The Management Board of the Synthos S.A. company (the Company)
hereby gives notice that the following rules of corporate governance, forming a part of the document entitled Code of Best Practice for WSE Listed Companies, accepted under Resolution No. 12/1170/2007 of the Supervisory Board of the Warsaw Stock Exchange S.A. on 4th July 2007, are neither applied, not will they be applied, within the Company.
Section II: Best Practice for Management Boards of Listed Companies
Rule No. 1. “A company should operate a corporate website and publish:”
Item 4: “the date and place of a General Meeting and its agenda and draft resolutions, together with their legal basis and other available materials related to the company’s General Meetings, at least 14 days before the date set for the General Meeting;”
This rule is neither applied, nor will it be applied, as regards that part which concerns the date by which draft resolutions, together with their legal basis and other available materials related to the Company’s general meetings, shall be published on the Company’s website. The designation of a date at least 8 days before that set for the General Meeting as the publication date for the substance of draft resolutions, together with the relevant appendices, as stipulated in Par. 39 item 1 (3), in connection with Par. 97 item 5 of the Minister of Finance’s Ordinance on current and periodical reports published by issuers of securities, of 19th October 2005, allows sufficient time to become acquainted with the documents concerned.
Item 6: “annual reports submitted by the Supervisory Board on its activity, taking account of the work of its committees, together with an evaluation of the Supervisory Board’s work and of internal control and significant risk management systems;”
This rule is neither applied, nor will it be applied, as regards that part which concerns reports on the work of the committees and the evaluation of internal control and significant risk management systems. No committees exist under the Supervisory Board. Given that the Company does not operate internal control and significant risk management systems, the competence therein lies with the Supervisory Board, which does not present an evaluation of the said systems.
Item 7: “shareholders’ questions regarding items on the agenda, submitted before and during a General Meeting, together with the answers to those questions;”
This rule is neither applied, nor will it be applied. The Company does not present a detailed record, wherein every question and answer arising during the proceedings of a GM is particularised. The inclusion or otherwise of individual matters in the minutes of a GM is decided by the Chair, who is guided by the law, the significance of a given issue and reasonable requests made by the shareholders. In accordance with the provisions of the Commercial Companies’ Code, participants in a GM are entitled to submit a written declaration, which is then attached to the minutes. The Company deems this rule to provide a sufficient guarantee of transparency with regard to its General Meetings.
Item 11: “information known to the Management Board, based on a statement made by a member of the Supervisory Board, regarding any relationship between a member of the Supervisory Board and a shareholder who holds shares representing not less than 5% of all the votes at the company’s General Meeting;”
This rule is neither applied, nor will it be applied by the Company’s Management Board, inasmuch as the Board has received no such declaration from any member of the Supervisory Board, due to the non-application of Rule No. 2, Pt. III of the WSE Code of Best Practice.
Rule No. 3. “Before a company executes a significant agreement with a related entity, its Management Board shall request the Supervisory Board’s approval of the said transaction/agreement. This obligation shall not apply to typical transactions, made under market terms and conditions, within the business operations of a company having a subsidiary wherein that company holds a majority stake. For the purposes of this document, the linked entity shall be understood within the meaning of the Minister of Finance’s Ordinance on current and periodical reports submitted by issuers of securities, of 19th October 2005”.
This rule is neither applied, nor will it be applied. The Management Board deems the stipulations of the law in force, together with the Company’s statute and the Regulations of its Supervisory Board concerning transactions/agreements entered into with a linked entity, to be sufficient. The permanent supervision of the Company’s operations, both as regards decisions relating to any and all significant agreements involving the Company and in terms of the incorporation into the said agreements of the criteria set out in the Company’s statute, lies within the competence of the Supervisory Board.
Rule No. 5. “Draft resolutions of a General Meeting should be accompanied by the grounds thereon, with the exception of resolutions on points of order and typical resolutions adopted during the course of an Ordinary General Meeting. In view of the foregoing, the Management Board should either present the said grounds, or request their provision from the person submitting the motion for the inclusion of a given issue on the agenda of a General Meeting.
This rule is neither applied, nor will it be applied. The introduction of the said rule for the obligatory provision of the grounds for draft resolutions of the GM gives rise to the potential for objections that the grounds are inappropriate, or too brief, or have been found by the shareholders to be deficient in some other way. With a view to minimising the risks inherent in the non-application of the said rule, the Management Board will present the grounds for draft resolutions before and during a GM to the Company Shareholders concerned.
The following rules of corporate governance, included within the document entitled Code of Best Practice for WSE Listed Companies, accepted under Resolution No. 12/1170/2007 of the Supervisory Board of the Warsaw Stock Exchange S.A. on 4th July 2007, are neither applied, not will they be applied, within the Company:
Item 2: “A company should publish its website in English to at least the extent prescribed in Section II.1.
This rule is neither applied, nor will it be applied, as regards that part which concerns the publication, in English, on the Company’s website, of periodic and current reports submitted prior to and including 31st December 2008. Periodic and current reports submitted from 1st January 2009 onwards will be thus published..
The partial deviation from the rule referred to in the foregoing is dictated by the need to curb operating costs and by the fact that reports issued prior to 31st December 2008 are historical in nature.
