The Board of Directors (“the Board”) recognize the importance of good corporate governance and is committed to ensure that good corporate governance is being practiced by the Group in order to safeguard the shareholders and relevant stakeholders’ interests as well as enhancing shareholders’ value.
All Board members are responsible to the Company for achieving a high level of good corporate governance.
This Board Charter shall constitute and form an integral part of each Director’s duties and responsibilities.
The Board Charter lays down clearly the responsibilities, functions and terms of reference within which the Board, Board Committees and individual Directors play their roles distinct from the management (“Management”). Its essence is as follows:
a) it is subject to the provisions of relevant legislations, regulations, the Malaysian Code on Corporate Governance (“MCCG 2017”) and other codes of conduct and the Company’s Memorandum and Articles of Association (“M&A”):
b) it sets out the duties and processes of the Board which all Board members are to be aware of;
c) it will act as a source of reference to prospective Board members;
d) it is a means of providing Directors serving and coming on board, clarity as to their roles and responsibilities and principal matters reserved for the Board, the Board Committees and as to the different roles they as Directors; and
e) the process by which the Board and Board Committees function including the scheduling, calling and convening of Board meetings and other matters affecting their affairs and for them to play an effective role.
This Board Charter is not an “all inclusive” document and should be read as a broad expression of principles.
The Board Charter will be reviewed on a periodic basis and may be amended by the Board from time to time.
3. Roles, power and responsibilities of the Board
The Board is collectively responsible for the long-term success of our Company and the delivery of sustainable value to its stakeholders. In discharging its fiduciary duties and leadership functions, the Board govern and set the strategic direction of the Company and exercising oversight on management. The Board plays a critical role in setting the appropriate tone at the top, providing thought leadership and championing good governance and ethical practices throughout the Company.
The Board has full control of and is responsible to the Group’s strategic aims, ensure the necessary resources are in place for the Group to meet its objectives and review management performance. The Board has set the Group’s values and standards, and ensure that its obligations to its shareholders and other stakeholders are understood and met.
The Group has adopted top-down strategic planning process whereby the Executive Directors will periodically formulate Group’s strategy and communicate it down to the organisation for implementation. During the strategic planning process, the Executive Directors will set the Group’s mission and objective. The Executive Directors and Chief Executive Officer will carry out situation analysis, inclusive of allocation of time, human capital and budget with the Senior Management before formulating the strategy in achieving the Group’s objectives. During the implementation of the strategic plans, relevant policies will be set and communicate to the respective team for implementation and necessary organisational changes will be putting in place. During the implementation stage, the Senior Management will continuously monitor and to ensure the effectiveness of the plan.
The Board is responsible for the good corporate governance practices of the Group. It guides and monitors the affairs of the Group on behalf of the shareholders and other stakeholders of the Group.
All Board members are responsible to the Company for achieving a high level of good corporate governance. Each Director has a duty to act in the best interests of the Group. The Directors, both individually and collectively, are aware of their responsibilities to the shareholders and other stakeholders for the manner in which the affairs of the Group are managed.
Following the guidelines as stated in the MCCG 2017, the Board recognises the key role it plays in charting the strategic direction of the Group and has assumed the following core responsibilities in discharging its fiduciary and leadership functions:
a) Set the vision and mission for the Company;
b) Established good corporate governance and culture for the Group;
c) Ensure that the Group adheres to high standards of ethics and corporate behaviour including transparency in the conduct of business. In this regard, our Directors are required to comply with the Directors’ Code of Ethics which amongst others includes the declaration of any personal, professional or business interests, direct or indirect which may conflict with directors’ responsibilities as a Board Member and to refrain from voting on such transaction with the Group;
d) Review and adopting strategic plan for the Group taking into consideration long-term value creation which includes strategies on economic, environmental and social considerations underpinning sustainability;
e) Oversighting the conduct of the Group’s business and to evaluate whether the business is being properly managed;
f) Set the goals for the management to meet and monitor their performance by setting relevent Key Performance Indicators (“KPI”)
g) Establish written procedures (such as the M&A of the Company, Terms of Reference of relevant Board Committees, Standard Operating Procedure and other documents) in determining which issues required decision of the full Board and which issues can be delegated to relevant Board Committees or to the Management;
h) Establish various relevant Board Committees and ensure their effectiveness to address specific issues, by considering recommendations of the various board committees and acting on their reports;
i) Identifying principal risks and ensuring the implementation of appropriate systems to manage these risks;
j) Set the risk appetite within which the Board expects Management to operate and ensure that there is an appropriate risk management framework to identify, analyse, evaluate, manage and monitor significant financial and non-financial risks;
k) Establish succession planning including appointing, training, fixing the compensation of, and, where appropriate, replacing Senior Management;
l) Reviewing the adequacy and the integrity of the Group’s internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines;
m) Ensure that the financial statements of the Group and the Company are fairly stated and conform with the relevant regulations including acceptable accounting policies that result in balanced and understandable financial statements;
n) Developing and implementing an appropriate investor relations and communications policy for the Company.
