Report Functions CAC
1. Composition, responsibilities and operation
On 17 April 2015, the Board of Directors approved the creation of the Audit and Control Committee.
The Board of Directors shall appoint from its members an Audit and Control Committee that comprises the number of directors determined in each case, within the minimum of three members and maximum of five members envisaged in the bylaws, all of whom must have the status of non-executive directors. At least two of the members of the Audit and Control Committee shall have the status of independent directors, and one of them will be appointed for his/her knowledge and experience in the area of accounting, auditing, or both.
The Audit and Control Committee comprises the following members:
|Mr. Pierre Blayau||Independent||16/04/2015||Chairman|
|Mr. Francisco José Aljaro||Dominical||17/11/2014|
|Mr. Bertrand Boudewijn Kan||Independent||16/04/2015|
|Ms. Mary Annabel Gatehouse||29/06/2015||Chairman|
The rules of organization and operation of the Audit and Control Committee, described below, are contained in article 23, chapter c.2 of the Bylaws and article 15 of the Board of Directors’ Regulation, without prejudice to the other tasks assigned to it by the applicable legislation or the Board, the Audit and Control Committee will have at least the following responsibilities:
- To inform the General Shareholders’ Meeting on questions arising in relation to those matters which fall within the competence of the Committee;
- To propose to the Board of Directors, for submission to the General Shareholders’ Meeting, proposals for the selection, appointment, re-election and replacement of the external auditors or auditing company, the contract conditions, the scope of the professional mandate and, where appropriate, revocation or non-renovation, all pursuant to the current regulations, as well as to regularly gather from the same information on the audit plan and the implementation thereof, and to safeguard their independence in the exercising of their duties;
- To monitor the process of preparing and presenting the mandatory financial information as well as the integrity thereof;
- To establish the appropriate relations with the external auditors or external auditing companies in order to receive information on issues which may prejudice their independence, to be studied by the Committee, and any other information related to the auditing of the accounts, as well as any other notifications envisaged in the legislation and regulations concerning the auditing of accounts. In all cases, they must receive on an annual basis from the external auditors or external auditing companies written confirmation of their independence from the Company or any organisations directly or indirectly related thereto, in addition to information regarding any additional services of any kind provided to said organisations and the corresponding fees received therefrom by the external auditors or external auditing companies, or by persons or organisations related thereto in accordance with the provisions established in the legislation applicable to the auditing of accounts;
- To issue, on an annual basis, prior to the issue of the Audit Report, a report expressing an opinion on the independence of the external auditors or auditing companies. This report must contain, in all cases, an evaluation of the provision of the additional services referred to in the previous paragraph, considered individually and as a whole, other than the legal audit, and in connection with their independent status or with the governing regulations of the audit;
- To inform the Board of Directors in advance on all matters provided for by the Law, the corporate bylaws and in these Regulations and, in particular, regarding the financial information that the Company must publish periodically, on the creation or acquisition of holdings in entities with a special purpose or domiciled in countries or territories considered as being tax havens and on operations with associated parties;
- To supervise compliance with the internal protocol for relationships between the majority shareholder and the Company and the companies of its respective groups, as well as to conduct any other actions established in the protocol itself for optimal compliance with the aforesaid duty of supervision;
- To provide information in relation to the transactions that involve or could involve conflicts of interest, and in general, on the matters considered in Chapter IX of the Board of Director’s Regulation;
- To inform on operations of structural and corporate modifications which the Company plans to conduct, the economic conditions and the accounting impact thereof and, in particular, on the exchange ratio, where applicable;
- To monitor the effectiveness of the Company’s internal control, the internal audit services, verifying the suitability and integrity thereof and to review the appointment and replacement of those persons responsible for the same, to supervise the suitable security and control measures for preventing the commission of criminal offences, the risk management systems, including fiscal risks, the systems for managing compliance with all applicable regulations, as well as to discuss with the external auditors any significant weaknesses detected in the internal control system while conducting the audit;
- To supervise a mechanism which allows employees to confidentially report potentially relevant irregularities detected inside the Company, especially those regarding finance and accounting, as well as those which may constitute a criminal responsibility for the Company.
The above responsibilities are stated by way of example, without prejudice to any others that may be conferred upon the Committee by the Board of Directors or which may be attributed thereto by the regulations governing the auditing of accounts.
The Board of Directors’ Regulation shall define the skills of the Committee and its scheme of organization and operation.
The Board shall likewise determine who will hold the position of Chair from among the independent directors, who will be replaced every four years, being able to be re-elected once a period of one year has elapsed since his/her resignation. The Committee itself will appoint a Secretary and may also appoint a Vice-Secretary, neither needing to be members thereof.
The Audit and Control Committee will meet as many times as necessary for the execution of its functions and will be convened by its Chairman, either on his/her own initiative or at the request of the Chair of the Board of Directors, or of two members of the Committee itself.
The Audit and Control Committee will be validly constituted when the majority of its members attend the meeting, either present or represented. The resolutions will be adopted by a majority vote among those in attendance, present or represented.
Any member of the management team or company personnel will be obliged to attend the Committee’s sessions and to provide them with his/her assistance and access to the information s/he has available, if so requested. The Committee can also request that the Company’s external auditors attend its sessions.
During 2015, the Audit and Control Committee met on seven occasions and carried out the following activities:
a) Review of financial information
- Half yearly financial statements
- In July, the Audit and Control Committee reviewed the half-yearly financial statements with those responsible for preparing them; they also reviewed the conclusions of the work carried out by the external auditors. After due consideration, they provided a favourable recommendation to the Board of Directors to approve the interim consolidated financial statements.