Section II: “Best Practice for Supervisory Board Members”
Rule No. 1. “In addition to its responsibilities, as set out in the legal provisions, the Supervisory Board should:”
Item 1: “prepare and present to the Ordinary General Meeting, on an annual basis, a brief assessment of the company’s standing, including an evaluation of the internal control and significant risk management systems;”
This rule is neither applied, nor will it be applied, as regards that part which concerns the evaluation of the said systems. Given that the Company does not operate internal control and significant risk management systems, the Supervisory Board does not present an evaluation of those systems to the Ordinary General Meeting.
Rule No. 2. “A member of the Supervisory Board should submit to the company’s Management Board information regarding any relationship with a shareholder who holds shares representing not less than 5% of all the votes at the General Meeting. This obligation concerns financial, family, and other relationships which may affect the position of the member of the Supervisory Board on issues decided by that Board.”
This rule is neither applied, nor will it be applied by the Company’s Supervisory Board, being redundant in terms of the need to exclude a member of the Supervisory Board from participation in the Board’s decision-making processes as a result of a conflict of interests. The criterion of purpose and result, which a member of the Supervisory Board wishes to bring about, and brings about, by means of his or her activities, is both proper and sufficient in terms of the law in force. The said criterion is that of acting in the best interests of the Company and it shareholders, together with an undertaking of responsibility for any potential damage arising from a given activity and sustained by either the Company or its shareholders.
Rule No. 6. At least two members of the Supervisory Board should meet the criteria of being independent of the company and entities having significant connections to the company. In respect of the independence criteria, Annex II to the EU Commission Recommendation of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board should be applied. Irrespective of the provisions of point b) of the said Annex, a person who is an employee of the company, or of an associated company, cannot be deemed to meet the criteria of independence set out in the Annex. In addition, a relationship with a shareholder which precludes the independence of a member of the Supervisory Board, as understood herein, is an actual and significant relationship with any shareholder who has the right to exercise at least 5% of all the votes at the General Meeting.”
This rule is neither applied, nor will it be applied by the Company.
In accordance with the legal regulations in force, members of the Supervisory Board are appointed by the independent action of the Company’s GM. In view of the foregoing, there exists no basis for curtailing the free election of Supervisory Board members. Moreover, the criterion of ‘independence’ fails to properly define the position and criteria by which a member of the Supervisory Board should be guided when taking decisions in the process of carrying out his or her mandate. By virtue of the very fact that the shareholders are able to appoint and dismiss a member of the Supervisory Board, whose function is to then represent those shareholders, this criterion is both illusory and ambiguous. The Company deems the ‘independence’ of the members of its organs to be the capability and necessity of acting within the law and in the Company’s best interests and it is by this understanding of independence that the Company abides.
Rule No. 7. “At the very least, the Supervisory Board should establish an audit committee. The committee should include at least one member who is independent of the company and entities having significant connections to the company and who holds qualifications in accounting and finance. In companies where the Supervisory Board consists of the minimum number of members required by law, the tasks of this committee may be performed by the Supervisory Board.
This rule is neither applied, nor will it be applied, inasmuch as no committees operate under the Supervisory Board. The Company takes the position that there are no grounds for the division of the Supervisory Board’s competences into committees within the Board’s structure. Those matters which lie within the competence of committees are addressed collectively by the Company’s Supervisory Board and decisions are taken in the same manner. The members who sit on the Supervisory Board possess the knowledge and competence appropriate to their position.
Rule No. 8. “Annex I to the EU Commission Recommendation of 15 February 2005 on the role of non-executive or supervisory directors (…) should apply to the tasks and operation of the Supervisory Board committees.”
This rule is neither applied, nor will it be applied, inasmuch as Rule No. 7 of Section III of “Best Practice for Supervisory Board Members” is not applied. No committees operate under the Supervisory Board.
Rule No. 9. “The conclusion, on the part of the company, of an agreement/transaction with a related entity which meets the conditions set out in Section II.3 herein, requires the approval of the Supervisory Board.”
This rule is neither applied, nor will it be applied. The Management Board deems the stipulations of the law in force, together with the Company’s statute and the Regulations of its Supervisory Board concerning transactions/agreements entered into with a linked entity, to be sufficient. The permanent supervision of the Company’s operations, both as regards decisions relating to any and all significant agreements involving the Company and in terms of the incorporation into the said agreements of the criteria set out in the Company’s statute, lies within the competence of the Supervisory Board.
Section IV: “Best Practice for Shareholders”
Rule No. 1. “The presence of representatives of the media should be allowed at General Meetings.”
This rule is neither applied, nor will it be applied. The people who participate in the GM are those who are entitled to do so and those who are responsible for the provision of services thereto. The Company perceives no necessity to introduce further shareholder obligations in the form of enabling media representatives to be present at a GM. The performance, on the part of public companies, of the obligation to make information available in the interests of openness and transparency, is sufficiently regulated by the law in force, including the Minister of Finance’s Ordinance on current and periodical reports submitted by issuers of securities, of 19th October 2005. When a media representative raises any questions with the Company in regard to the GM, the Company then issues an appropriate response without delay.