Corporate Governance

The Board of Directors of TomCo Energy (“TomCo” or “the Company”) monitors the business affairs of the Company on behalf of its shareholders. The Board currently consists of the Executive Chairman, Chief Executive Officer and two Non-Executive Directors.  Neither of the Non-Executive Directors has held an executive position with the Company in the past.  The Directors have responsibility for the overall corporate governance of the Company and recognise the need for the highest standards of behaviour and accountability.  The Directors are committed to the principles underlying best practice in corporate governance and have adopted the QCA Corporate Governance Code (“the QCA Code” or the “Code”).

The Board is responsible for the stewardship of the Company through consultation with the management of the Company. Any responsibility that is not delegated to management or to the committees of the Board remains with the Board, subject to the powers of the shareholder meetings.  The frequency of Board meetings, as well as the nature of agenda items, varies depending on the state of the Company’s affairs and in light of opportunities or risks which the Company faces.  Members of the Board are in frequent contact with one another and meetings of the Board are held as deemed necessary.

Corporate Governance Report

The QCA Code sets out 10 principles of Corporate Governance that the Company should adopt.  These are listed below together with a short explanation of how the Company applies each of the principles:

Principle One – Business Model and Strategy

TomCo is an oil shale exploration and development company focused on using innovative technology to unlock hydrocarbon resources, initially in Utah, USA.

Its objective is to become the leading development company in the use of radio frequency (“RF”) technology in the extraction of oil & gas from oil shale and to commercialise its current oil shale assets.

The Company believes that the RF technology, held through TurboShale Inc. in which the Company has an 80% interest, will benefit from being economically attractive, carrying significant lower costs than other methods of retorting and will be environmentally benign.  The Company believes this will prove to be a disruptive technology and one with the potential to unlock TomCo’s oil shale assets.

Further information regarding the Business Model and Strategy can be found in the Company’s 2017 Annual Report a copy of which is available on the Company’s website at www.tomcoenergy.com.

Principle Two- Understanding Shareholder Needs and Expectations

The Board is committed to maintaining good communications and having constructive dialogue with its shareholders.  The Company has close ongoing relationships with its private shareholders and has taken on board suggestions for a more proactive communications strategy.  Shareholders and analysts have the opportunity to discuss issues and provide feedback at meetings with the Company and management.

All shareholders are encouraged to attend and participate in all shareholder meetings called by the Company, in particular its Annual General Meeting (AGM).  Investors also have access to current information on the Company and its subsidiaries (together the “Group”) though its website, www.tomcoenergy.uk.com.

Principle Three – Considering wider stakeholder and social responsibilities

The Board recognises that the long-term success of the Group is reliant upon the efforts of the employees of the Group, its partners, consultants, contractors, suppliers, regulators and other stakeholders.  The Board have put in place a range of processes and systems to ensure that there is close oversight and contact with its key stakeholders.

The Group is subject to oversight by a number of different U.S. State and other regulatory bodies, who directly or indirectly are involved with the licensing and approval process of its Oil & Gas operations in Utah.  Additionally, given the nature of the Group’s business, there are other parties who, whilst not having regulatory power, nonetheless have interest in seeing that the Group conducts its operations in a safe, environmentally responsible, ethical and conscientious manner.

The Group makes all reasonable efforts, directly or through its advisers, to engage in and maintain active dialogue with each of these governmental and non-governmental bodies, to ensure that any issues faced by the Group, including but not limited to regulations or proposed changes to regulations, are well understood and ensuring to the fullest extent possible that the Group is in compliance with all appropriate regulation, standards and specific licensing obligations, including environmental, social and safety, at all times.

Principle Four – Risk Management

In addition to its other roles and responsibilities, the Board is responsible for ensuring that procedures are in place and are being implemented effectively to identify, evaluate and manage the significant risks faced by the Group.

The Group is subject to a number of risks and set out a summary of the principal risks and the manner in which the Company and its Board seek to mitigate these.

Risk

Comment

Mitigation

Currency fluctuations may affect the costs of doing business and the results of operations.

The Group has overseas subsidiaries which operate in the United States, which involve expenses denominated in US$. Foreign exchange risk is inherent in the Group and Company’s activities and is accepted as such. Some of the Company’s expenses are denominated in US Dollars.