Subject to the applicable laws and Bursa Malaysia Securities Berhad (“Bursa Malaysia”) Main Market Listing Requirements, the Board reserves full decision-making powers on the following matters:-
a) Corporate strategies and plans;
b) Conflict of interest issues relating to a substantial shareholder or a Director;
c) Material acquisitions and disposition of assets not in the ordinary course of business;
d) Material investments in capital projects;
e) Risk management and internal control policies;
f) Key human resource issues.
The Board has delegated some of its duties and responsibilities to various committees within the Board. Currently the Board has established five (5) Board Committees, namely the Audit Committee, Nominating Committee, Remuneration Committee, Investment Committee and Risk Management Committee; the primary functions of which are to assist the Board in overseeing the affairs of the Company and these Committees have been entrusted with specific responsibilities and authority. The authorities and functions of these Board committees are properly set out in their respective Terms of Reference.
The abovementioned Committees are authorised to examine specific issues and report to the Board with their recommendations. The responsibility of decisions on all matters ultimately lies with the Board as a whole. The Board receives regular reports on the respective Committees proceedings and deliberations. On matters reserved for the Board and where Committees have no authority to make decisions, recommendations are highlighted in their respective reports for the Board’s deliberation and endorsement.
3.1.1 Ethics and Compliance
The Code of Conduct and Ethics (“CCE”) of Dufu states the standards of responsibility and obligations and promotes fair dealing, integrity and ethical conduct amongst Dufu’s Directors and employees. The CCE, which is subject to periodically reviewed, forms part of the Board’s responsibility to set the tone and standards in articulating acceptable practices and guide of behavior of Directors, Management and employees that integrates into Dufu’s company-wide management practices.
The Directors and employees (“Dufucian”) are to comply with the highest standards in conducting their daily businesses and ensure full compliance with the law of the country.
Dufucian are encouraged to uphold the following: –
a) Conduct all business with honesty, integrity and with high ethical standards;
b) Fully comply with Dufu’s standards on doing business with integrity;
c) Comply with the country’s laws, rules and regulations;
d) Promote ethical behaviour among peers, subordinates, suppliers and customers;
e) Promote responsible use of and control over the Group’s resources; and
f) Promptly report any violation of the above, violation of law, fraud, or any transaction or relationship that reasonably could give rise to a conflict of interest to the Chief Executive Officer (“CEO”) or the Director of Human Resources Department or Investigating Officers, depending on the severity of the violation.
The policies of the CCE covers areas in managing conflicts of interest, preventing abuse of power, business gifts, insider trading and money laundering.
A copy of the CCE Policy is available at the Company’s website.
3.1.2 Policies and strategies
The Board has established written procedures (such as the M&A of Association of the Company and other documents) determining which issues require a decision of the full Board and which issues can be delegated to Board Committees or the Management.
The Company has in place its Whistleblower Policy and Procedures (“WPP”) and CCE to allow the stakeholders of Dufu to report concerns about alleged unethical behaviour, actual or suspected fraud within the Group, or improper business conduct affecting the Group and about business improvement opportunities.
3.1.3 Internal Control
The Board oversees, reviews and monitors the operation, adequacy and effectiveness of the Group’s system of internal controls.
Dufu has set up its in-house Internal Audit Department (“IA”) during the financial year 2016 with the guidance of an external professional consulting firm. The in-house IA is independent of the activities it audits and report directly to the Audit Committee.
