BlueNord is committed to maintaining a high standard of corporate governance and believes that effective corporate governance is essential to its success.
Implementation and reporting on corporate governance
The board of directors (hereinafter the “Board”) is focused on maintaining an appropriate standard on corporate governance and to fulfil the recommendations in the Norwegian Code of Practice for Corporate Governance.
The Company will seek to comply with the Norwegian Code of Practice for Corporate Governance (the “Corporate Governance Code”), last revised on 17 October 2018, which is available at the Norwegian Corporate Governance Committee’s website www.nues.no. The principal purpose of the Corporate Governance Code is to ensure (i) that listed companies implement corporate governance that clarifies the respective roles of shareholders, the Board of Directors and executive management more comprehensively than what is required by legislation and (ii) effective management and control over activities with the aim of securing the greatest possible value creation over time in the best interest of companies, shareholders, employees and other parties concerned.
According to the Company’s own evaluation, the Company deviates from the Corporate Governance Code on the following points:
- The Board of Directors of the Company has been, and is expected to be, provided with authorisations to acquire own shares and issue new shares. Not all of such authorisations have separate and specific purposes for each authorisation as the purposes of the authorisations shall be explained in the notices to the general meetings adopting the authorisations.
- Options have been and/or are expected to be granted members of the Board of Directors in addition to management through the share option programme of the Company, first implemented at a general meeting of 21 January 2016 and later extended and expanded.
- Due to the unpredictable nature of a takeover situation, the Company has decided not to implement detailed guidelines on take-over situations. In the event a takeover was to occur, the Board of Directors will consider the relevant recommendations in the Corporate Governance Code and whether the concrete situation entails that the recommendations in the Corporate Governance Code can be complied with or not.
The Board of BlueNord is responsible for compliance with corporate governance standards. Noreco is a Norwegian public limited liability company (ASA), listed on the Oslo Stock Exchange and established under Norwegian laws. In accordance with the Norwegian Accounting Act, section 3- 3b, Noreco includes a description of principles for corporate governance as part of the Board of Directors’ Report in the annual report. The Company will seek to comply with the Corporate Governance Code. The Board of Directors will include a report on the Company’s corporate governance in its annual report, including an explanation of any deviations from the Corporate Governance Code. The Company’s strategy is to continue its value creation to replace and maximise recovery of proven reserves and resources and to continue to explore new opportunities in and above the ground.
BlueNord's business and main strategy
The Company is an E&P company with a strategic focus on value creation through increased recovery, enabled by a competent organisation with a long-term view on reservoir management and the capability to invest and leverage new technology.
On an annual basis, the Board defines and evaluates the Company’s objectives, main strategies and risk profiles for the Company’s business activities to ensure that the company creates value for shareholders.
The Company integrates considerations related to its stakeholders into its value creation and shall achieve its objectives in accordance with the Company’s Code of Conduct
The Company’s business is defined in the following manner in the Company’s articles of association (the “Articles of Association”) section 3:
The object of the Company is direct and indirect ownership and participation in companies and enterprises within exploration, production, and sale related to oil and gas, and other activities related hereto.
Equity and dividents
As of 31 December 2019, the Company’s consolidated equity was USD 575 million, which is equivalent to approximately 20% of total assets. The Company’s equity level and financial strength shall be considered in light of its objectives, strategy and risk profile.
The Company has not paid any dividends to date, whether in cash or in kind.
The Company does not expect to make dividend payments prior to completion of the Tyra Redevelopment project. The Company may revise its dividend policy from time to time. The Company currently intends to retain all earnings, if any, and to use these to finance the further business of the Company.
Share capital increases and issuance of shares
In the extraordinary general meeting held on 8 November 2018 the Board of Directors was granted authorization to increase the share capital of the Company in connection with acquisition of shares in SOGU, valid until the ordinary General Meeting in 2020, however in any event no later than until 30 June 2020.
Purchase of own shares
The Board of Directors of the Company has been authorised to acquire own shares with a total par value of NOK 7,194,730 that is valid until 28 June 2020. The authorisation may be used in relation to incentive schemes, strengthening the equity capital and for funding business opportunities.
