PACIFIC GROUP HOLDING Plc (“THE COMPANY”): HOW THE COMPANY SEEKS TO ACHIEVE GOOD CORPORATE GOVERNANCE
What is good corporate governance?
“In essence, good corporate governance is about having the right people in the right roles, working together, and doing the right things to deliver value for shareholders as a whole over the medium to long-term.
Good corporate governance is achieved through a series of decisions made by the board, which needs to be kept dynamic and diverse and engender a consistent corporate culture throughout the organisation. Good corporate governance is about ensuring that the board is set up to make robust decisions and manage risk. It is also increasingly about ensuring that a healthy culture is in place which combines a strong focus on performance and a sense shared throughout the workforce of what is acceptable and what is unacceptable in terms of behaviour.” (Extract from the introduction to the QCA Corporate Governance Code).
The Code provides a framework designed to ensure that companies who adopt and comply with its provisions have boards that fulfil not only their statutory obligations but also those to their shareholders and other stakeholders.
The London Stock Exchange has determined that each AIM company must confirm that it intends to comply with the provisions of a recognised corporate governance code and cite any areas in which it intends to deviate from the provisions of that code.
The Board of the Company has confirmed its intention to comply with the provisions of the QCA Corporate Governance Code (“the Code”) in so far as it is appropriate to an organisation of the size and structure of the Company.
As Chairman of the Company it is my responsibility to ensure that in its methods of management, the manner in which the Board is structured and operates and in its relationship with its shareholders it is compliant with the Code.
The following explain the way in which the Company complies with the ten key principles of in the Code; the disclosures were last updated on 3 October 2024.
Principle 1: Establish a strategy and business model which promote long-term value for shareholders.
The Company’s strategy is to acquire and manage commercial assets and which will primarily be situated in Latin America and in or related to the agribusiness sector with such acquisitions and their subsequent management being undertaken by the Company together with one or more co-investors.
The Directors review the Company’s investment policy annually and will advise shareholders of any variations or alterations to it. Were the Company to make an investment that fell outside of the stated investment policy the Directors would do so in compliance with the AIM Rules and having obtained shareholder consent.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Board has to date kept its shareholders updated about developments in the Company through RNS announcements and its website from which it is possible to check the progress being made by each of the companies into which it has invested. In this way it has informed them about investments made and developments by the companies into which investments have been made.
The Board has decided that in order that information provided to shareholders does not provide a misleading picture as to the potential of a particular investments it does not provide periodic returns or disclosures or calculations of net assets value unless there is information that is would be regarded as being disclosable under Rule 11 of the AIM Rules.
The Company offers shareholders the opportunity to listen to and interrogate the Board at its Annual General Meeting that is held at a central London location and in premises able to hold large numbers of shareholders. In addition, shareholders may ask questions of the Board or to make comment by emailing it at: info@pacificgroupholdingsplc.com.
Although it is not aware of any information that should have been shared with its shareholders the Board is reviewing the methods of communication it has used to see if it is able to provide them with a fuller understand of the Company’s business.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long term success
The Board’s primary statutory responsibility is to promote the success of the Company for the benefit of its shareholders. The Company has no employees other than the Directors and the it recognises and accepts its responsibility to shareholders and other parties including those who supply services to pursue a socially responsible approach in all its dealings.
Due to the present size and nature of the Company the social, environmental and economic impacts from carrying out its business are limited but are of not disregarded. As an investment objective the Company seeks out (but is not limited to) businesses producing “green” products or which are intended to produce a social benefit such as re-cycling of materials that would otherwise be disposed of.
The Board takes a socially responsible approach to all its investments and satisfies itself that each is socially useful and is operated an ethically and environmentally satisfactory manner.
Any feedback received from shareholders on individual investments or on more general matters of policy received from shareholders (or any other stakeholders) is referred to the Board to ensure that it is informed. Any action taken in response is dictated by the nature of the feedback.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation.
The Company is not subject to particular pressures from competitors or from suppliers of services or finance. This is due to the substantial number of potential investments that are available to it.
The major risk that the Board has to face is the need to ensure firstly that a potential investment meets the Company’s stated investment parameters, secondly, that the nature of its business and market fits within the investment policy selected by the Board and that the potential return for shareholders is sufficient to justify the investment risk.
The Board contains the legal accounting and investment skills required to assess investment opportunities and the Company has available to it a range of persons who, together, are experts in all the areas in which the Company would consider investing and who are thereby able to ensure that the Board is adequately informed when it considers whether it should invest in a particular project.
Each of the investment decisions are made after careful and detailed analysis and consideration; the Board is not under any pressure to make a particular number or value of investments in any year so that there is no undue pressure on it to invest in high-risk positions that may damage shareholder value if they are unsuccessful.