Detail of the Internal Audit activities is set up in the Statement on Risk Management and Internal Control in the Company’s yearly Annual Report.
3.2 Role of Individual Directors
Directors are expected to comply with their legal, statutory and equitable duties and obligations when discharging their responsibilities as Directors. Broadly these include:
a) acting in good faith and in the best interests of the Company as a whole;
b) acting with care and diligence and for proper purpose;
c) avoiding conflicts of interest with the Company in a personal or professional capacity; and
d) refraining from making improper use of information gained through the position of director and from taking improper advantage of the position of director.
Directors will keep all Board information, discussions, deliberations and decisions that are not publicly known confidential and not use information gained through the Board for their interest, or their employers’ interest.
3.3 Role of Senior Independent Director
The Board may appoint a Senior Independent Director whose role includes acting as the effective communication channel between the Company, its shareholders and the public.
3.4 Role of Chairman and Chief Executive Officer
The Company practices a division of responsibilities between the Chairman and the Chief Executive Officer (“CEO”). Their roles are separated and clearly defined to ensure a balance of power and authority, increased accountability and greater capacity of the Board for independent decision-making. The Chairman leads the Board and is mainly responsible for the Board’s effectiveness and conduct. He also promotes an open environment for debate and ensures effective contributions from Non-Executive Directors. The Chairman also exercises control over the quality, quantity and timeliness of information flow between the Board and Management. At a general meeting, the Chairman plays a role in fostering constructive dialogue between shareholders, Board and Management.
The key responsibilities of the Board Chairman include:-
• Providing leadership for the Board so that the Board can perform its responsibilities effectively
• Setting the Board agenda and ensuring that board members receive complete and accurate information in a timely manner
• Leading board meetings and discussions
• Encouraging active participation and allowing dissenting views to be freely expressed
• Managing the interface between Board and Management
• Ensuring appropriate steps are taken to provide effective communication with stakeholders and that their views are communicated to the Board as a whole; and
• Leading the Board in establishing and monitoring good corporate governance practices in the Company.
Being in the executive position would encompass the Board Chairman, assumed by Mr. Lee Hui-Ta to take the leading role on joint venture pursuits and relations, dealing with external funding (investors and lendors) and strategic plan guidance.
The CEO takes the lead on running the Group across its strategic, operational and organisational processes. In doing so, the CEO is in charge of the day-to-day operations of the business, implements the Group’s policies and decisions as adopted by the Board, overseeing the operations as well as developing, coordinating and implementing business and corporate strategies.
3.5 Board Committees
The Board has established five (5) Board Committees, namely Audit Committee, Nominating Committee, Remuneration Committee, Risk Management Committee and Investment Committee.
3.5.1 Audit Committee (“AC”)
The Principal objective of the AC is to assist the Board of Directors in discharging its statutory duties and responsibilities relating to accounting and reporting practices of the Group.
The duties and responsibility of the AC include the following:-
a) to consider the appointment or re-appointment of external auditors, the audit fee and matter relating to the resignation or dismissal of auditors, if any;
b) to review with the external auditors the audit plan, their evaluation of the system of internal accounting controls, their letter to management and the management’s response;
c) to review the quarterly and annual financial statements before submission to the Board of Directors for approval, focusing particularly on:-
– Changes in accounting policies and practices;
– Significant and unusual events;
– Significant adjustments resulting from the audit;
– The going concern assumption;
– Compliance with accounting standard and other legal requirements.
d) to discuss problems and reservations arising from the interim and final audits, and any matter the auditors may wish to discuss (in the absence of the Executive Directors and/or Management where necessary);
e) To do the followings where an internal audit function exists;
– Review the budget, adequacy of the scope, function and resources of the internal audit function and that it has the necessary authority to carry out its work;
– Review the internal audit programme and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendations of the internal audit function;
– Review any appraisal or assessment of the performance of members of the internal audit function;
– Approved any appointment or termination of senior staff members of the internal audit function;
– Review the resignation of internal audit staff members and provide the staff member the opportunity to submit his reasons for resigning; and
– To consider major findings of internal investigations and management’s response.
f) to review and consider any related party transaction and conflict of interest situation that may arise within the Company or the Group including any transaction, procedure or course of conduct that arises questions of management integrity;
g) to assess the suitability, objectivity and independence of the external auditor by considering among others:-
• The competence, audit quality and resource capacity of the external auditor in relation to the audit
• Nature and extent of the non-audit services rendered and the appropriateness of the level of fees; and
• Obtaining written assurance from the external auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.
h) to perform such other duties if any as may be agreed to by the Committee and the Board.