The effect of a 10% strengthening or weakening of the US dollar against sterling at the reporting date on the dollar denominated balances would, all other variables held constant, not result in a significant exchange gain or loss in the period.

Interest rate risk.

The Group and Company manage the interest rate risk associated with the Group cash assets by ensuing that interest rates are as favourable as possible, whether this is through investment in floating or fixed interest rate deposits, whilst managing the access the Group requires to the funds for working capital purposes.

The Company’s cash and cash equivalents are subject to interest rate exposure due to changes in interest rates. Short-term receivables and payables are not exposed to interest rate risk. A 1% increase or decrease in the floating rate attributable to the cash balances held at the year end would not result in a significant difference on interest receivable.

Liquidity risk.

Liquidity risk arise from the Company’s management of working capital. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due.

The Company policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of at least 90 days.

Credit risk.

Credit risk is the risk of financial loss to the Company if a customer or a counter party to a financial instrument fails to meet its contractual obligations.

The Company is principally exposed to credit risk on cash and cash equivalents with banks and financial institutions. For banks and financial institutions, only independently rated parties with an acceptable rating are utilised.

The Board consider that an internal audit function is not necessary or practical due to the size of the Group and the close day to day control exercised by the Executive Directors.  However, the Board will continue to monitor the need for an internal audit function.  The Executive Directors have established appropriate reporting and control mechanisms to ensure the effectiveness of the Group’s control systems.

Principle Five – A Well Functioning Board of Directors

The Board is currently comprised of the Executive Chairman, Andrew Jones, Chief Executive, John Potter and two independent Non-Executive Directors, Alexander Benger and Malcolm Groat.

Biographies for each of the current Directors are set out on the Company’s website and in the 2017 Annual Report.  Executive and Non-Executive Directors are subject to re-election usually at the Company’s Annual General Meeting, at intervals of no more than three years.

The Board meets on a regular basis, typically at least once a month.

The Board is responsible for formulating, reviewing and approving the Group’s strategy, budgets and corporate actions. As such, the Company has established separate Audit, Nominations and Remuneration Committees.

The Audit Committee is comprised Alexander Benger (Chairman) and Malcolm Groat.  The Audit Committee meets at least three times per year to consider the integrity of the financial statements of the Company, including its annual and interim accounts; the effectiveness of the Company’s internal controls and risk management systems; auditor reports; and terms of appointment and remuneration for the auditor.

The Company’s Remuneration Committee is comprised of Malcolm Groat (Chairman) and  Alexander Benger.  The Remuneration Committee from time to time, but not less than twice a year, to review and determine, amongst other matters, the remuneration of Executives on the Board and any share incentive plans of the Company.

Our Nomination Committee is comprised of Malcolm Groat (Chairman), Andrew Jones and Alexander Benger.  The Nomination Committee meets at least once per year and is responsible for reviewing the structure, size and composition, including skills, knowledge and experience, of the Board and making recommendations to the Board about adjustments.  The Committee also considers succession planning for Directors.

The Chairman and Chief Executive are full time employees of the Company whilst each of the Non-Executive Directors are considered to be part time, though they are expected to provide as much time to the Company as is required.

The QCA Code recommends that the Chair must have adequate separation from the day-to-day business to be able to make independent decisions.  Currently Andrew Jones is the Company’s Executive Chair.  As the Board is comprised of only four members, two of whom are Executive and two of whom are independent Non-Executive Directors, the Directors are of the view that given the current size and stage of development of the Company it would not be appropriate to have a Non-Executive Chair as well.  For the same reason the Board has not appointed a senior independent director.

Principle Six – Appropriate Skills and Experience of the Directors

The Company believes that the current balance of skills in the Board as a whole, reflects a very broad range of commercial and professional skills across geographies and industries and each of the Directors has previous experience in public markets.

The Company has an established and stable Board which it considers to be well suited to its fundamental objective of enhancing and preserving long-term shareholder value and ensuring that the Group conducts its business in an ethical and safe manner.  The Board is considered to be of sufficient number to provide more than adequate experience and perspective to its decision-making process and given the size and nature of the Group, the Board does not consider at this time that it is appropriate to increase the size of the Board or amend its composition.