At the end of 2019, the Company did not hold any of its own shares. Subsequent to the period end, BlueNord launched a share buy-back programme in early 2020 and as per 30 April 2020 holds 345,917 of its own shares.
Equal treatment of shareholders and transactions with related parties
Class of shares
The Company has one class of shares. All shares carry equal rights in the Company, and the Articles of Association do not provide for any restrictions, or rights of first refusal, on transfer of shares. Share transfers are not subject to approval by the Board of Directors.
Pre-emption rights to subscribe
According to the Norwegian Public Limited Liability Companies Act section 10-4, the Company’s shareholders have pre-emption rights in share offerings against cash contribution. Such pre-emption rights may; however, be set aside, either by the general meeting or by the Board of Directors if the general meeting has granted a board authorisation which allows for this. Any resolution to set aside pre-emption rights will be justified by the common interests of the Company and the shareholders, and such justification will be publicly disclosed through a stock exchange notice from the Company.
Trading in own shares
The Board of Directors will aim to ensure that all transactions pursuant to any share buy-back program will be carried out either through the trading system at Oslo Børs or at prevailing prices at Oslo Børs. In the event of such program, the Board of Directors will take the Company’s and shareholders’ interests into consideration and aim to maintain transparency and equal treatment of all shareholders. If there is limited liquidity in the Company’s shares, the Company shall consider other ways to ensure equal treatment of all shareholders.
Transactions with close associates
The Board of Directors aims to ensure that any not immaterial future transactions between the Company and shareholders, a shareholder’s parent company, members of the Board of Directors, executive personnel or close associates of any such parties are entered into on arm’s length terms. For any such transactions which do not require approval by the general meeting pursuant to the Norwegian Public Limited Liability Companies Act, the Board of Directors will on a caseby- case basis assess whether a fairness opinion from an independent third party should be obtained.
Guidelines for directors and executive management
The Board of Directors has adopted rules of procedures for the Board of Directors which inter alia includes guidelines for notification by members of the Board of Directors and executive management if they have any material direct or indirect interest in any transaction entered into by the Company.
Freely negotiable shares
The shares of the Company are freely transferable. There are no restrictions on transferability of shares pursuant to the Articles of Association.
The Board of Directors will make its best efforts with respect to the timing and facilitation of general meetings to ensure that as many shareholders as possible may exercise their rights by participating in general meetings, thereby making the general meeting an effective forum for the views of shareholders and the Board of Directors.
The notice for a general meeting, with reference to or attached support information on the resolutions to be considered at the General Meeting, shall as a principal rule be sent to shareholders no later than 21 days prior to the date of the General Meeting. The Board of Directors will seek to ensure that the resolutions and supporting information are sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting. The notice and support information, as well as a proxy voting form, will normally be made available on the Company’s website bluenord.prod.dekodes.no/general-meeting no later than 21 days prior to the date of the general meeting.
Participation and execution
To the extent deemed appropriate or necessary by the Board of Directors, the Board of Directors will seek to arrange for the general meeting to vote separately on each candidate nominated for election to the Company’s corporate bodies.
The Board of Directors and the nomination committee shall, as a general rule, be present at general meetings. The auditor will attend the ordinary general meeting and any extraordinary general meetings to the extent required by the agenda items or other relevant circumstances. The Board of Directors will seek to ensure that an independent chairman is appointed by the general meeting if considered necessary based on the agenda items or other relevant circumstances.
The Company will aim to prepare and facilitate the use of proxy forms which allows separate voting instructions to be given for each item on the agenda, and nominate a person who will be available to vote on behalf of shareholders as their proxy. The Board of Directors may decide that shareholders may submit their votes in writing, including by use of electronic communication, in a period prior to the general meeting. The Board of Directors should seek to facilitate such advance voting.
The nomination committee is provided and governed by the Articles of Association, in addition to instructions for the nomination committee. The nomination committee shall consist of three members who shall be shareholders or shareholder representatives. The members shall be elected by the general meeting for a term of two years, unless the General Meeting determines that the term shall be shorter.
The members of the nomination committee should be selected to take into account the interests of shareholders in general. The majority of the committee should be independent of the Board of Directors and the executive personnel. At least one member of the nomination committee should not be a member of the board. No more than one member of the nomination committee should be a member of the Board of Directors, and any such member should not offer himself or herself for re-election to the board.