Details of the Terms of Reference for AC of DUFU are detailed as Appendix I.
3.5.2 Nominating Committee (“NC”)
Dufu established its NC to assist the Board in recommending appointment of new Directors and assessing the effectiveness of the Board.
The NC of Dufu assumes the following core responsibilities:-
a) formulating the nomination, selection and succession policies for members of the Board;
b) review the structure, size and diversity (including without limitation, gender, age, cultural and educational background, ethnicity, professional experience, skills, knowledge and length of service) of the Board;
c) consider the election criteria and develop procedures for the sourcing and election of candidates to stand for election by Dufu’s shareholders (“Shareholders”) or to fill casual vacancies of Directors;
d) identify and nominate candidates to the Board for it to recommend to Shareholders for election as Directors;
e) undertake an assessment of its Independent Directors annually;
f) review the training needs for the Directors regularly; and
g) establishing a set of quantitative and qualitative performance criteria to evaluate the performance of each member of the Board, each Board Committee and reviewing the performance of the Board as a whole.
Details of the Terms of Reference for NC of Dufu are detailed as Appendix II.
3.5.3 Remuneration Committee (“RC”)
The main duties of the RC shall be (on an annual basis):
a) to review and recommend to Dufu Board in consultation with Management and the Chairman of the Board, a framework of remuneration and to determine the specific remuneration packages and terms of employment for each of the executive Directors and senior executives/divisional Directors those reporting directly to the Chairman and the Group Managing Director/CEO of Dufu Group.
b) to recommend to Dufu Board in consultation with Management and the Chairman of the Board, any long term incentive schemes which may be set up from time to time and to do all acts necessary in connection herewith.
c) to carry out its duties in the manner that it deemed expedient, subject always to any regulations or restrictions that may be imposed upon the RC by Dufu Board from time to time.
As part of its review, the RC shall ensure that:
– all aspects of remuneration including Director’s fees, salaries, allowances, bonuses, options and benefits-in-kind should be covered, and observe any major changes in employee benefit structures throughout Dufu Group.
– the remuneration packages should be comparable within the industry and comparable companies and shall include a performance-related element coupled with appropriate and meaningful measures of assessing individual executive Directors’ and senior executives/divisional Directors’ performances.
– to determine the policy for and scope of service agreements for the executive management team, termination payments and compensation commitments, including fixing appointment period for the Directors.
– to ensure the level of remuneration for Non-Executive Directors and Independent Directors are linked to their level of responsibilities undertaken and contribution to the effective functioning of the Board.
The current remuneration policy of the Group is summarised as follows:-
a) The Directors’ salary for Executive Directors are set at a competitive level for similar roles within comparable markets, reflect the performance of the director, skills and experience as well as responsibility undertaken.
b) Directors’ Fees are based on a standard fixed fee and are subject to approval by its shareholders at the general meeting.
c) Meeting Allowance – All the Directors’ are entitled to a fixed amount of allowance paid in accordance with the number of meeting attended during the year, subject to approval by its shareholder at the general meeting.
d) Benefits-in-kind – only Executive Directors of the Group are entitled to benefits-in-kind provided by the Group.
e) The RC may obtain independent professional advice in formulating the remuneration package of its Directors.
Details of the Terms of Reference for RC of Dufu are detailed as Appendix III.
3.5.4 Risk Management Committee (“RMC”)
The RMC is formed to assume the following functions:-
a) To oversee the risk management activities of the Group and to assist the Board in fulfilling its responsibility for identifying significant risks and ensuring the implementation of appropriate systems to manage the overall risk exposure of the Group.
b) Advises the AC and the Board on areas of high risk and the adequacy of compliance and control procedures throughout the organization.
Details of the Terms of Reference for RMC of Dufu are detailed as Appendix IV.
