Report: Application of code of best practice by
Hemas Holdings PLC
Course: FIN 3229 –Business Ethics and Corporate Governance
Course facilitator:
Dr. T.C. Ediriwickrama
2018ms8123-Giridaran.A
Bachelor of Business Administration Degree Program (2019/2023)
Semester v
Department of Finance
Faculty of Management and finance
University of Colombo
March, 2021
i
Abstract
.
Hemas Holdings is a prominent public quoted company that brings nourishing living
to life through a portfolio of unparalleled products and services in the Consumer,
healthcare and mobility sectors. Intertwined into the socio economic fabric of Sri
Lanka, Hemas holdings has also expanded regionally with operations in Bangladesh,
West Bengal and Myanmar. This report documents and presents about the application
of code of best practice by Hemas holdings PLC. The intention of this report is to
analyze the disclosure of corporate governance variables throughout the last five
years. This report extends its analysis on the changes in Corporate Governance
Disclosures during the time span. All the findings presented on this report were
collected by referring Annual reports of Hemas for the last five years. Code of best
practice on Corporate Governance 2013 and Code of best practice on Corporate
Governance 2017. This comprehensive report gives the reader an idea about how
Hemas holdings have applied aspects of corporate governance correctly.
ii
Table of Content
Abstract …………………………………………………………………….............. ii
Table of contents……………………………………………………………............ iii
List of tables………………………………………………………………………….. iv
1. Board meeting frequency ………………………………………………………...1
2. Board size …………………………………………………………………………..1
3. CEO duality …………………………………………………………………………2
4. Board Independence ……………………………………………………………….2
5. Director’s remuneration …………………………………………………………..4
6. Audit opinion ……………………………………………………………………….6
7. Audit committee …………………………………………………………………….6
8. Related party disclosures …………………………………………………………..7
9. Ownership structure ……………………………………………………………….. 9
Reference list ………………………………………………………………………….10
Appendix……………………………………………………………………………....11
iii
List of tables
Table 1.1 Number of Board meetings conducted in the last five years ………………1
Table 2.1 Board size and composition in the last five years……………………………1
Table 3.1 Names of Chairman and CEO in the last five years………………………..1
Table 7.1Composition of audit committee and the number of meetings held during the
last five years …………………………………………………………………………………. 5
Table 9.1 Ownership structure of Hemas throughout the last five years …………….7
iv
1. Board Meeting Frequency
Throughout the last five years Hemas Holdings complied with the code by conducting
board meetings at least once in every quarter.
Table 1.1 Number of Board meetings conducted in the last five years.
Year
Number of board meetings
2015/16
5
2016/17
7
2017/18
6
2018/19
6
2019/20
4
2. Board Size
During the last five years Hemas complied with code by having a well-balanced and
diverse board which is in appropriate size.
Table 2.1 Board size and composition in the last five years.
Year
Total
Executive
Non-Executive
Independent NonIndependent
2015/16
11
3
5
3
2016/17
10
3
4
3
2017/18
11
3
5
3
2018/19
12
3
6
3
2019/20
11
3
5
3
1
3. CEO Duality
During the last five years Chairman and CEO positions were held by two different
individuals. Therefore CEO duality didn’t exist in Hemas .
Table 3.1 Names of Chairman and CEO in the last five years
Year
Chairman
CEO
CEO duality
2015/16
Husein N. Esufally
Steven Enderby
No
2016/17
Husein N. Esufally
Steven Enderby
No
2017/18
Husein N. Esufally
Steven Enderby
No
2018/19
Husein N. Esufally
Steven Enderby
No
2019/20
Husein N. Esufally
Steven Enderby
No
4. Board Independence
4.1 2015/16
Hemas complied with the code as each of the independent directors submitted a
signed and dated declaration of his independence against the specified criteria.
The board of Hemas made a determination as to the independence of each Nonexecutive Independent Director and confirmed that four directors met the criteria for
independence in terms of rule 7.10.4 of the Listing Rules.
In year 15/16 Mr. Pradipta Mohapatra was deemed Independent, notwithstanding the
fact that he has served on the Board since 2007.
Hemas Holding adequately disclosed this by specifying the criteria not met and the
basis for its determination in the annual report.
4.2 2016/17
Hemas complied with the code as each of the independent directors submitted a
signed and dated declaration of his independence against the specified criteria.
2
The board of Hemas made a determination as to the independence of each Nonexecutive Independent Director and confirmed that four of the seven non-executive
directors met the criteria for independence in terms of rule 7.10.4 of the Listing Rules
4.3 2017/18
Hemas complied with the code as each of the independent directors submitted a
signed and dated declaration of his independence against the specified criteria.
