Corporate Governance

The Board of AFC Energy is committed to achieving high standards of governance commensurate with the size and stage of development of the Company. As an AIM-listed company,


The Board of AFC Energy is committed to achieving high standards of governance commensurate with the size and stage of development of the Company. As an AIM-listed company, AFC Energy intends to adopt as far as possible the principles of the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”). The QCA Code identifies ten principles to be followed in order for companies to deliver growth in long term shareholder value, encompassing and efficient, effective and dynamic management framework accompanied by good communication to promote confidence and trust.

The sections below set out the ways in which AFC Energy applies the ten principles of the QCA Code in support of the Company’s medium to long-term success, together with any areas of non-compliance. More detailed information is also provided in the Company’s Annual Report.

Establish a strategy and business model which promote long-term value for shareholders

The principal objective of AFC Energy is to install, own, operate and maintain stationary alkaline fuel cell systems that generate durable power at the highest levels of fuel efficiency for the future. AFC Energy seeks to be a world-class energy company that deploys low cost, high performance alkaline fuel cell technology to the global market.

AFC Energy is primarily targeting large-scale industrial applications for the fuel cell system but is also considering distributed and related applications (such as water treatment), which has tremendous potential to serve communities. AFC Energy also highly values the relationships it has with those parties with common interests in our project locations and seeks to maintain a positive dialogue and transparency with its local communities and neighbours. Ultimately, the creation of sustained long-term shareholder value will be driven by the pace and scale of AFC Energy’s technology deployment and by maintaining a broad-based competitive advantage over substitute or near substitute offerings. Further detail of AFC Energy’s business model is set out at:

The strategy, objectives and business model of AFC Energy are developed by the executive directors and the senior management team, and then approved by the Board. The management team, led by the Chief Executive Officer, is responsible for implementing the strategy and managing the business at an operational level.

AFC Energy has a substantial and diverse portfolio of pipeline project opportunities for its alkaline fuel cell technology. However, the Company continuously looks for new partners and potential revenue streams to help grow and diversify the business and deliver sustainable growth in value for shareholders.

Seek to understand and meet shareholder needs and expectations

AFC Energy seeks to maintain a regular dialogue with both existing and potential shareholders in order to communicate its strategy and progress and to understand the needs and expectations of shareholders.

Beyond the Annual General Meeting, the Chief Executive Officer, Chief Operating Officer and, where appropriate, other members of the senior management team meet regularly with investors and analysts to provide them with updates on the business and to obtain feedback regarding the market’s expectations of AFC Energy.

AFC Energy’s investor relations activities encompass dialogue with both institutional and private investors.

The Board also endeavours to maintain a dialogue and keep shareholders informed through its public announcements and Company website. AFC Energy’s website provides not only information specifically relevant to investors (such as the Company’s annual report and accounts, investor presentations, regulatory announcements and share price information) but also regarding the nature of the business itself, the technology, key projects and background to AFC Energy’s target markets and non-regulatory press releases.

The Annual General Meeting of the Company, normally attended by all Directors, provides the Directors the opportunity to report to shareholders on current and proposed operations and developments, and also enables shareholders to express their views of AFC Energy’s business activities. Shareholders are encouraged to attend and are invited to ask questions during the meeting and to meet with the Directors after the formal proceedings have ended.

The Board intends to announce the detailed results of shareholder voting in its announcements to the market.

Take into account wider stakeholder and social responsibilities and their implications for long-term success

Due to the very nature of AFC Energy’s technologies and the potential solutions these provide, not least in respect of decarbonisation, these benefits will potentially extend beyond the client to the wider society and our environment.

In terms of the global fuel cell market, there are three key areas to consider: (1) international co-operation; (2) national government policies; and (3) global industry.

International Co-operation

Governments are increasingly globally co-ordinated in tackling climate change (e.g. the Paris Agreement) through the adoption of decarbonisation policy agendas – this is evidenced by the targeting of large-scale, efficient energy integration. Hydrogen storage solutions, when combined with electrolysis and AFC technology can potentially provide a significant hydrogen battery solution for integration with intermittent renewable energy sources.

National Government Policies

Governments are utilising fiscal incentive structures to prioritise the improved utilisation of limited resources. By-product hydrogen, vented as a waste product, is gaining increased scrutiny. For example, there is recognition of the need to significantly reduce oil-fired power generation in Saudi Arabia, with the utilisation of hydrogen from the petrochemical industry, with AFCs offering one such solution. Japan, Korea and the United States are also firm advocates with fiscal incentives seeking to improve hydrogen utilisation.

