The Lighthouse Hotel PLC (LHH) continues to be committed to conducting the Company’s business ethically and in accordance with high standards of good corporate governance.
The Board has appointed Jetwing Hotels Ltd. as the managing agents of the Hotel.
We set out below the corporate governance practices adopted and practiced by LHH and compliance with the Rules set out in Section 7 of the Listing Rules of the Colombo Stock Exchange.
Board of Directors
Executive Directors
Mr. N.J.H.M. Cooray (Chairman), Mr. R.A.E. Samarasinghe (Managing Director), Mr. C.S.R.S. Anthony
Non-Executive Directors
Ms. N.T.M.S. Cooray, Ms. A.M. Ondaatjie
Non-Executive Independent Directors
Mr. N. Wadugodapitiya, Mr. R. de Silva, Mr. E.P.A. Cooray, Dr. C. Pathiraja, Mr. T. Nadesan, Mr. A.T.P. Edirisinghe
The Board meets quarterly as a matter of routine. Adhoc meetings are held as and when necessary. During the year under review the Board met on five occasions. The attendance at these meetings was:
| Mr. N.J.H.M. Cooray (Chairman) | Executive | 5/5 |
| Mr. R.A.E. Samarasinghe (Managing Director) | Executive | 4/5 |
| Mr. C.S.R.S. Anthony | Executive | 5/5 |
| Ms. N.T.M.S. Cooray | Non-Executive | 3/5 |
| Ms. A.M. Ondaatjie | Non-Executive | 4/5 |
| Mr. N. Wadugodapitiya | Non-Executive Independent | 5/5 |
| Mr. R. de Silva | Non-Executive Independent | 3/5 |
| Mr. E.P.A. Cooray | Non-Executive Independent | 4/5 |
| Dr. C. Pathiraja | Non-Executive Independent | 5/5 |
| Mr. T. Nadesan | Non-Executive Independent | 3/5 |
| Mr. A.T.P. Edirisinghe | Non-Executive Independent | 4/5 |
Responsibilities
The Directors of the Company are responsible for formulation of company policy and overall business strategy. The implementation of policy and strategy is done in a framework that requires compliance with applicable laws and regulations as well as establishing best practices in dealing with employees, customers, suppliers and the community at large.
The annual capital expenditure budgets, non-budgeted capital expenditure and the annual budgeted operating statements require Board approval. The Board meets regularly to review performance and forecasts against budgets so as to take decisions in the best interest of the Company. The managing agents are represented at these meetings and are responsible for follow-up action. Directors’ interests in contracts are regularly disclosed and such disclosures pertaining to year ended 31st March, 2014 can be seen on the Directors’ Report.
The Board is responsible to ensure that adequate systems of internal controls to safeguard the assets of the Company are in place and proper records are maintained. However, any system can ensure only reasonable but not absolute assurance that errors and irregularities are prevented or detected within a reasonable time frame.
Chairman’s Role
The Chairman is responsible for the efficient conduct of Board meetings. The Chairman maintains close contact with all Directors, and holds informal meetings with Non-Executive Directors as and when necessary.
Board Balance
The composition of the Executive and Non-Executive Directors (the latter are over one-third of the total number of Directors) satisfies the requirements laid down in the Listing Rules of the Colombo Stock Exchange. The Board has determined that six Non-Executive Directors satisfy the criteria for ‘independence’ set out in the Listing Rules of the Colombo Stock Exchange.
Non-Executive Directors profiles reflect their calibre and the weight their views carry in Board deliberations.
The Chairman of the Company is also the Chairman of Jetwing Hotels Ltd., the managing agents. Chief Executive Authority is vested in the Managing Director of the Company.
Company Secretary
The services and advice of the Company Secretary are made available to Directors as necessary. The Company Secretary keeps 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.
Financial Acumen
The Board, includes one Chartered Accountant, and three Chartered Management Accountants who possess the necessary knowledge and competence to offer the Board guidance on matters of finance.
Supply of Information
Directors are provided with quarterly reports on performance and such other reports and documents as are necessary. The Chairman ensures all Directors are adequately briefed on issues arising at meetings.
Appointments to the Board
The Board as a whole decides on the appointment of Directors, in terms of the Articles of Association of the Company.
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.
The Managing Director does not retire by rotation.
Remuneration Committee
The Company has its own Remuneration Committee. The Committee consists of three Independent Non-Executive Directors. The Remuneration Committee report appears in this Report.
Constructive Use of the Annual General Meeting
The active participation of shareholders at the Annual General Meeting (AGM) is encouraged. The Board believes the AGM is a means of continuing effective dialogue with shareholders.
The Board offers clarifications and responds to concerns shareholders have over the content of the Annual Report as well as other matters which are important to them. The AGM is also used to adopt the Financial Statements for the year.
Communication with Shareholders
Shareholders are provided with Quarterly Financial Statements and the Annual Report, which the Company considers as its principal communication with them and other stakeholders. These reports are also provided to the Colombo Stock Exchange.
Shareholders may bring up concerns they have, either with the Chairman, the Managing Director or the Secretaries of the Company as appropriate. The Company maintains an appropriate dialogue with them.
Accountability and Audit
Financial Reporting
The Board places great emphasis on complete disclosure of financial and non-financial information within the bounds of commercial reality and on the adoption of sound reporting practices. Financial information is disclosed in accordance with the Sri Lanka Accounting Standards comprising SLFRS and LKAS. Revisions to existing accounting standards and adoption of new standards are carefully monitored.
The Statement of Directors’ Responsibilities for the Financial Statements is given in this Report.
