Corporate Governance

Sunshine Holdings PLC (SUN)is the holding company of four subsidiaries namely Sunshine Healthcare Lanka Limited, Sunshine Consumer Lanka Limited, Sunshine Wilmar (Pvt) Limited, Sunshine Tea (Pvt) Limited and Sunshine Packaging Lanka Limited, representing the business sectors, Healthcare, Consumer Goods, Agriculture and others.

SUN believes that an important aspect of communication with stakeholders and other interested parties, is in compliance with best practice on corporate governance issued by the Institute of Chartered Accountants of Sri Lanka in 2017, the rules set out in Section 09 of the Corporate Governance of the Colombo Stock Exchange and compliance with the Country’s Legislative and Regulatory requirements relevant to the Group.

The Group’s corporate governance framework provides the directors and the corporate management guidance on their responsibilities and duties. It defines the matters which requires board approval, delegate to management and requiring review by board sub-committee.

The SUN corporate governance framework is given in the following diagram.

The Board of Directors

The Company’s business and operations are managed under the supervision of the Board, which consists of members with experience and knowledge in the areas of business, in which the company is engaged, with specific acumen in terms of commercial, financial and or technical expertise.

Board Responsibilities and Rights

The Board has the following powers to execute its responsibilities.

Strategic Direction

The Board provides vision, strategic direction and stewardship to the business entities whilst transparency and accountability is maintained. The Board also reviews and monitors the Company’s activities.

Business Performance

Reviews business results on a regular basis and guides the management by giving appropriate direction in achieving it’s goals.

Management of Risks

With the consultation of the Audit Committee and Risk Review Committee, a risk management system was developed and periodically reviewed. Risk review committee report is depicted in page 80 of this report. Further, the Audit Committee report is also given in page 76.

Code of Conduct and Ethics

The Company communicates it's code of conduct and ethics to all levels of the employees including it's board of directors.

Financial Performance of the Company

The Board meets at a minimum, once in three months to review the financial performance of the company. The Quarterly Financial Statements are reviewed by the Audit Committee before recommending to the Board of Directors for adoption and release to the public. Final dividends and interim dividends are considered and recommended by the Board of Directors.

Investor Rights and Relations

The Company communicates periodically with its shareholders through the quarterly reports. The Annual Report provides a comprehensive assessment of the Company’s performance during the year.

Audit

An independent statutory audit review is carried out annually and the appointment of auditors for the ensuing year is recommended to the shareholders at the Annual General Meeting.

Budget

The Board is responsible for approval of annual budgets, capital budgets and new projects. The performances are monitored and reviewed against budgets quarterly.

Corporate Governance

Monitoring and reviewing Corporate Governance in accordance with the best practice framework issued by the Institute of Chartered Accountants of Sri Lanka.

Statements confirming the extent of compliance with the Corporate Governance Rules set out herein, in the Annual Report of the Entity.

Board Balance

The Company maintains a Board balance of executive, non-executive and independent Directors as required under Listing Rules of the Colombo Stock Exchange. Together, the Directors with their wide experience in both the public and private sectors and diverse academic backgrounds provide a collective range of skills, expertise and experience, which is vital for the successful direction of the Group.

Compliance with the requirements of the policy in place governing matters relating to the Board of directors in the Annual Report and provide explanations for any non- compliance with any of the requirements with reasons for such non-compliance and the proposed remedial action.

Composition of the Board

The Board consists of twelve (12) members. Nine (9) members are Non-Executive Directors (including the Chairman) and three (3) are Executive Directors. Seven (7) Non-Executive Directors are independent as defined under the Listing Rules of the Colombo Stock Exchange.

The Non-Executive Independent Directors are;

Mr A Cabraal
Mr A D B Talwatte
Mr S Renganathan
Mr S Shishoo
Mr S Jain
Mr M R Mihular (appointed w.e.f. 6 April 2023)
Ms A Goonetilleke (appointed w.e.f. 15 November 2023)
Mr H Abeywickrama (retired w.e.f. 24 May 2023)
Ms R Fernando (retired w.e.f. 27 October 2023)

There is a distinct and clear division of responsibility between the Chairman and the Group Chief Executive Officer to ensure that there is a balance of power and authority. The roles of the Chairman and the Group Chief Executive Officer are separated and clearly defined. The Chairman is responsible for ensuing Board effectiveness and conduct whilst the Group Chief Executive Director has overall responsibilities over the operating units, organisational effectiveness and implementation of Board policies and decisions.