The board of Hemas holding made a determination as to the independence of each
Non-executive Independent Director and confirmed that five of the eight nonexecutive directors met the criteria for independence in terms of rule 7.10.4 of the
Listing Rules
4.4 2018/19
Hemas complied with the code as each of the independent directors submitted a
signed and dated declaration of his independence against the specified criteria.
The board of Hemas made a determination as to the independence of each Nonexecutive Independent Director and confirmed that six of the nine non-executive
directors meet the criteria for independence in terms of rule 7.10.4 of the Listing
Rules.
4.5 2019/20
Hemas complied with the code as each of the independent directors submitted a
signed and dated declaration of his independence against the specified criteria.
The board of Hemas made a determination as to the independence of each Nonexecutive Independent Director and confirmed that five of the eight non-executive
directors met the criteria for independence in terms of rule 7.10.4 of the Listing Rules.
3
5. Director’s remuneration
5.1 2015/16
Hemas complied with the code by confirming no director is involved in deciding
his/her own remuneration
Hemas complied with the requirement related to remuneration committee by having
two independent directors and by disclosing all relevant information in the 15/16
financial statement clearly.
Hemas offered a reasonable and competitive compensation package to its directors as
code required. The annual report of Hemas listed the names of directors comprising
the remuneration committee and contained a statement of remuneration policy and
sets out the aggregate remuneration paid to executive and non-executive directors.
5.2 2016/17
Hemas complied with the code by confirming no director is involved in deciding
his/her own remuneration
Hemas complied with the requirement related to human resources and remuneration
committee by having non-executive directors majority of whom are independent and
they have disclosed all relevant information in the 16/17 financial statement clearly.
Hemas offered a reasonable and competitive compensation package to its directors as
code required. The annual report of Hemas listed the names of directors comprising
the remuneration and human resource committee and contains a statement of
remuneration policy and sets out the aggregate remuneration paid to executive and
non-executive directors.
5.3 2017/18
Hemas complied with the code by confirming no director is involved in deciding
his/her own remuneration.
In year 17/18 Human resources and remuneration committee consisted of three nonexecutive directors’ most of who are independent.
4
Hemas offered a reasonable and competitive compensation package to its directors as
code required. The annual report of Hemas listed the names of directors comprising
the remuneration and human resource committee and contains a statement of
remuneration policy and sets out the aggregate remuneration paid to executive and
non-executive directors.
5.4 2018/19
Hemas complied with the code by confirming no director is involved in deciding
his/her own remuneration
In year 18/19 Human resources and remuneration committee consisted of three nonexecutive directors’ most of whom are independent.
Hemas offered a reasonable and competitive compensation package to its directors as
code required. The annual report of Hemas sets out the names of directors comprising
the remuneration and human resource committee and contains a statement of
remuneration policy and sets out the aggregate remuneration paid to executive and
non-executive directors.
5.5 2019/20
Hemas complied with the code by by confirming no director is involved in deciding
his/her own remuneration
In year 19/20 Human resources and remuneration committee consisted of three nonexecutive directors’ most of whom are independent.
Hemas offered a reasonable and competitive compensation package to its directors as
code required. The annual report of Hemas sets out the names of directors comprising
the remuneration and human resource committee and contains a statement of
remuneration policy and sets out the aggregate remuneration paid to executive and
non-executive directors.
5
6. Audit Opinion
From 15/16 to 19/20 EY Sri Lanka audited financial statements of Hemas Holdings.
Their opinion was “In our opinion, the consolidated financial statements give a true
and fair view of the financial position of the Group as at 31 March 2016, and of its
financial performance and cash flows for the year then ended in accordance with Sri
Lanka Accounting Standards.” (Hemas Holdings PLC, 2016)
7. Audit committee
Table 7.1Composition of audit committee and the number of meetings held during the
last five years
Year
Members
No of
Report
meetings
committee as required by
the code
2015/16
Mr.Maithri Wickremesinghe
5
Yes
4
Yes
4
Yes
5
Yes
(INED)(Chairman) (Resigned w.e.f.
01.01.2019)
Mr.Saktha Amaratunga ( INED) (Chairman)
(Appointed w.e.f. 01.01 2016 )
Mr.Dinesh weerakkody (INED)
Mr.Imtiaz Esufally ( NED)
2016/17
Mr.Saktha Amaratunga ( INED) ( Chairman)
Mr.Dinesh weerakkody( INED)
Mr.Imtiaz Esufally ( NED)
2017/18
Mr.Saktha Amaratunga ( INED) ( Chairman)
Mr.Dinesh weerakkody( INED)
Mr.Imtiaz Esufally ( NED
2018/19
Mr.Saktha Amaratunga ( INED) ( Chairman)
6
by
the
audit
Mr.Dinesh weerakkody( INED)
Mr.Imtiaz Esufally ( NED)
2019/20
Mr.Saktha Amaratunga ( INED) ( Chairman)
4
Yes
Mr.Dinesh weerakkody( INED)( Retired w.e.f.