The Company’s risk when investing is further reduced by it choosing to co-invest who are of a suitable size and good reputation rather than be the sole investor as the size of the investment is thereby reduced and the Board knows that another party has also carried out due diligence on the opportunity and has been satisfied.
The level of operational risk is low because of the simplicity of the Company’s operating structure and the absence of mangers or other employees below the Board. The Company’s transactions are essentially limited to the making of the investments and of any subsequent disposals or re-investments. For these reasons the members of the Board are able stay in close contact with all the financial and operational aspects of the Company’s business.
Principle 5: Maintain the Board as a well-functioning, balanced team led by the chair
The size and composition of the Board have reflected both the Company’s strategy of having an operating structure that is simple and low cost and the need for it to be able to call on various areas of expertise when making an investment decision. In this manner the board contains expertise in investment and in undertaking due diligence exercises and in financial and legal matters.
The Board is composed of myself, Edgar Hernandez as President and Chief Executive Officer, Nilesh Jagatia as Chief Financial Director and Peter Jay as Non-Executive Chairman and Daniele Penna as independent Non-Executive Directors of the Company. Further details of the Directors (including their respective time commitments and attendances at board and committee meetings) are included under principle 6.
As Chairman my responsibility includes chairing Board Meetings and using my professional experience of making financial investments and managing funds to source and organise due diligence on possible investments and to lead the negotiation and manage the making of any investment that the Board decides that the Company should make.
I am satisfied that the composition of the Board and its collective skills enable it to analyse and complete potential investments and that save for particular trade or scientific expertise that may be required for the analysis of certain investments it is able to assess and complete investments by the Company.
Principle 6: Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
Currently, the Board meets on whenever there is a need for decisions to be made or reports to be provided.
The Directors have the experience and skills required to enable to successfully undertake its business and execute its strategy.
I maintain a dialogue with a number of specialists in various new technologies relating to the areas of green and renewable products and sciences to ensure that I and our Board and our external experts are aware of new products, businesses that may be potential investments for the Company. I also attend trade shows and seminars and link to high level private equity/private debt asset managers for this purpose.
My fellow directors maintain their further professional education by attending lectures and reading professional journals.
The Executive Directors
Edgar Hernandez – President and Chief Executive Officer
Mr Hernandez followed more than 25 years’ experience as an investment banking professional in the areas of commercial banking, insurance, investment management, and risk management across Central and South America by founding in 2012 Pacific Capital Investment Banking Advisory, (“Pacific Capital”). Pacific Capital, a Guatemalan entity manages, works with and co-invests with companies such as Santander Group, Manttra, Allied Global, Qitronics, Pacific Trust and Grupo Hache in a range of industries and sectors including Agribusiness, Agritech, Energy and Business Process Outsourcing. The investments are selected and actively managed by Mr Hernandez, his management team at Pacific Capital and by employees of the co-investors. In addition, since 2023 Pacific Capital has been an advisor to CreAI, a Mexican start-up focused on developing artificial intelligence software solutions.
Mr Hernandez is the founding partner and principal of CreAI, he has also recently joined its Board of Directors. Mr Hernandez received an MBA in 1999 from INCAE Business School, Costa Rica, after graduating from Universidad Rafael Landívar in Guatemala in 1995 with a BA in Economics, and since 2005 Mr Hernandez has lectured on investment banking and international finance at the Universidad Francisco Marroquin (UFM) in Guatemala and also a director at Bolsa de Valores Nacional from 1999 to 2013.
There is no upper or lower limit to the amount of time that he is obliged to spend on the Company’s business; he is required to spend such an amount of time as is necessary for the proper performance of his duties.
Nilesh Jagatia – Chief Financial Officer
Nilesh is a qualified accountant and holds a degree in finance. Nilesh joined the Company during its original incorporation and flotation. As well as being Chief Financial Officer of the Company Nilesh holds similar positions with Octagonal Plc (financial services) and Inspirit Energy Holdings Plc (energy and technology).
He has been involved in a number of IPO’s and has been a CFO of quoted companies in various sectors including corporate finance, media, fintech, leisure and real-estate.
There is no upper or lower limit to the amount of time that he is obliged to spend on the Company’s business; he is required to spend such an amount of time as is necessary for the proper performance of his duties.
Peter Jay – Non-Executive Chairman
Peter spent 40 years as a corporate lawyer in the City and the West End, was a founding partner and subsequently senior partner of the firm that became Finers (later, Finers Stephens Innocent) before moving to become a partner specialising in capital markets with a national law firm, Beachcroft (now DAC Beachcroft LLP) in 2002. After retiring as a solicitor in 2008 Peter has provided corporate finance advice to a number of clients, project managed corporate transactions and held board position in listed and private companies.
Daniele Penna– Non-Executive Director
Daniele is a lawyer who was admitted to the bar in Rome in 1998. After working for Clifford Chance and Credit Suisse in Italy he moved to London in 2006 to work with Barclays Capital setting up its retail platform and subsequently worked for them on investor solutions and legal structuring.