Going Concern
The Directors, after making necessary inquiries and reviews including reviews of the Company budget for the ensuing year, capital expenditure requirements, future prospects and risks, cash flows and borrowing facilities, have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Therefore the going concern basis has been adopted in the preparation of the Financial Statements.
Audit Committee
LHH constituted its own Audit Committee on 13th February, 2008. The Committee consists of three Independent Non-Executive Directors of the Company. The meetings of the Audit Committee were attended by the Chairman, Managing Director, Executive Director, General Manager and the Chief Financial Officer by invitation when matters relating to the Company were taken up for discussion. The External Auditor/Internal Auditor attended the meetings when his presence was deemed necessary.
The Audit Committee has written terms of reference and is empowered to examine any matters relating to the financial affairs of the Company and its internal and external audits.
The Committee reviewed the Financial Statements, internal control procedures and risk management, accounting policies, compliance with accounting standards, emerging accounting issues and other related functions that the Board required. It also reviews the adequacy of systems for compliance with the relevant legal, regulatory and ethical requirements. Significant issues discussed by the Committee at the reviews were communicated by the Managing Director to the Board of Directors for their consideration and action.
The Audit Committee helps the Company to achieve a balance between conformance and performance.
| Members of the Audit Committee | Attendance at the Meeting |
|
| Mr. N. Wadugodapitiya (Chairman) | Non-Executive Independent | 5/5 |
| Mr. E.P.A. Cooray | Non-Executive Independent | 5/5 |
| Mr. A.T.P. Edirisinghe | Non-Executive Independent | 4/5 |
The Audit Committee recommends the appointment and fees of the External Auditors, having considered their independence and performance.
The Audit Committee Report appears in this Report.
Level of Compliance with the Listing Rules of the Colombo Stock Exchange
Level of compliance with the Listing Rules of the CSE Section 7, on Corporate Governance are given in the following table:
| Rule No. | Subject | Applicable requirement | Level of compliance |
| 7.10.1 | Non-Executive Directors | At least one-third of the total number of Directors should be Non-Executive Directors | Eight out of Eleven Directors are Non-Executive Directors |
| 7.10.2 (a) | Independent Directors | Two or one-third of Non-Executive Directors, whichever is higher should be Independent | Six of the Eight Non-Executive Directors are Independent |
| 7.10.2 (b) | Independent Directors | Each Non-Executive Director should submit a declaration of his independence/non-independence in the prescribed format. | Non-Executive Directors have submitted the declaration |
| 7.10.3 (a) | Disclosure relating to Directors | Names of independent Directors should be disclosed in the Annual Report | Please refer Corporate Governance section. |
| 7.10.3 (b) | Disclosure relating to Directors | The basis for Board to determine a Director as independent, if specified criteria for independence is not met | Not Applicable |
| 7.10.3 (c) | Disclosure relating to Directors | A brief resume of each Director should be included in the Annual Report including the areas of Expertise | Please refer Board of Directors section. |
| 7.10.3 (d) | Disclosure relating to Directors | Forthwith provide a brief resume of new Directors appointed to the Board with details specified in 7.10.3 (d) to the CSE | A brief résumé provided to the CSE |
| 7.10.5 | Remuneration Committee | A listed company shall have a Remuneration Committee | Company has formed a Remuneration Committee |
| 7.10.5 (a) | Composition of Remuneration Committee | Shall comprise of Non-Executive Directors a majority of whom will be independent | Remuneration Committee consists of three Independent
Non-Executive Directors |
| 7.10.5 (b) | Functions of Remuneration Committee | The Remuneration Committee shall recommend the remuneration of Chief Executive Officer and Executive Directors | Please refer Remuneration Committee Report |
| 7.10.5 (c) | Disclosure in the Annual Report relating to Remuneration Committee | The Annual Report should set out:
(a) Names of Directors comprising the Remuneration Committee |
Names of the members of the Remuneration Committee are stated in this report under the heading of Remuneration Committee |
| (b) Statement of Remuneration Policy | Please refer Remuneration Committee Report | ||
| (c) Aggregated remuneration paid to Executive Directors and Non-Executive Directors | Given in this report under the heading of Directors’ Remuneration | ||
| 7.10.6 | Audit Committee | The Company shall have an Audit Committee | Company has formed an Audit Committee |
| 7.10.6 (a) | Composition of Audit
Committee |
Shall comprise of Non-Executive Directors, a majority of whom will be independent | Audit Committee consists of three Independent Non-Executive Directors |
| Non-Executive Director shall be appointed as the Chairman of the Committee | Chairman of the Audit Committee is an Independent Non-Executive Director | ||
| Chief Executive Officer and the Chief Financial Officer shall attend Audit Committee meetings unless otherwise determined | Chairman, Managing Director, Executive Director, General Manager and 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 | Chairman of the Audit Committee is a Fellow Member of the Chartered Institute of Management Accountants - UK | ||
| 7.10.6 (b) | Audit Committee
Functions |
Should be as outlined in the Section 7 of the Listing Rules the Colombo Stock Exchange | The terms of reference of the Audit Committee adopted by the Board is listed on Audit Committee Report page |
| 7.10.6 (c) | Disclosure in the Annual Report relating to Audit Committee | (a) Names of Directors comprising the Audit Committee stated in this Report under the heading of Audit Committee | Names of the members of the Audit Committee are stated in this Report under the heading of Audit Committee on Corporate Information page |
| (b) The Audit Committee shall make a determination of the independence of the Auditors and disclose such determination | Please refer Audit Committee Report | ||
| (c) The Annual Report shall contain a Report of the Audit Committee setting out the manner of Compliance of the functions | Please refer Audit Committee Report |