- Quarterly information
- In October, the members reviewed the financial results for the third quarter of the year. This information was discussed with the members of the management team responsible for their preparation. The Committee reported to the Board of Directors and provided a favourable recommendation to approve the third quarter results.
- In November, the members reviewed the third quarter interim consolidated financial statements with those responsible for their preparation, together with the external auditors who presented the conclusions of their limited review to the Committee. The members provided a favourable recommendation to the Board of Directors to approve the interim consolidated financial statements.
b) External auditors.
- In July, the Committee met the external auditors to review: (i) the scope and methodology of their engagement and audit work; and (ii) the conclusions of their review of the Q2 interim consolidated financial statements.
- In November, the Committee met the external auditors who reported the results of the limited review of the Q3 interim consolidated financial statements.
- In December, the external auditors attended the Committee to present the conclusions of their work carried out in relation to the Company’s internal control over financial reporting model for regulated information.
c) Other information.
- Interim dividend: at the November meeting, following a detailed review of the Company’s financial information with those responsible, the Committee reviewed the dividend policy and agreed to provide a favorable recommendation to the Board of Directors to approve the proposed distribution of an interim dividend in December.
- Refinancing and bond issuance: In May, the Committee reviewed the key information relating to a potential bond issuance and the proposed refinancing of the Company’s existing facilities (together the “Refinancing Proposal”), and provided a favorable recommendation to the Board of Directors to approve the Proposed Refinancing. In June, management provided the Committee with an update on the Refinancing Proposal and in July, confirmed the issuance of the bond and execution of the Refinancing Proposal.
- Approval of the Treasury Stock Policy and Authorisations: At the November meeting, the Committee reviewed the draft Treasury Stock Policy which has been circulated to the members for their comments by those responsible for preparing it. The Committee resolved to provide a favourable recommendation to the Board of Directors to approve the Treasury Stock Policy and the proposed Authorisations.
- In December, the Committee proposed to the Board of Directors to approve, in accordance with Chapter IX of Part IX of Law No. 37/1992 of 28 December, the special regime for groups of entities for VAT, as the parent company of the group, for the accounting period 2016 and subsequent periods in accordance with such Law.
e) Internal Control over Financial Reporting (ICFR).
- In accordance with the Company’s commitment to ensure the reliability and integrity of financial information and considering that its previous shareholder was also a listed company, Cellnex already had a model of internal control over financial reporting, although part of the monitoring and audit activities related to the corporate functions of Abertis. Therefore, most of the activities carried out by the Committee during 2015 were to adapt this model to the Company’s needs as a newly listed entity.
- In this regard, the Committee carried out the following activities in relation with the ICFR during 2015:
- Monitoring the degree of implementation and possible changes in the ICFR model.
- Approving the review criteria of the ICFR.
- Development of the following manuals in relation to the ICFR:
- Organisation and Supervision Model for the ICFR;
- Manual of Internal Control and Risk Management of Financial Reporting;
- Manual for the Publishing of Financial Reporting.
- During 2015, the Committee met with Internal Audit and with the Company’s external auditors to review the requirements of the ICFR and to monitor and analyze the evolution of the implementation of the ICFR.
- In December, the Committee met with the external auditors to review the key findings of their ICFR work in order to understand any internal control weaknesses identified in their work as well as all other significant findings.
- Finally, the Committee reviewed all the financial information that the Company released to the market during the period.
f) Monitoring internal audit.
- Functions. The main Internal Audit functions are:
- The definition of the auditing activities to be defined through an annual audit plan, based on reasonable and established criteria, especially in the risk level assessment and focusing on the main organization’s activities, giving priority to those that are considered to be more exposed to risk, and those that are requested by Senior Management
- An adequate coordination with the external auditors to be maintained for the exchange of information regarding the audits carried out with the aim of minimizing duplication and to track the audits performed, as well as any weaknesses in the internal control identified.
- Report to the Audit and Control Committee and Senior Management of Cellnex Group regarding the key recommendations in each company, as well as the action plan to be performed by the Company.
- Activities. The main activities carried out by Internal Audit and supervised by the Audit and Control Committee:
- Those audits included in the 2015 Audit Plan.
- Monitoring recommendations proposed in the reviews.
- 2016 Audit Plan. In October, the Committee approved the 2016 Annual Audit Plan based upon:
- Assessing the risk level and focusing on the main organization’s activities, giving priority to those that are considered to be more exposed to risk, and those that are requested by Senior Management.
- Defining the activities to be reviewed: basic processes (revenues, procurements, etc.), other processes (patrimony) and compliance (ICFR, others).
g) Risk control.
This function is carried out by Internal Audit.
- Functions. Internal Audit establishes mechanisms to identify, assess, prioritise and monitor the risks defined by the areas to mitigate the risks.
- Activities. The activities carried out by Internal Audit since July 2015 and supervised by the Committee were:
- Reviewing the Risk Map: in July, the Committee carried out a review (including likelihood and impact).
- Monitoring the main changes in risks: carried out in the October and November meetings of the Committee.
- Risk Management Policies: in December, the Committee approved the Company’s Risk Management Policies.
During 2016, an update of the Risk Map will be carried out and the Risk Map of Cellnex Italy will be defined.
f) Ethics channel.
Review the level of implementation of the Ethics Channel. This channel enables employees to report any significant irregularity that may be detected. The channel has been implemented via the Company’s intranet and on the webpage and became operative in December 2015.