26.06.2019)
Mr.Imtiaz Esufally ( NED)
Jyotindra Trivedi ( Appointed w.e.f.
01.07.2019)
8. Related party disclosures
8.1 15/16
Hemas Holdings complied with the code since “directors declared that they complied
with the provisions of the Code relating to full disclosure of Related Party
Transactions entered into during the financial year ended 31st March 2016”
Details of all related party transactions were disclosed.
Interest register is maintained and all related party disclosures were made in
accordance with LKAS 24.
8.2 16/17
Hemas complied with the code by disclosing non-recurrent related party transactions
of which aggregate value exceeds 10% of the equity or 5% of the total assets
whichever is lower as per 31 March 2016 Audited financial statements.
“Directors declared that they complied with the provisions of the Code relating to full
disclosure of Related Party Transactions entered into during the financial year ended
31st March 2017”
Details of all related party transactions were disclosed.
Interest register is maintained as per the companies act and all related party
disclosures were made in accordance with LKAS 24.
7
8.3 17/18
Directors declared that they have complied with the provisions of the Code relating to
full disclosure of Related Party Transactions entered into during the financial year
ended 31st March 2018”
Details of all related party transactions were disclosed.
Interest register is maintained as per the companies act and all related party
disclosures were made in accordance with LKAS 24
8.4 18/19
Directors declared that they have complied with the provisions of the Code relating to
full disclosure of Related Party Transactions entered into during the financial year
ended 31st March 2019”.
Details of all related party transactions were disclosed.
Interest register is maintained as per the companies act and all related party
disclosures were made in accordance with LKAS 24.
8.5 19/20
Directors declared that they have complied with the provisions of the Code relating to
full disclosure of Related Party Transactions entered into during the financial year
ended 31st March 2020”.
Details of all related party transactions were disclosed.
Interest register is maintained as per the companies act and all related party
disclosures were made in accordance with LKAS 24.
8
9. Ownership structure
During the last five year Hemas Holding’s ownership structure is dominated by
institutional shareholders.
Table 9.1 Ownership structure of Hemas throughout the last five years.
Detail
Years
15/16
16/17
5.7Bn
5.74 Bn
4,238
3966
3856
3939
4051
Shares
37,319,044
37,644,933
37,270,408
39,104,392
43,263,882
Number
287
255
252
265
282
535,226,089 535,088,534 537,663,851
556,938,693
552,779,543
Public holdings
202,833,518 203,021,852 205,222,644
212769785
212,769,060
Public holdings as a %
35.43%
35.44%
35.69%
35.70%
35.7%
4525
4221
4108
4204
4333
12
12
12
12
15
4513
4209
4096
4192
4318
Stated Capital
Individual
Number
17/18
5.96Bn
18/19
19/20
7.73 Bn
7.73Bn
of share
holders
Institutional
of share
holders
Shares
issued capital
Total number of
shareholders
Number of persons
holding share excluded
when computing public
holding%
Number of shareholders
representing public
holding
9
Reference list
Hemas Holdings PLC. (2020). Annual report 2019/20 (Rep.). Retrieved from
https://cdn.cse.lk/cmt/upload_report_file/506_1594723166776.pdf
Hemas Holdings PLC. (2019). Annual report 2018/19 (Rep.). Retrieved from
https://cdn.cse.lk/cmt/upload_report_file/506_1559302143.pdf
Hemas Holdings PLC. (2018). Annual Report 2017/18 (Rep.). Retrieved from
https://cdn.cse.lk/cmt/upload_report_file/506_1527851687900.pdf
Hemas Holdings PLC. (2017). Annual Report 2016/17 (Rep.). Retrieved from
https://cdn.cse.lk/cmt/upload_report_file/506_1496399325836.pdf
Hemas Holdings PLC. (2016). Annual Report 2015/16 (Rep.). Retrieved from
https://cdn.cse.lk/cmt/upload_report_file/506_1465210561.pdf
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Appendix
Corporate Governance Variables
Board meeting frequency
Board Size
Sections referred in code of best practice on
Corporate governance
2013
2017
A.1.1
A.1.1
A.5
A.5
A.5.1
A.5.1
CEO duality
Board independence
A.5.7
A.5.3
A.5.4
A.5.5
A.5.7
A.5.3
A.5.4
A.5.5
Directors’ remuneration
B.1
B.1.1
B.1.2
B.1.3
B.2
B.3
B.1
B.1.1
B.1.2
B.1.3
B.2
B.3
Audit opinion
-
-
Audit committee
D.3.1
D.3.1
Related party disclosures
D.1.7
D.1.8
Ownership structure
E,F
E,F
11