The nomination committee shall give its recommendation to the general meeting on election of and compensation to members of the Board of Directors, in addition to election of and compensation to members of the nomination committee. The proposals shall be justified.
The Company should provide information on the membership of the committee and provide suitable arrangements for shareholders to submit proposals to the committee for candidates for election.
Board of Directors: Composition and Independence
Pursuant to the Articles of Association section 5, the Company’s Board of Directors shall consist of three to seven members, which are shareholders’ elected members in accordance with a decision by the General Meeting.
The composition of the Board of Directors should ensure that the board can attend to the common interests of all shareholders and meet the Company’s need for expertise, capacity and diversity. Attention should be paid to ensuring that the board can function effectively as a collegiate body.
The composition of the Board of Directors should ensure that it can operate independently of any special interests. The majority of the shareholder-elected members of the board should be independent of the Company’s executive personnel and material business contacts. At least two of the members of the Board elected by shareholders should be independent of the Company’s main shareholder(s), the executive personnel and material business contacts.
The Board of Directors should not include executive personnel, if the board does include executive personnel, the Company should provide an explanation for this and implement consequential adjustments to the organisation of the work of the board, including the use of board committees to help ensure more independent preparation of matters for discussion by the board.
The Chairman of the Board of Directors should be elected by the General Meeting.
The annual report should provide information to illustrate the expertise of the members of the Board of Directors, and information on their record of attendance at board meetings. In addition, the annual report should identify which members are considered to be independent.
Work of the Board of Directors
The Board of Directors is responsible for the overall management of the Company, and shall supervise the Company’s business and the Company’s activities in general.
The Norwegian Public Limited Liability Companies Act regulates the duties and procedures of the Board of Directors. In addition, the Board of Directors has adopted supplementary rules of procedures, which provides further regulation on inter alia the duties of the Board of Directors and the managing director, the division of work between the Board of Directors and the managing director, the annual plan for the Board of Directors, notices of board proceedings, administrative procedures, minutes, board committees, transactions between the Company and the shareholders and matters of confidentiality.
The board shall produce an annual plan for its work, with a particular emphasis on objectives, strategy and implementation. The managing director shall at least once a month, by attendance or in writing, inform the Board of Directors about the Company’s activities, position and profit trend.
The Board of Directors’ consideration of material matters in which the chairman of the board is, or has been, personally involved, shall be chaired by some other member of the board.
The Board of Directors shall evaluate its performance and expertise annually, and make the evaluation available to the nomination committee.
The audit committee
The Company’s audit committee is governed by the Norwegian Public Limited Liability Companies Act and a separate instruction adopted by the Board of Directors. The members of the audit committee are appointed by and among the members of the Board of Directors. A majority of the members shall be independent of the Company’s operations, and at least one member who is independent of the Company shall have qualifications within accounting or auditing. Board members who are also members of the executive management cannot be members of the audit committee.
The principal tasks of the audit committee are to:
Prepare the Board of Directors’ supervision of the Company’s financial reporting process;
Monitor the systems for internal control and risk management;
Have continuous contact with the Company’s auditor regarding the audit of the annual accounts; and
Review and monitor the independence of the Company’s auditor, including in particular the extent to which the auditing services provided by the auditor or the audit firm represent a threat to the independence of the auditor.
The remuneration committee
The compensation for the members of the Board of Directors for their service as directors is determined annually by the shareholders of the Company at the annual general meetings of shareholders, on the basis of the motion from the Nomination Committee.
The Board of Directors has established a guideline for salaries and other remuneration to the managing director and other senior executives valid until the Annual General Meeting in 2020. The guideline was endorsed by the Annual General Meeting in May 2019.
The remuneration package for members of management includes fixed and variable elements. The fixed element consists of a base salary and other benefits, such as free mobile phone and life, accident and sickness insurance in accordance with normal practice in the oil industry.
Variable elements of remuneration may be used, or other special supplementary payment may be awarded other than those mentioned above if this is considered appropriate.
Remuneration to the managing director will be evaluated regularly by the Board of Directors to ensure that salaries and other benefits are kept, at all times, within the above guidelines and principles.