3.5.5 Investment Committee (“IVC”)
The IVC is formed to review, deliberate and approve the acquisition or disposal of investments or assets of the Group subject to the terms and conditions as set out in the Standard Operating Procedures of Dufu, amongst others:-
a) All Non-Operating Transactions;
b) All Operating Transactions that exceed RM2,000,000 or more;
c) To review, deliberate all Transactions that exceed RM5 million or more or a minimum of 5% of Dufu’s Net Assets (based on the latest Quarterly Results announced to Bursa Securities) whichever is lower. Thereafter, the Chairman of IVC shall propose to the Board to either approve or reject the said Transactions; and
d) To decide on the necessary steps (eg. open tender procedures, appointing approved professionals, etc) to be taken before deliberation and making its proposal to the Board for decision. Upon deciding on the steps to be taken, the IVC shall instruct the Finance Department to take the necessary actions as advised by the IVC.
Since the suspension and subsequent abolishment of Executive Committee on 24 February 2016, the IVC has assumed and replaced part of the functions of the defunct Executive Committee.
Details of the Terms of Reference for IVC of Dufu are detailed as Appendix V.
4. Composition and Board balances
4.1 Size and composition
The Board recognises the importance of ensuring a balance of power and authority between the Chairman and the CEO with a clear division of the responsibility between the running of the Board and the Company’s business respectively. The position of Chairman and CEO are separated and clearly defined.
The Board consists of qualified individual with diverse experiences, professionalism, perspectives and other relevant qualities. The composition and size of the Board is such that it facilitates the making of informed and critical decisions with the aim to meet the current and future needs. The Articles of Association (“AA”) of the Company provided that there will be a minimum of two Directors and a maximum of nine Directors.
The Board composition complies with Para 15.02 of the Bursa Securities Main Market Listing Requirements whereby the Company must have at least two (2) Directors or one-third (1/3) of the Board, whichever is higher, who are Independent Directors.
In the event of any vacancy in the Board resulting in the non-compliance with the above, the Company must fill the vacancy within three (3) months (or such other time frame as set out in the Bursa Securities Main Market Listing Requirements from time to time). The Board is of the opinion that the interests of shareholders of the Company are fairly represented by the current Board composition and its size constitutes an effective Board of the Company.
4.2 Nomination and appointments
The appointment of a new director is a matter for consideration and decision by the full Board. Nominating Committee (“NC”) is responsible to give full consideration to succession planning for directors.
Upon the appointment of a new director, the Company Secretary advises the said Director of his/her principal duties and responsibilities and explains the restrictions to which he or she is subject to in relation to price-sensitive information and dealings in the Company’s securities. Thereafter, all Directors are provided with appropriate briefings on the Company’s affairs and up-to-date Corporate Governance materials published by the relevant bodies.
The Company has adopted an induction programme for newly appointed directors. The induction programme communicates to the newly appointed directors the Company’s vision and mission, its philosophy and nature of business, current issues within the Company, the corporate strategy and the expectations of the Company concerning input from Directors.
The Company has adopted educational / training programmes to update the Board in relation to new developments pertaining to the laws and regulations and changing commercial risks which may affect the Board and/or the Company.
In accordance with the Company’s AA, all Directors are subject to re-election by shareholders at the Annual General Meeting (“AGM”) following their appointment. At least one-third (1/3) of the remaining Directors shall retire from office at each AGM at least once in every three (3) years, but shall be eligible for re-election.
The Board only considers directors to be independent where they are independent of management and no material business relationship that could significantly interfere with the exercise of their unfettered and independent judgement.
The Independent Directors are to provide shareholders with an independent voice on the Board and reduce accusations of self-interest in the behaviour of executives.
The NC played an important role to assist the Board in assessing the independence of
Non-Executive Directors of the Company on an annual basis. Based on the assessment conducted by the NC, the Board is generally satisfied with the level of independence demonstrated by all the Independent Directors of the Company and their ability to act in the best interest of the Company.
4.5 Tenure of Independent Directors
Notwithstanding the recommendation of the MCCG 2017, the Board is presently of the view that there is no necessity to fix a maximum tenure limit for Directors as there are significant advantages to be gained from the long-serving Directors who possess tremendous insight and knowledge of the Company’s businesses and affairs. Similarly, the Board does not set a time-frame on how long an Independent Director should serve on the Board, mainly for the following reasons:-
• The ability of a Director to serve effectively as an Independent Director is very much dependent on his caliber, qualification, credentials, experience and personal qualities, particularly his integrity and objectivity, and has no real connection to his tenure as an Independent Director.