Composition and Attendance at Meetings

The Board met quarterly to discharge its duties effectively. In addition, special Board Meetings are also held whenever necessary. A total of six (6) meetings was held in the financial year ended 31 March 2024. The attendances of Directors at these Meetings were as follows;

Attendance

Name of Director	No.	%
Mr A Cabraal	6/6	100
Mr V Govindasamy	6/6	100
Mr A D B Talwatte	5/6	83
Mr S G Sathasivam	6/6	100
Mr S Renganathan	6/6	100
Mr S Shishoo	5/6	83
Mr S Jain	5/6	83
Mr G Sathasivam	4/6	67
Mr Tyeabally Akbarally	4/6	67
Mr M R Mihular (appointed w.e.f. 6 April 2023)	6/6	100
Ms Aruni Goonetilleke (appointed w.e.f. 15 November 2023)	3/6	50
Mr Aruna Deepthikumara (appointed w.e.f. 18 January 2024)	2/6	33
Ms Wedage Yasanthi Ruvini Fernando (resigned w.e.f. 27 October 2023)	2/6	33
Mr Harsha Abeywickrama (resigned w.e.f. 24 May 2023)	0/6	0

Re-election of Directors

The provisions of the Company’s Articles require a Director appointed by the Board to hold office until the next annual general meeting and seek re-appointment by the shareholders at that meeting. The Articles call for one third of the Directors in office to retire at each Annual General Meeting. The Directors who retire are those who have served for the longest period after their appointment/re-appointment. Retiring Directors are generally eligible for re-election. In addition, a newly appointed Director is required to submit himself for retirement and re-election at the Annual General Meeting immediately following his appointment. The Group Chief Executive officer does not retire by rotation. Additionally the Director appointments are been evaluated by the Nominations and Governance committee.

Directors Remuneration

The objectives of the Company’s policy on Directors remuneration it to attract and retain Directors of the caliber needed to direct the group successfully. In the case of the executive Director, the component parts of the remuneration are structured so as to link rewards to corporate and individual performance. Performance is measured against profits and other targets set from the Company’s annual budget and plans, and from returns provided to shareholders. In the case of Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities undertaken by the Non-Executive Director concerned.

The Remuneration Committee recommends to the Board the frameworks of the Executive Director’s remuneration and the remuneration package for the Executive Director and Senior Management team. It is, nevertheless, the ultimate responsibility of the entire Board to approve the remuneration of the executive Director. The Director’s remuneration is disclosed in Note 41 of the Financial Statements.

Delegation of Board Authority – Board Committees

The Board in discharging its duties, establishes various Board Committees. The function and terms of reference of the Board Committee are clearly defined and where applicable, comply with the recommendations of the code of best practice on corporate governance. The group has five Board sub committees,

Audit Committee
Nominations and Governance Committee
Remuneration Committee
Related Party Transactions Review Committee
Risk and Compliance Review Committee
Investment Committee

However, the Board of Directors are collectively responsible for the decisions taken on the recommendation by Board Sub Committees.

Audit Committee

The Audit Committee provides an oversight on the Financial Statements and other related information prepared for presentation for external financial reporting, review the work of the internal audit function and ensures that the external auditor carry out their statutory duties in an independent and objective manner. It also assists the Board in ensuring a sound system of internal control. The Committee has full access to the auditors both internal and external who, in turn, have access at all times to the Chairman of the Committee. The Committee meets with the external auditors without any executives present except for the Group Secretaries, at least once a year. The report on the Audit Committee is presented on page 76 and the duties of the Audit Committee are included therein.

Nominations and Governance Committee

The Nomination Committee reviews the board composition to ensure board balance and adequacy of skills and experiences among the members of the Board. It reviews and recommends any new appointments to the Board.