Remuneration of the Board of Directors
The remuneration of the Board of Directors shall be decided by the Company’s General Meeting of shareholders, and should reflect the Board of Directors’ responsibility, expertise, time commitment and the complexity of the Company’s activities. The remuneration should not be linked to the Company‘s performance.
The nomination committee shall give a recommendation as to the size of the remuneration to the Board of Directors. Pursuant to the instructions for the nomination committee, the recommendation should normally be published on the Company’s website at least 21 days prior to the General Meeting that will decide on the remuneration.
The annual report shall provide details of all elements of the remuneration and benefits of each member of the Board of Directors, which includes a specification of any remuneration in addition to normal fees to the members of the Board.
Members of the Board of Directors and/or companies with which they are associated should not take on specific assignments for the Company in addition to their appointment as a member of the board. If they do nonetheless take on such assignments this should be disclosed to the full board. The remuneration for such additional duties should be approved by the Board of Directors.
Operation of the Executive Management
The Board of Directors will in accordance with the Norwegian Public Limited Liability Companies Act prepare separate guidelines for the stipulation of salary and other remuneration to key management personnel. The guidelines shall include the main principles applied in determining the salary and other remuneration of the executive management, and shall ensure convergence of the financial interests of the executive management and the shareholders. It should be clear which aspects of the guidelines that are advisory and which, if any, that are binding thereby enabling the general meeting to vote separately on each of these aspects of the guidelines. The guidelines will be made available to and shall be dealt with by the ordinary general meeting in accordance with the Norwegian Public Limited Liability Companies Act.
The Board of Directors aims to ensure that performancerelated remuneration of the executive management in the form of share options, annual bonus programs or the like, if used, are linked to value creation for shareholders or the Company’s earnings performance over time. Performance-related remuneration should be subject to an absolute limit. Furthermore, the Company aims to ensure that such arrangements are based on quantifiable factors that the employee in question can influence.
Information and Communications
The Board of Directors has adopted a separate manual on disclosure of information, which sets forth the Company’s disclosure obligations and procedures. The Board of Directors will seek to ensure that market participants receive correct, clear, relevant and up-to-date information in a timely manner, taking into account the requirement for equal treatment of all participants in the securities market.
The Company will each year publish a financial calendar, providing an overview of the dates for major events such as its ordinary general meeting and publication of interim reports.
Information to shareholders
The Company shall have procedures for establishing discussions with important shareholders to enable the board to develop a balanced understanding of the circumstances and focus of such shareholders. Such discussions shall be done in compliance with the provisions of applicable laws and regulations.
All information distributed to the Company’s shareholders will be published on the Company’s website at the latest at the same time as it is sent to shareholders.
In the event the Company becomes the subject of a takeover bid, the Board of Directors shall seek to ensure that the Company’s shareholders are treated equally and that the Company’s activities are not unnecessarily interrupted. The Board of Directors shall also ensure that the shareholders have sufficient information and time to assess the offer.
There are no defense mechanisms against takeover bids in the Company’s Articles of Association, nor have other measures been implemented to specifically hinder acquisitions of shares in the Company. The Board of Directors has not established written guiding principles for how it will act in the event of a takeover bid, as such situations are normally characterized by concrete and one-off situations which make a guideline challenging to prepare. In the event a takeover were to occur, the Board of Directors will consider the relevant recommendations in the Corporate Governance Code and whether the concrete situation entails that the recommendations in the Corporate Governance Code can be complied with or not.
The Board of Directors will require the Company’s auditor to annually present to the audit committee a review of the Company’s internal control procedures, including identified weaknesses and proposals for improvement, as well as the main features of the plan for the audit of the Company.
Furthermore, the Board of Directors will require the auditor to participate in meetings of the Board of Directors that deal with the annual accounts. At least one board meeting with the auditor shall be held each year in which no member of the executive management is present.
The Board of Directors’ audit committee shall review and monitor the independence of the Company’s auditor, including in particular the extent to which services other than auditing provided by the auditor or the audit firm represents a threat to the independence of the auditor.
The remuneration to the auditor for statutory audit will be approved by the ordinary general meeting. The Board of Directors should report to the general meeting on details of fees for audit work and any fees for other specific assignments.