Corporate Governance

As an AIM listed company, Paragon Entertainment Limited is not required to comply with the provisions of the UK Corporate Governance Code (“the Code”) that applies to companies with a premium London Stock Exchange listing. However, the Board recognises the importance and value of good corporate governance procedures and accordingly has selected those elements of the Code that it considers relevant and appropriate to the Group, given its size and structure.  An overview of the Group’s corporate governance procedures is given below.

Principles of the Code

Board of Directors

The Group is controlled through the Board of Directors which comprises the Non-Executive Director, the Chief Executive and three other Executive Directors.  The Board has a current vacancy for Chairman which is currently being performed by Mark Taylor as executive director. The roles of Chairman and Chief Executive are separate and have been so throughout the year.

The Non-Executive Board member, Martin Barratt, is considered to be independent and is the senior independent director. The Non-Executive Director brings a wide range of experience to the Group’s activities and provides a strong balance to the Executive Directors.

Non-Executive Directors are appointed on a six month rolling term and are subject to re-election along with the Executive Directors.

Board meetings are scheduled to take place in alternate months, with additional Board meetings held when and as the Chairman or other Board members deem necessary.  The Board is provided with extensive Board papers, usually during the week before each Board meeting.

There is a Company procedure which describes the matters which are reserved for the Board and all members of the Board have access to this document. These matters routinely include:

If required, the Directors are entitled to take independent advice and, if the Board is informed in advance, the cost of the advice will be reimbursed by the Company. The Company Secretary’s services are available to all members of the Board. The appointment and removal of the Company Secretary is a decision for the Board as a whole.

Board Effectiveness
The Chairman is responsible for conducting an annual assessment of the effectiveness of the Board and its Committees through one-to-one discussions with each Director.  Consideration is given to a number of areas, including board composition, meeting structure, strategic oversight, risk management, succession planning, with the outcomes and principal findings raised with the Board for consideration.

The performance of the Chief Executive Officer is appraised annually by the Chairman.  The performance of the remaining Executive Directors is appraised annually by the Chief Executive Officer.

Committees

Remuneration Committee

The Remuneration Committee comprises the Non-Executive Director, Mr M Barratt and of Mr M Taylor and Mr P Holdsworth.  It is responsible for the terms and conditions of employment and remuneration of the Executive Directors. The Remuneration Committee may consult external agencies when ascertaining market salaries. The Remuneration Committee has written terms of reference and the Chairman of the Remuneration Committee is available at the Annual General Meeting to answer any Shareholder questions.

Terns of reference for the remuneration committee are published on our investor website

Audit Committee

The Company has an Audit Committee chaired by Mr M Barratt and comprising Mr M Taylor and Mr P Holdsworth. No-one other than the members is entitled to be present at a meeting of the Audit Committee, however, the committee can and does invite other persons of the Company to attend including the Group Financial Controller, the Chief Executive Officer and the Group’s Auditor.  The Committee meets at least twice a year and has written terms of reference. It monitors the adequacy of the Group’s financial controls and provides the opportunity for the external Auditor to communicate directly with the Non-Executive Director.

The Audit Committee also undertakes a formal assessment of the Auditor’s independence each year which includes: a review of non-audit services provided to the Group and related fees; discussion with the Auditor detailing all relationships with the Group and any other parties that could affect independence or the perception of independence; a review of the Auditor’s own procedures for ensuring the independence of the audit firm and partners and staff involved in the audit, including the regular rotation of the audit partner; and obtaining written confirmation from the Auditor that, in their professional judgement, they are independent. An analysis of the fees payable to the external audit firm in respect of both audit and non-audit services during the year is set out in  to the financial statements.

Terns of reference for the audit committee are published on our investor website.

Executive Operational Committees

Mananagement Committee

The Management Committee, chaired by Mark Taylor, deals with the implementation of business strategy and significant operational matters. It meets monthly to discuss the core activities of the Group, current performance, progress on management initiatives and other relevant matters.

Strategy Committee

The Strategy Committee, chaired by Mark Taylor, deals with the definition, revision and review of business strategy.  It meets monthly to discuss the strategic direction of the Group, ensuring that the company sticks within its core vision.  It is responsible for the 'five year plan' and communicaiton of strategy to management, employees, investors and other stakeholders.

Shareholder communications

The Company gives high priority to its communication with Shareholders by means of an active investor relations programme. This is achieved through correspondence together with extensive corporate information that is regularly updated on the Company’s website www.paragonent.com. This is kept in accordance with AIM rule 26. In addition, the Company visits its main institutional investors bi-annually and makes available, free of charge, its Interim and Annual Reports from the Company’s head office.

At the AGM, the Shareholders are given the opportunity to question most of the members of the Board. All Board members are available to answer questions at the AGM.

Internal Control

The Board of Directors acknowledges its responsibility for establishing and monitoring the Group’s systems of internal control. There are inherent limitations in any system of internal control and accordingly, even the most effective systems can provide only reasonable, and not absolute assurance against material misstatement or loss. The Group’s control environment is the responsibility of the Group’s directors and managers at all levels. The Group’s organisational structure has clear lines of responsibility. Operating and financial responsibility for the subsidiary company is delegated to the operational management, including key risk assessment. In addition, this team is responsible for resource allocation, internal communication and enforcing the Group’s policies and procedures. The chairperson for the management Board sits on the main Board and is mandated to report monthly to the Board, highlighting financial performance, operational achievements, significant risks attached to achieving the Group’s objectives and to seek approval for matters reserved for the Board. This structure facilitates a continuing process for identifying, evaluating and managing risk within the business and is supported by the Audit Committee that meets with the Auditor twice a year. Recommendations from reviews from the Auditor or other sources are considered, and necessary actions are progressed to remedy any significant failings or weaknesses identified.

The Group operates a comprehensive budgeting and financial reporting system and, as a matter of routine, compares actual results with budgets that are approved by the Board.

Management accounts are prepared on a monthly basis. Material variances from budget are thoroughly investigated. In addition, updated forecasts are prepared, at least quarterly, to reflect actual performance and the revised outlook for the year. The Board considers that, in light of the control environment described above, there is no current requirement for a separate internal audit function.

Directors’ responsibilities statement

The Directors are responsible for preparing the Annual Report and the Accounts in accordance with applicable law and regulations.

The AIM Rules require the Directors to prepare financial statements for each financial year. Under the AIM Rules the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgments and accounting estimates that are reasonable and prudent;

• state whether applicable IFRSs have been followed,subject to any material departures disclosed and explained in the financial statements;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statementscomply with applicable laws and regulations. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Company is incorporated in the Cayman Islands and registered in the Cayman Islands. The Company is not required to prepare audited financial statements under Cayman Island company law, however the Company is required under AIM rule 19 to provide shareholders with annual audited consolidated financial statements for the financial year.

The directors have requested Grant Thornton UK LLP to undertake an audit of the Company’s consolidated financial statements.