Remuneration Committee

The Remuneration Committee recommends to the Board, the remuneration policy and the remuneration to be paid to each Executive director. The Remuneration Committee reviews the Group’s remuneration policy and the remuneration packages of key management personnel of the Group.

Investment Committee

The role of the Investment Committee is to review capital expenditure budgets and new projects and make recommendations to the Board of Directors.

Related Party Transactions Review Committee

The Committee exercises oversight on behalf of the Board, that all Related Party Transactions (RPTs, other than those exempted by the CSE listing rules on the RPTs) are carried out at arms length basis and disclosed in a manner consistent with the CSE Listing Rules.

Risk and Compliance Review Committee

The Risk and Compliance Committee is responsible for reviewing and assessing relevant risk categories within the organization. When necessary, the Committee will escalate these matters to the Board for further consideration. Additionally, the Committee will evaluate the compliance status of various business units and report any identified non-compliances to the Board for appropriate action.

Membership of Sub Board Committees are listed below.

	Appointment to the Board	Nomination and Governance Committee	Remuneration Committee	Audit Committee	Investment Committee	Related Party Transactions Committee	Risk & Compliance Review Committee
Executive
Mr V Govindasamy	8 February 2000
Mr S G Sathasivam	13 June 2006
Mr A Deepthikumara	18 January 2024
Non-Executive
Mr G Sathasivam	9 August 2000
Independent Non-Executive
Mr A D B Talwatte	30 May 2016
Mr S Shishoo	18 December 2017
Mr A Cabraal	31 May 2017
Mr S Jain	3 February 2022
Mr S Renganathan	27 May 2022
Mr T Akbarally	17 August 2022
Mr M R Mihular	6 April 2023
Ms A Goonetilleke	15 November 2023

Financial Acumen

The Board comprises of a Senior Chartered Accountant and he serves as members of the Audit Committee and Related Party Transaction Review Committee. Moreover, there are finance professionals who serves for the Board.

Supply of Information

Directors are provided with quarterly reports on performance, minutes of quarterly meetings and such other reports and documents as necessary. The Chairman ensures all Directors are adequately briefed on issues arising at meetings.

Company Secretaries

The services and advice of the Company secretaries are made available to Directors as necessary. The company secretaries keep the Board informed of new laws, regulations and requirements coming into effect which are relevant to them as individual Directors and collectively to the Board.

Corporate Services (Private) Limited having their registered office at No, 216, De Saram Place, Colombo 10 are the Company secretaries since 1 April 2016.

Going Concern

The Directors after making necessary inquiries and reviews including reviews of the Group’s budget for the ensuring year, capital expenditure requirements, future prospects and risks, cash flows and borrowings facilities, have a reasonable expectation of the Company’s existence in the foreseeable future. Therefore, the going concern basis is adopted in the preparation of the Financial Statements.

Internal Control

The Board is responsible for the Company’s internal controls and for reviewing their effectiveness. Internal control is established with emphasis placed on safeguarding assets, making available accurate and timely information and imposing greater discipline on decision making. It covers all controls, including financial, operational and compliance control and risk management. It is important to state, however that any system can ensure only reasonable and not absolute, assurance that errors and irregularities are prevented or detected within a reasonable time. The Internal Audit & Compliance Officer and also outsourced internal auditor, Ms EY regularly review the internal control systems and processes.

Communication with Stakeholders

Shareholders are provided with quarterly Financial Statements and the Annual Report which the Group considers as its principal communication with them and other stakeholders. These reports are provided to the Colombo Stock Exchange and also published in virtual media platforms. Shareholders may bring up concerns they have, either with the Chairman or Group Chief Executive Officer as appropriate. Sunshine Holdings PLC’s website www.sunshineholdings.lk and websites of listed companies within the Group serve to provide a wide range of information on the Group. The Company has reported a fair assessment of its position via the published Audited Financial Statements and quarterly accounts. In preparation of these documents, the company has complied with the requirements of the Companies Act No. 07 of 2007 and in accordance with the Sri Lanka Financial Reporting Standards.