Global Industry

Energy intensive sectors are increasingly exposed to government carbon policy and rising power prices. Many international industrial groups now seek cleaner, off grid and long-term affordable energy solutions. The use of by-product vented hydrogen through the adoption of fuel cells will enable industry to mitigate the risk of rising power prices and Government policy.

AFC Energy’s aim is to install, own, operate and maintain stationary alkaline fuel cell systems that generate durable power at the highest levels of fuel efficiency for the future. AFC Energy seeks to be a world-class energy company that deploys low cost, high performance alkaline fuel cell technology to the global market.

AFC Energy is primarily targeting large-scale industrial applications for the fuel cell system but is also developing distributed and related applications (such as water treatment), which has tremendous potential to serve communities. AFC Energy also highly values the relationships it has with those parties with common interests in our project locations and seeks to maintain a positive dialogue and transparency with its local communities and neighbours.

The Board is aware of its corporate social responsibilities and the need to maintain effective working relationships across a range of stakeholder groups. These include AFC Energy’s employees, clients, suppliers and shareholders. The Company’s operations and working methodologies take account of the need to balance the needs of all of these stakeholder groups while maintaining focus on the Board’s primary responsibility to promote the success of AFC Energy for the benefit of its members as a whole. AFC Energy endeavours to take account of feedback received from stakeholders, making amendments to working arrangements and operational plans where appropriate and where such amendments are is consistent with the Company’s longer term strategy.

The Company takes due account of any impact that its activities may have on the environment and seeks to minimise this impact wherever possible. Through the various procedures and systems it operates, AFC Energy ensures full compliance with health and safety and environmental legislation relevant to its activities and is currently undergoing a programme to become ISO 9001, 14001 & 45001 certified.

Embed effective risk management, considering both opportunities and threats, throughout the organisation

The Board is responsible for the systems of risk management and internal control and for reviewing their effectiveness. The internal controls are designed to manage rather than eliminate risk and provide reasonable but not absolute assurance against material misstatement or loss. Through the activities of the Audit Committee, the effectiveness of these internal controls is reviewed annually.

A summary of the principal risks and uncertainties facing AFC Energy, as well as mitigating actions, are set out on pages 22 and 23 of the Company’s 2017 Annual Report.

A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. This budget is maintained and updated where required throughout the year. Performance against the budget and forecasts is reviewed by the management team on a monthly basis and by the Board at each Board meeting.

The Company maintains appropriate insurance cover in respect of actions taken against the Directors because of their roles, as well as against material loss or claims against the Company. The insured values and type of cover are comprehensively reviewed on a periodic basis.

Maintain the Board as a well-functioning, balanced team led by the Chair

AFC Energy’s Board currently comprises 2 Executive Directors and 4 Non-Executive Directors (2 of whom are not considered to be independent). The Board includes an independent Non-Executive Chairman who is responsible for leadership by the Board and ensuring all aspects of its role.

All of the Directors are subject to election by shareholders at the first Annual General Meeting after their appointment to the Board and will continue to seek re-election at least once every three years.

Directors’ biographies are set out at:

The Board is responsible to the shareholders for the proper management of the Company and meets at least six times a year to set the overall direction and strategy of the Company and to review operational and financial performance. All key operational and investment decisions are subject to Board approval.

A summary of Board and Committee meetings held in the year ended 31 October 2017, and Directors’ attendance records, is set out in the Company’s 2017 Annual report at:

The Board considers itself to be sufficiently independent and adheres to the QCA Code recommendation that a board should have at least two independent Non-Executive Directors. Two of the four Non-Executive Directors who currently sit on the Board are not regarded as independent.

Ensure that between them, the directors have the necessary up-to-date experience, skills and capabilities

The Board considers that all of the Non-Executive Directors are of sufficient competence and calibre to add strength and objectivity to its activities, and bring considerable experience in scientific, operational and financial development of clean technology products and companies.

The Directors’ biographies are set out at:

The Board regularly reviews the composition of the Board to ensure that it has the necessary breadth and depth of skills to support the ongoing development of the Company.

The Chairman, in conjunction with the Company Secretary, ensures that the Directors’ knowledge is kept up to date on key issues and developments pertaining to the Company, its operational environment and to the Directors’ responsibilities as members of the Board. During the course of the year, Directors received updates from the Company Secretary and various external advisers on a number of corporate governance matters.

