full Board for determining the qualities and experience required of the Company’s Executive and Non‑Executive Directors and for identifying suitable candidates. In appropriate cases, recruitment consultants assist in the process. The Committee is responsible for succession planning. Executive and Non‑Executive Directors are subject to election by shareholders at the first opportunity after their appointment and to re‑election thereafter by the shareholders at least every three years. The nomination committee met once during the year and the meeting was attended by all members.

The terms of reference of the nomination committee include the following responsibilities:

• to review the structure, size and composition of the Board;
• to prepare a description of the role and capabilities required for a particular appointment;
• to identify and nominate candidates required for a particular appointment; and
• to satisfy itself with regard to succession planning.

Remuneration Committee

The Remuneration Committee is made up entirely of independent Non‑Executive Directors and is chaired by Ms P Freer and comprised Mr G Cook, and Mr J‑C Tschudin. The committee is responsible for making recommendations to the Board on remuneration policy for the Company’s Executive Directors and the terms of their service contracts, with the aim of ensuring that their remuneration, including share options and awards under the Share Schemes, is based both on their own performance and that of the Group generally. The remuneration committee will also administer and establish performance targets for the Share Schemes and approve further grants or awards under them. In addition, it will advise on the remuneration policy for the Group’s employees. The remuneration committee met twice during the year, each meeting was attended by all members.

The terms of reference of the Remuneration Committee include the following responsibilities:

• to determine the framework and policy and the individual packages for the remuneration of the Executive Directors, Chairman and members of the executive management;
• to determine targets for any performance‑related pay schemes;
• to approve overall remuneration policy;
• to review employee benefit structures; and
• to produce an annual report of the Committee’s remuneration policy.

Appointments to the Board

Appointments to the Board are made on merit and against objective criteria. Care is taken to ensure that appointees have enough time to devote to the job. The Board keeps under review, and takes appropriate action, to ensure orderly succession for appointments to the Board and to senior management, so as to maintain an appropriate balance of skills and experience within the company and on the Board. The Code provisions require the formation of a Nomination Committee to lead and oversee the application of the Code principles as they relate to Board and senior management appointments.

The Board considers the other significant commitments of Non‑Executive Directors prior to appointment, to ensure that they have sufficient time to meet what is expected of them, and keeps changes to these commitments under review. The terms and conditions of appointment of Non‑Executive Directors are available for inspection at the Company’s registered office during normal business hours and at the AGM (for 15 minutes prior to the meeting and during the meeting).

Chairman and Chief Executive

The roles of Chairman and Executive management, led by the Chief Executive Officer, are separated and clearly defined:

1. The Non‑Executive chairman, Mr G Cook, is responsible for leadership of the Board, ensuring effectiveness in all aspects of its role, setting the Board’s agenda and conducting Board meetings, and ensuring effective communication with shareholders and the conduct of shareholders meetings; and
2. Executive management are led by the Chief Executive Officer, Dr MJ Flynn, who has been delegated responsibility by the Board for the day‑to‑day management of the Company within the control and authority framework set up by the Board. The levels of authority for management are periodically reviewed by the Board and are documented. The Chief Financial Officer, Mr JAP Randall and Directors of the Sinclair Pharmaceuticals Limited Board assist the Chief Executive Officer, in managing the business.

The division of responsibility between the Chairman and the Chief Executive is clearly established, set out in writing and agreed by the Board.

Board balance and independence

The Board includes a balance of Executive and Non‑Executive Directors such that no individual or small group of individuals can dominate the Board’s decision taking. The size of the Board and balance of skills is considered appropriate for the requirements of the business. No one other than the committee chairman and members is entitled to be present at a meeting of the audit, nomination or remuneration committees, but others may attend at invitation of the committee.

As a smaller company, Code provision A3.2 requires the company to have at least two independent Non‑Executive Directors. The Board considers that Mr G Cook, Ms P Freer, and Mr J‑C Tschudin are independent for the reasons set out below.

The Board has reviewed the independence of the Non‑Executive directors, including an assessment of their overall character and approach, and concluded based on the following guiding principles that they are independent throughout the year. They have not been previous employees of the Group, have no material business relationships with the Group, are not members of the Company’s pension scheme or share option schemes, have no close family ties with the Company’s advisers, Directors or senior employees, hold no cross Directorships linking them with the other Directors, do not represent significant shareholders and, in the case of Mr G Cook, Ms P Freer, and Mr J‑C Tschudin have served on the Board less than five years. All the Non‑Executive directors have nominal shareholdings in the Company, which the Board considers appropriate without compromising independence. The Board considers that Mr G Cook remains independent even in his capacity as Chairman.

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