Corporate Governance Disclosure

The Company has published quarterly financial statements with the necessary explanatory notes as required by the rules of the Colombo Stock Exchange and the Securities and Exchange Commission of Sri Lanka to all stakeholders. Any other financial and non-financial information, which is price sensitive or warrants the shareholders and stakeholders’ attention and consideration is promptly disclosed to the public.

Subject	Rule/Code No.	Compliance requirement	Compliance status	Section
The Board of Directors	A 1	Company to be headed by an effective Board to direct and control the company	Complied	Profile of the Board
	A 1.1	Regular Board meetings	Complied	Composition & attendance
	A 1.2	Responsibilities	Complied	Board Responsibility
	A 1.3	Act in accordance with the laws of the country and obtain professional advice as and when required	Complied	Annual Report of the Board of Directors
	A 1.4	Access to Company Secretary	Complied	Communication with stakeholders
	A 1.5	Bring Independent judgment on various business issues and standards of business conduct	Complied	The Directors are permitted to get professional advice when necessary and the Directors of SUN group has obtained professional advice for certain matters during the year and coordinated through company secretaries
Chairman and Group Chief Executive Officer (GCEO)	A 2	Chairman and GCEO’s division of responsibilities to ensure a balance of power and authority	Complied	The Chairman does not involve himself in day-to-day operations of the Group and acts as an independent Non-Executive Director. The GCEO executes powers given by the Chairman and the Board to run the operation
Chairman’s Role	A 3	Facilitate the effective discharge of Board functions	Complied	The Chairman is responsible for conducting meetings effectively and he preserves order and implements board decisions taken
	A 3.1	Ensure Board proceedings are conducted in a proper manner	Complied	The Chairman is responsible for the effective participation of both executive & non-executive directors, their contribution for the benefit of the group, balance of power between executive & non-executive directors and control of group’s affairs and communicate to stakeholders
Financial Acumen	A 4	Availability of financial acumen within the Board	Complied	Financial acumen
Board Balance	A 5.1	Non-Executive Directors	Complied	Nine (9) out of Twelve (12) are Non-Executive Directors
	A 5.2	Independent Non-Executive Directors	Complied	Seven (7) out of Nine (9) Non-Executive Directors are independent
	A 5.3	Independent Non-Executive Directors	Complied	All independent Non-Executive Directors are in fact free of any business with the group and are not involved in any activity that would affect to their independence
	A 5.4	Annual Declaration	Complied	Submitted the declarations as prescribed
	A 5.5	Determination of independence of the Directors	Complied	The independence of Directors is determined based on declarations submitted by the Non-Executive Directors
Supply of Information	A 6.1	Provide appropriate & timely information to the Board	Complied	Directors are provided quarterly performance reports, minutes of review meetings and other relevant documents in advance to the board meeting
	A 6.2	Adequate time for effective conduct of Board meeting	Complied	The minutes, agenda and reports for the board meeting are provided well before the meeting date
Appointments to the Board	A 7	Formal and transparent procedure for Board appointments	Complied	Nomination committee makes recommendations to the Board on new Board appointments
	A 7.1	Nomination Committee to make recommendations on new Board appointments	Complied	Nomination committee makes recommendations to the Board on new Board appointments
	A 7.2	Assessment of the capability of the Board to meet strategic demands of the company	Complied	Profile of the Board