After founding FCS Capital Partners and becoming its managing partner and general counsel taking the role of general counsel in 2015 he joined EBW Capital to work on fund raising in 2016.
In addition, Daniele is a partner with Laytons LLP, Solicitors and Chief Operating Officer at Sunset Credit Yield, a family office.
Principle 7: Evaluate Board performance based upon clear and relevant objectives, seeking continuous improvement
The Board has not yet implemented a formal evaluation process primarily because it was not considered to be of use in measuring the respective contributions of the individual directors, whose principal role is to contribute towards analysing potential investments, deciding on the merit of making required the same and monitoring the performance of the companies that are the subject of the investments. However, as the number of investments increases and it becomes possible to measure the return and performance of those that have been made a process for evaluation will be appropriate and required.
For the present however it has been agreed that a formal evaluation would not be a useful tool in my hands as Chairman or of the Board and that it is primarily the performance of the Company’s investments that acts as an indication of its performance.
The Board does however monitor closely the performance of the Company’s investments and the progress of the companies into which investments have been made. As noted above, it is not the Company’s intention to hold investments for the long-term and therefore continuous appraisal is not only a risk management tool but a necessary feature for divestment decision making.
Principle 8: Promoting a corporate culture that is based upon ethical values and behaviours
The Company has no employees and the only parties directly involved in it are the four persons who comprise the Board. The result is that the culture is a collegiate one with decisions being made following open discussion between them.
Emphasis is placed upon the need for integrity and accuracy in all dealings and attention to the interests of the shareholders.
As a feature of the investment policy, the Company prides itself on considering investments where there is a societal benefit as well as a financial return. Accordingly, these values are at the heart of its business.
Principle 9: Maintaining governance structures and processes that are fit for purpose and support good decision-making by the Board
The Company has adopted the Code and abides by its principles except that in certain aspects it has proceeded differently because the Board believes that the size and structure of the Company make other solutions more appropriate.
In particular:
1. The Board does not believe that it is necessary for it to create a nominations committee.
2. Apart from having convened AGMs and EGMs the Board has not organised meetings with its shareholders. The Board does intend to commence a shareholder engagement programme and convene the first of such meetings in the near future and to invite all the Company’s shareholders to it.
The Board will keep the Code and the manner in which it complies with it under regular review and will amend its policies and the manner in which it adheres to the Code from time to time in line with developments in the scope and size of the Company.
The Board is the primary decision-making forum of the Company and it is responsible for matters relating to the Company’s performance (and the review of it), strategy, financing, capital expenditure and administration.
The Board meets approximately once a month either together or by telephone and also meets on an ad hoc basis when it has an investment proposal to consider.
The Board is comprised of:
1. President and Chief Executive Officer, Edgar Hernandez
2. A Chief Financial Officer, Nilesh Jagatia.
3. Independent Non-Executive Chairman, Peter Jay
4. Independent Non-Executive Directors, Daniele Penna.
The Board has set up an Audit Committee. Delegated to it is the oversight of the Company’s annual audit, selection of the auditors and a meeting with the audit partner and his team following conclusion of their work. At that meeting the audit partner will advise the Committee of his conclusions as to the state of the Company’s financial systems and will highlights any matters that require improvement or correction.
The Committee’s chairman is Nilesh Jagatia who is assisted by me.
The Remuneration Committee has not yet had reason to meet and will be convened when it is required.
Principle 10: Communicating how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
1. The Company is managed by the Board of Directors who meet regularly:
2. Review the current and historic performance of the Company;
3. Review investment proposals;
4. Receive a report by the Chairman on the performance of the Company’s existing investments.
5. Receive reports (if any) from the Company’s audit or remuneration committees;
6. Review the Company’s cash flow and consider it in the context of funds it holds at the time;
7. Discuss matters relating to its AIM listing and relationships with its professional advisers;
As an irregular item, a discussion on any aspects of the Company’s strategy that arises from the above including consideration of new opportunities that may be available to it.
The Company’s strategy is to assess and make investments in line with its stated investment policy and where the businesses fit within the areas covered by the Company’s stated strategy. When investments are made or the Company exits from them entirely upon the winning of construction contracts of various sizes these events are announced to shareholders by way of an RNS which will provide as much information as other parties to the investment allow the Company to disclose.
The Board is reviewing the format and content of the trading statements in order to make them more informative for the shareholders and it is the Board’s intention to periodically commission independent research into the Company’s investments so as to provide shareholders with as transparent a view as possible of the Company.
The Board’s principal point of direct contact with its shareholders is at annual general meetings (it has not had reason to convene any extraordinary general meetings) and copies of the various resolutions that have been proposed are included in the various notices of annual general meeting that are listed on the Company’s website. All of the resolutions have been passed without any significant opposition.