Directors’ service contracts or appointment letters and the terms of reference of the sub-committees of the Board make provision for a Director to seek personal advice in furtherance of his or her duties and responsibilities.

Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

The Company’s Directors are evaluated each year by way of peer appraisal. The appraisal seeks to determine the effectiveness and performance of each member with regards to their specific roles as well as their role as a Board member in general.

The appraisal system seeks to identify areas of concern and make recommendations for any training or development to enable the Board member to meet their objectives which will be set for the following year. The appraisal process will also review the progress made against prior year targets to ensure any identified skill gaps are addressed.

Whilst the Board considers this evaluation process is currently best carried out internally, the Board will keep this under review and may consider independent external evaluation reviews in the future.

As well as the appraisal process, the Board monitor the Non-Executive Directors’ status as independent to ensure a suitable balance of independent Non-Executive and Executive Directors remains in place.

The Board may utilise the results of the evaluation process when considering the adequacy of the composition of the Board and for succession planning.  Succession planning is formally considered by the Board on an annual basis, in conjunction with the appraisal process.

Promote a corporate culture that is based on ethical values and behaviours

The Board seeks to maintain the highest standards of integrity and probity in the conduct of the Company’s operations. These values are enshrined in the written policies and working practices adopted by all employees in the Company. An open culture is encouraged within the Company, with regular communications to staff regarding progress and staff feedback regularly sought. Senior management regularly monitors the Company’s cultural environment and seeks to address any concerns than may arise, escalating these to Board level as necessary.

AFC Energy is committed to providing a safe environment for its staff and all other parties for which the Company has a legal or moral responsibility in this area. The Company has a Health and Safety policy which is enforced rigorously.

Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board has overall responsibility for promoting the success of the Company. The Executive Directors have day-to-day responsibility for the operational management of the Company’s activities. The Non-Executive Directors are responsible for bringing independent and objective judgment to Board decisions.

There is a clear separation of the roles of Chief Executive Officer and Non-Executive Chairman. The Chairman is responsible for overseeing the running of the Board, ensuring that no individual or group dominates the Board’s decision-making and ensuring the Non-Executive Directors are properly briefed on matters. The Chairman has overall responsibility for corporate governance matters of the Company. The Chief Executive Officer has overall responsibility for implementing the strategy of the Board and managing the day-to-day business activities of AFC Energy. The Company Secretary is responsible for ensuring that Board procedures are followed and applicable rules and regulations are complied with.

The Board has established an Audit Committee and a Remuneration Committee with formally delegated duties and responsibilities. Joe Mangion chairs the Audit Committee and Lisa Jordan chairs the Remuneration Committee. The Board has also established a nominations committee chaired by John Rennocks.

The Audit Committee meets formally twice a year and at other times if necessary and has responsibility for, amongst other things, planning and reviewing the annual report and accounts and interim statements involving, where appropriate, the external auditors. The Committee also approves external auditors’ fees and ensures the auditors’ independence as well as focusing on compliance with legal requirements and accounting standards. It is also responsible for ensuring that an effective system of internal control is maintained. The ultimate responsibility for reviewing and approving the annual financial statements and interim statements remains with the Board. The Company’s external auditors are invited to attend meetings of the Committee on a regular basis.

The Remuneration Committee, which meets as required, but at least once a year, has responsibility for making recommendations to the Board on the compensation of senior executives and determining, within agreed terms of reference, the specific remuneration packages for each of the Executive Directors. It also makes recommendations to the Board concerning employee incentive schemes including setting performance conditions for share options granted under the schemes.

The Remuneration Report for the year ended 31 October 2017 is set out on pages 28 to 29 of AFC Energy’s 2017 Annual Report.

The Directors believe that the above disclosures constitute sufficient disclosure to meet the QCA Code’s requirement for a Remuneration Committee Report. Consequently, a separate Remuneration Committee Report is not presented in the Company’s Annual Report.

Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Board places a high priority on regular communications with its various stakeholder groups and aims to ensure that all communications concerning the Company’s activities are clear, fair and accurate. AFC Energy’s website is regularly updated and announcements or details of presentations and events are posted onto the website.

AFC Energy’s financial reports can be found at:

The results of voting on all resolutions in future general meetings will be posted to AFC Energy’s website, including any actions to be taken as a result of resolutions for which votes against have been received from at least 20 per cent of independent shareholders.