	A 7.3	Disclosure of New Board member profile and interests	Complied	Profile of the Board
Re election	A 8 – 8.2	Board members should be subject to election, and re-election by shareholders	Complied	Re-election of Directors
Appraisal of Board performance	A 9 – 9.3	Existence of Board evaluation methods and execution	Complied	The Chairman & Remuneration committee evaluates the performance of the Executive Directors
Disclosure of information in respect of Directors	A 10 – 10.1	Profiles of Directors Directors’ interests Board meeting attendance Board committee memberships	Complied	Profile of the Board
Appraisal of GCEO	A 11 – 11.2	Appraisal of the GCEO against the set strategic targets	Complied	Evaluation is done by the Chairman & Remuneration committee based on the financial & non-financial targets set with the discussion of the committee
Directors’ Remuneration	B 1	Establishment of the Nomination & Remuneration Committee	Complied	Nomination & Remuneration committee report
	B 1 – 1.3	Membership of the nomination & remuneration committee to be disclosed and should only comprise of Non-Executive Directors	Complied	Discussed under sub committees
Disclosure of Remuneration	B 3.1	Disclose the remuneration policy and aggregate remuneration	Complied	Discussed under sub committees
Relations with Shareholders	C 1.1	Counting of proxy votes	Complied	A Form of Proxy accompanies the Annual Report, when they are dispatched to the shareholders. The Chairman makes and announcement of the proxies received at the commencement of the Annual General Meeting
	C 1.2	Separate resolution to be proposed for each item	Complied	The Company propose a separate resolution at the AGM on each significant issue
	C 1.3	Heads of Board subcommittees to be available to answer queries	Complied	Sub-committee Chairman’s are present at the AGM
	C 1.4	Notice of Annual General Meeting to be sent to shareholders with other papers as per statute	Complied	A copy of Annual Report including financials, Notice of Meeting and the form of Proxy are sent to shareholders 15 working days prior to the date of the AGM
	C 1.5	Summary of procedures governing voting at General Meetings to be informed	Complied	Circulated through Notice of the Annual General Meeting
Major Transactions	C 2 - 2.1	Disclosure of all material facts involving any proposed acquisition, sale or disposal of assets	Complied	Major transactions of the Group were disclosed to all stakeholders through the Colombo Stock Exchange, print media, and the Company website
Accountability & Audit	D 1.1	Disclosure of interim and other price-sensitive and statutorily mandated reports to Regulators	Complied	Annual Report of the Board of Directors
	D 1.2 – 1.5	Declaration by the Directors that the company has not engaged in any activities, which contravene laws and regulations, declaration of all material interests in contracts, equitable treatment of shareholders and going concern with supporting assumptions or qualifications as necessary	Complied	Annual Report of the Board of Directors
	D 1.3	Statement of Directors’ responsibility	Complied	Directors’ Responsibility report
	D 1.4	Management Review & Preview	Complied	Segment Analysis
Internal Control	D 2.1	Annual review of effectiveness of the system of internal control	Complied	Internal Auditors carry out an independent review, and report directly to the Audit Committee
Audit Committee	D 3.1	Audit Committee composition	Complied	Composition of Audit Committee
	D 3.2	Terms of reference, duties and responsibilities	Complied	Clearly documented to Audit Committee charter
Communication with Shareholders	E 1 – 1.1	Regular dialogue to be maintained with shareholders	Complied	Shareholders are provided Quarterly Financial Statements and the Annual Report. These reports are also available in the Group website & provided to the Colombo Stock Exchange