• NC conducts an annual assessment of Independent Directors in respect of inter alia their skills, experience and contributions, and whether the Independent Directors are able to discharge their duties with unbiased judgement. Furthermore, the NC also reviews the Directors Profile of Independent Directors and assesses its family relationship, interest of shareholdings in the Company and related party transactions with the Group (if any).
4.6 New Directorship
The Directors are expected to have ability to commit sufficient time to the Group in fulfilling their roles and responsibilities and Company’s affairs. This is evidenced by the attendance record of the Directors at Board meetings. Any Director shall notify the Chairman before accepting any new directorship and the notification shall include the indication of time that will be spent on the new appointment.
5.1 Directors’ assessment
The Company has in place its procedures and criteria for appointment of new directors. All candidates for appointment are first considered by the NC, taking into account the mix of skills, competencies, experience, professionalism and other relevant qualities required to well manage the business, with the aim to meet the current and future needs of the Board composition. The NC also evaluates the candidates’ character and ability to commit sufficient time to the Group. Other factors considered for appointment of Independent Director will include the level of independence of the candidate.
The NC will also be reviewing the composition of respective Board Committees of the Company to ensure its functional effectiveness.
The NC has also established a set of quantitative and qualitative performance criteria to evaluate the performance of each member of the Board, each Board Committee and reviewing the performance of the Board as a whole. The criteria for assessment of Directors shall include attendance record, intensity of participation at meetings, quality of interventions and special contributions.
5.2 Directors’ Training and Development
In addition to the mandatory programmes as required by Bursa Securities, the Directors are mindful that they should continue to attend training programmes to enhance and update their skills and knowledge where relevant, as well as to keep abreast with the changing regulatory and corporate governance developments The Board shall disclose in the Annual Report the trainings attended by the Directors.
6.1 Board meetings
6.1.1 Calling of Meetings
A Director may, and the Secretary at the request of a Director shall, summon a meeting of the Directors at any time provided reasonable notice is given. Regular meetings are scheduled up front where an annual meeting calendar is prepared and circulated to all the Directors before the beginning of the new financial year.
6.1.2 Notice of Meetings
Notice of a meeting of the Directors is deemed to be duly given to a Director if it is given to him personally or by electronic communication to an address given by him to the Company for that purpose or sent in writing to him at his last known address or another address given by him to the Company for that purpose. A Director may waive the requirement that notice be given to him of a meeting of the Directors, either prospectively or retrospectively provided that the waiver is made and signed by the Director in writing.
6.1.3 Schedule and Frequency of Meetings
The Board meets at least four times a year, with additional meetings convened when decisions on urgent matters are required between scheduled meetings. Upon consultation with the Chairman, due notice is given to all Directors of all meetings.
7. Access to Information and Independent Professional Advice
The Board may seek independent professional advice at the Company’s expense on specific issues to enable it to discharge its duties in relation to matters being deliberated. Individual Directors may also obtain independent professional or other advice in furtherance of their duties, subject to the approval of the Chairman or the Board, depending on the quantum of the fees involved.
The Meeting Papers will be prepared and distribute to the Board and respective Board Committees via e-mail. This is to ensure The Board and Committee members are able to access the information timely especially for the members who are on duty in overseas and in more efficient manner, thus improving Board performance and overall effectiveness of decision making.
The Directors have individual and independent access to the advice and dedicated support services of the Company Secretaries in ensuring the effective functioning of the Board. The Directors may seek advice from the Management on issues under their respective purview. The Directors may also interact directly with the Management, or request further explanation, information or updates on any aspect of the Company’s operations or business concerns from them.
8. Review of the Board Charter
This Board Charter will be reviewed periodically to ensure the needs of the Company are met as well as to encompass any development in rules and regulations that may have an impact on the discharge of the Board’s duties and responsibilities.
The Board will make any necessary amendments to ensure they remain consistent with the Board’s objectives, current laws and governance practices. Any updates to the principles and practices set out in this Charter will be made available on the Company’s corporate website.
The Board charter has been adopted and subsequently revised by the Board on 27 November 2017.