The Board is responsible for: (a) ensuring that all new Directors receive a comprehensive orientation, that they fully understand the role of the Board and its committees, as well as the contribution individual directors are expected to make (including the commitment of time and resources that the Company expects from its directors) and that they understand the nature and operation of the Group’s business; and (b) providing continuing education opportunities for all directors, so that individuals may maintain or enhance their skills and abilities as directors, as well as to ensure that their knowledge and understanding of the Group’s business remains current.

Given the size of the Company and the in-depth experience of its Directors, the Company has not deemed it necessary to develop a formal process of orientation for new Directors but encourages all its Directors to visit the Group’s operations to ensure familiarity and proper understanding.

Principle Seven – Evaluation of Board Performance

The Board has determined that it shall be responsible for assessing the effectiveness and contributions of the Board as a whole, its committees (which currently comprise the Audit Committee, the Remuneration Committee and the Nomination Committee).  The small size of the Board allows for open discussion.  The Chairman has regular dialogue with the Chief Executive whereby the Board’s role and effectiveness can be considered.

No formal assessments have been prepared.  However, the Board will keep this matter under review and especially if either the size of the Board or the number of committees increases, which in turn may require a more formalised assessment and evaluation process to be established to ensure continued effectiveness.

Principle Eight – Corporate Culture

The Board recognises that their decisions regarding strategy and risk will impact the corporate culture of the Group as a whole and that this will impact the performance of the Group.  The Board is very aware that the tone and culture set by the Board will greatly impact all aspects of the Group as a whole.  The corporate governance arrangements that the Board has adopted are designed to ensure that the Group delivers long-term value to its shareholders and that shareholders have the opportunity to express their views and expectations for the Company in a manner that encourages open dialogue with the Board.

A large part of the Group’s activities is centred upon what needs to be an open and respectful dialogue with partners, suppliers, consultants and other stakeholders.  Therefore, the importance of sound ethical values and behaviour is crucial to the ability of the Group to successfully achieve its corporate objectives.

The Directors consider that at present the Group has an open culture facilitating comprehensive dialogue and feedback and enabling positive and constructive challenge.

Principle Nine – Maintenance of Governance Structures and Processes

Ultimate authority for all aspects of the Group’s activities rests with the Board, with the responsibilities of the Executive Directors arising as a consequence of delegation by the Board.

The Board has adopted appropriate delegations of authority which set out matters which are reserved to the Board.  The Chairman is responsible for the effectiveness of the Board, while management of the Group’s business and primary contact with shareholders has been delegated by the Board to the Chief Executive Officer.

Non-Executive Directors

The Board evaluates its performance and composition on a regular basis and will make adjustments as and when indicated.  When assessing the independence of each Non-Executive Director, length of service is one of the considerations.  The Board will when assessing new appointments in the future consider the need to balance the experience and knowledge that each independent director has of the Group and its operations, with the need to ensure that independent directors can also bring new perspectives to the business.

In accordance with the Isle of Man Companies Act 2006, the Board complies with: a duty to act within their powers; a duty to promote the success of the Company; a duty to exercise independent judgement; a duty to exercise reasonable care, skill and diligence; a duty to avoid conflicts of interest; a duty not to accept benefits from third parties and a duty to declare any interest in a proposed transaction or arrangement.

Principle Ten – Shareholder Communication

The Board is accountable to the Company’s shareholders and as such it is important for the Board to appreciate the aspirations of the shareholders and equally that the shareholders understand how the actions of the Board and short-term financial performance relate to the achievement of the Group’s longer-term goals.

The Board reports to the shareholders on its stewardship of the Group through the publication of interim and final financial results.  News releases are issued throughout the year and the Company maintains a website (www.tomcoenergy.uk.com) on which press releases, corporate presentations and the Report and Financial Statements are available to view.

Enquiries from individual shareholders on matters relating to the business of the Group are welcomed.  Shareholders and other interested parties can subscribe to receive notification of news updates and other documents from the Company via email.

The Annual General Meeting, and other meetings of shareholders that may be called by the Company from time to time, provide an opportunity for communication with all shareholders and the Board encourages the shareholders to attend and welcomes their participation.  The Board is committed to maintaining good communication and having constructive dialogue with its shareholders.  The Company has close ongoing relationships with its private shareholders.

Last Reviewed 25th September 2018