Levels of Compliance with the CSE’s Listing Rules Section 07 – Rules on Corporate Governance are given in the following table.

Subject	Rule No.	Applicable requirement	Compliance status	Details
Non-Executive Directors	7.10.1	At least one third of the total number of Directors should be Non-Executive Directors	Complied	Nine (9) out of Twelve (12) Directors are Non-Executive Directors
Independent Directors	7.10.2 (a)	Two or one-third of Non-Executive Directors, whichever is higher should be independent	Complied	Seven (7) out of Nine (9) Non-Executive Directors are independent
Independent Directors	9.8.5 (a)	Each Non-Executive Director should submit a declaration of independence/ non-independence in the prescribed format	Complied	Non-Executive Directors have submitted these declarations
Disclosure relating to Directors	9.8.5.(b)	Name of independent Directors should be disclosed in the Annual Report	Complied	Please refer page 65
Disclosure relating to Directors	7.10.3 (b)	The basis for the Board to determine a director is independent, if criteria specified for independence is not met	Complied	Given in page 64 under the heading of Board balance
Disclosure relating to Directors	9.10.4. (a) and (b)	A brief resume of each director should be included in the Annual Report and should include the Director's areas of expertise	Complied	Profile of Directors
Disclosure relating to Directors	7.10.3 (d)	Forthwith provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3 (d) to the CSE	Complied	Brief resumes have been provided to the Colombo Stock Exchange
Remuneration Committee	9.12.2	A listed company shall have a Remuneration Committee	Complied	Remuneration Committee comprises of: Mr A Cabraal Mr G Sathasivam Mr A D B Talwatte Mr M R Mihular
Composition of Remuneration Committee	9.12.5	Shall comprise Non-Executive directors- a minimum of three members out of which two shall be independent	Complied	All members are Non-Executive and Three (3) out of Four (4) are independent
Remuneration Committee Functions	9.12.7 (1)	Shall recommend the remuneration of the Executive Directors and GCEO	Complied	As above
Disclosure in the Annual Report relating to Remuneration Committee	9.12.8 (a)	The Annual Report should set out Names of Directors comprising the Nomination & Remuneration Committee	Complied	Please refer page 76
	9.12.8 (b)	Statement of Remuneration Policy	Complied	Please refer page 78
	9.12.8 (c)	Aggregated remuneration paid to Executive and Non-Executive Directors	Complied	Note 41 of Financial Statement
Audit Committee	9.13.1	The Company shall have an Audit Committee	Complied	Please refer Report of the Audit Committee on page 76
Composition of Audit Committee	7.10.6 (a)	Shall comprise of Non-Executive Directors, majority of whom will be independent	Complied	Four (4) out of Four (4) Directors are Independent Non-Executive Directors
		Non-Executive Directors shall be appointed as the Chairman of the Committee	Complied	Chairman of the Committee is an Independent Non-Executive Director
		GCEO and Group Chief Financial Officer should attend Audit Committee Meetings	Complied	GCEO and Group Chief Financial Officer attend meetings by invitation
		The Chairman of the Audit Committee or one member should be a member of a professional Accounting body	Complied	One (1) member is a Qualified Chartered Accountants
Audit Committee functions	7.10.6 (b)	Should be as outlined in the section 7.10 of the listing rules	Complied	The terms of reference of the Audit Committee have been ratified by the Board
Disclosure in the Annual Report relating to Audit Committee	7.10.6 (c)	a. Names of the Directors comprising the Audit Committee	Complied	Please refer page 76
		b. The Audit Committee shall make a determination of the independence of the Auditors and disclose the basis for such determination	Complied	Please refer Audit Committee Report on pages 76
		c. The Annual Report shall contain a Report of the Audit Committee setting out of the manner of compliance with their functions	Complied	Please refer Audit Committee Report on pages 76

Statement of Compliance under Section 9.14.8 of the Listing Rules of the CSE on Corporate Governance
Mandatory Provisions – Fully Compliant

Subject	Rule No.	Applicable requirement	Compliance status	Reference (within the WATA Annual report)
Disclosures in the Annual Report	9.14.8 (1)	Details pertaining to Non-Recurrent Related Party Transactions	Complied	Notes to the Financial Statements
Disclosures in the Annual Report	9.14.8 (2)	Details pertaining to Recurrent Related Party Transactions	Complied	Notes to the Financial Statements
Disclosures in the Annual Report	9.14.8 (3)	Report of the Related Party Transaction Review Committee	Complied	Refer Report of the Related Party Transaction Review Committee
Disclosures in the Annual Report	9.14.8 (4)	Declaration by the Board of Directors as an affirmative statement of compliance with the rules pertaining to Related Party Transactions, or a negative statement otherwise	Complied	Annual Report of the Board of Directors
Disclosures in the Annual Report	9.10.4	Whether either the Director or Close Family Members has any material business relationships with other Directors of the Listed Entity	Complied	Refer the Director ship list provided on page 31
Disclosures in the Annual report	9.10.4	Whether Executive, Non-Executive and/or independent Director; (e) the total number and names of companies in Sri Lanka in which the Director concerned serves as a Director and/or Key Management Personnel indicating whether such companies are listed or unlisted Companies and whether such Director functions in an executive or non-executive capacity, provided that where he/she holds directorships in companies within a Group of which the Listed Entity is a part, their names (if not listed) need not be disclosed; it is sufficient to state that he/she holds other directorships in such companies	Complied	Refer the Director ship list provided on page 31
Disclosures in the Annual report	9.10.4	Details of attendance of Committee Meetings of the Audit, Related Party Transactions Review, Nominations and Governance and Remuneration Committees	Complied	Refer the Sub committee reports