Investor - Corporate Governance

As a company whose securities are traded on the Alternative Investment Market (“AIM”), the Parent Company is not required to adhere to the provisions of the 2006 FRC Combined Code on Corporate Governance and all of the disclosures made in this report are voluntary.

The purpose of this voluntary statement is to describe the Parent Company’s approach to corporate governance and, in particular, to explain,
review and report upon the effectiveness of how the Group and Parent Company has applied the principles set out in Section 1 of the
Combined Code issued in June 2006 which are commensurate with its size.

The Board is composed of a mixture of Executive and Non-Executive members in order to provide the division of responsibilities and balance which are considered appropriate to the Parent Company’s individual circumstances.

The Group and Parent Company is 80% owned by EOI Fire SARL (“EOI”) which is itself controlled by the Chairman of the Parent Company, J.G. Murray. In the absence of a substantial third party shareholder, it is considered unnecessary and, to a large degree unrealistic, to separate the roles of Chairman and Chief Executive. All the Executive Directors are connected with EOI as is M-C. Leon (Non-Executive Director) and are therefore not considered to be independent as required by the Combined Code.

To limit the effect of the majority shareholder, the Parent Company and EOI entered into a relationship agreement dated 10 December 1999 in which EOI has provided certain assurances to the Parent Company with regard to its relationship with the Parent Company. The agreement confirms that the business and affairs of the Parent Company shall be managed by the Board in accordance with the Parent Company’s Memorandum and Articles of Association and with applicable laws and all relevant statutory provisions for the benefit of the shareholders as a whole. Any transactions or other relationships between any member of the EOI Group and the Parent Company would be at arm’s length and on a normal commercial basis. The above Directors declare their interest and take no part in decisions where appropriate.

H. Shouler and M. Gailer are considered to be Independent Non-Executive Directors. H. Shouler is the recognised Senior Independent Non-Executive Director.

Due to the small size of the Board and close involvement of the majority shareholder, the Directors have no current intentions to appoint a third Independent Non-Executive Director.

Due to the relatively small size of the Group and the nature of its businesses, the Executive Directors are more directly involved in the day-to-day activities than would be the case in a larger, more diversified organisation.

The full Board meets regularly to review current trading and to make key operational and strategic decisions and has extensive access to detailed information in addition to the monthly management accounts and other reports that are circulated on a monthly basis. A schedule is maintained of matters specifically reserved for decision by the full Board, which includes matters of business strategy, business acquisitions, business disposals, approval of budgets and approval of financial statements. Interim meetings or appropriate sub-committees are established when decisions at full Board level are required between scheduled meetings.

All Directors have access to the Company Secretary who is responsible to the Board for ensuring that all applicable procedures and regulations are complied with. Each Director has the right to take independent professional advice in connection with his or her duties at the Parent Company’s expense.

Board Committees
The Board maintains two standing committees comprising Executive and Non-Executive Directors. Both committees have written constitutions and terms of reference.

The remuneration committee comprises H. Shouler, M. Gailer and J-J. Murray. The committee is chaired by H. Shouler. The remuneration committee reviews the performance of Executive Directors and sets the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. No Director is permitted to participate in decisions concerning his or her own remuneration.

The audit committee currently comprises H. Shouler, M. Gailer and J-J. Murray H. Shouler and M. Gailer are independent of management and EOI Fire SARL. The committee is chaired by H. Shouler. The audit committee is responsible for ensuring that the financial performance of the Group is properly monitored, controlled and reported on. It meets regularly and meets the auditors to discuss the audit approach and results of the audit.

The audit committee considers the need to introduce an internal audit function each year. After taking into consideration the current size and complexity of the Group, the committee believes that it would not be cost effective to have an internal audit function and the committee feels that sufficient comfort is obtained through the scope and quality of management’s ongoing monitoring of risks.

Due to the small size of the Board, the Directors consider that a nomination committee need not be established.

Apointment and Removal of Board Members
The appointment of Directors involves selection by the full Board and Directors so appointed must be re-elected at the following Annual General Meeting. All Directors are subject to retirement by rotation and at least one third of Directors must offer themselves for re-election at each Annual General Meeting. The rotation is structured so that all Directors submit themselves for re-election at least every three years.

The removal of Board members, and the Company Secretary, is a matter for the Board as a whole.

Relations with Shareholders
The Company monitors its share register to ensure that dialogue is entered into with other shareholders as appropriate. All proxy votes are counted and the results are announced in respect of each resolution at the Annual General Meeting. The Company’s last Annual General Meeting was conducted in accordance with the Combined Code.

Internal Financial Control
The Combined Code introduced a requirement that the Directors review the effectiveness of the Group’s system of internal controls. This extended the existing requirement in respect of internal financial controls to cover all controls.

The Directors have considered the Combined Code requirement to review and report upon the effectiveness of the Group’s system of internal controls and have concluded that the benefits gained in meeting this requirement are outweighed by the costs involved. The Directors have therefore continued to report upon internal financial controls only in accordance with the ICAEW’s guidance “Internal Control and Financial Reporting” (the Rutteman guidance) and to report non-compliance with “Internal Control: Guidance for Directors on the Combined Code” (the Turnbull guidance).

Key elements of the Group’s system of internal financial controls are as follows:

The Directors confirm that they have reviewed the effectiveness of the system of internal financial controls.

With the exception of certain matters set out in this Report in relation to the appointment of a separate Chairman and Chief Executive, the independence of Directors, the requirement to have written Directors’ service contracts, the absence of a nomination committee enabling a formal procedure for the appointment of new Directors, having only two independent Non-Executive Directors, the appointment of an Executive Director to the remuneration committee and two Executive Directors to the audit committee, the Board considers that it has complied throughout the year with the provisions of Section 1 of the Combined Code issued in July 2006.

Going Concern
After making enquiries, the Directors consider that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union and Parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (“UK GAAP”). In preparing the Group financial statements the Directors have also elected to comply with IFRS, issued by the International Accounting Standards Board (“IASB”). The Group and Parent Company financial statements are required by law to give a true and fair view of the state of affairs of the Parent Company and the Group and of the profit or loss of the Parent Company and Group for that period.

In preparing those financial statements the Directors are required to:

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Parent Company and the Group and to enable them to ensure that the Group and Parent Company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Parent Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

These financial statements will be published on the Parent Company’s website, in addition to the paper version posted to shareholders. The maintenance and integrity of the London Security plc website is the responsibility of the Directors. The work carried out by the auditors does not involve consideration of these matters. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

By order of the Board
R. Pollard
Company Secretary
28 April 2016