Corporate Governance

Website disclosure

Lithium Australia’s website disclosure on corporate governance follows.

Introduction

The Corporate Governance Manual adopted by Lithium Australia NL (ASX: LIT) (‘the Company’) forms the basis of a comprehensive system of control and accountability for the Company’s administration of corporate governance. The board is committed to administering the policies and procedures with openness and integrity, pursuing the true spirit of corporate governance commensurate with the Company’s needs. To the extent they are applicable to the Company, the board has adopted the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (‘the Principles and Recommendations’).

The Company is pleased to make the following information on its corporate governance practices available on this website.

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Board charter

Role of the board
The role of the board is to provide leadership for and supervision of the Company’s senior management. The board provides the Company’s strategic direction and regularly measures progression by senior management of that strategic direction.

Role of senior management
Those who have the opportunity to materially influence the integrity, strategy and operation of the Company and its financial performance are considered part of senior management. The role of senior management is to progress the strategic direction provided by the board. In particular, the managing director, or equivalent, is responsible for the day-to-day activities of the Company in advancing the strategic direction.

Responsibilities of the board
Collectively, the board is responsible for promoting the success of the Company by:

  1. overseeing the Company, including its control and accountability systems;
  2. appointing the managing director, or equivalent, for a period and on terms as the directors see fit and, where appropriate, removing the managing director, or equivalent;
  3. ratifying the appointment and, where appropriate, the removal of senior executives, including the chief financial officer and the company secretary;
  4. ensuring the Company’s Policy and Procedure for Selection and (Re)Appointment of Directors is reviewed in accordance with the Company’s Nomination Committee Charter;
  5. approving and monitoring compliance with the Company’s Diversity Policy;
  6. approving the Company’s policies on risk oversight and management, internal compliance and control, Code of Conduct and legal compliance;
  7. satisfying itself that senior management have developed and implemented a sound system of risk management and internal control in relation to financial reporting risks and reviewed the effectiveness of the operation of that system;
  8. assessing the effectiveness of senior management’s implementation of systems for managing material business risk, including the making of additional enquiries, and to request assurances regarding the management of material business risk, as appropriate;
  9. monitoring, reviewing and challenging senior management’s performance and implementation of strategy;
  10. ensuring appropriate resources are available to senior management;
  11. approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures;
  12. approving the annual budget of the Company;
  13. monitoring the financial performance of the Company;
  14. ensuring the integrity of the Company’s financial (with the assistance of the Audit Committee, if applicable) and other reporting through approval and monitoring;
  15. providing overall corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company;
  16. appointing the external auditor (where applicable, based on recommendations of the Audit Committee) and the appointment of a new external auditor when any vacancy arises, provided that any appointment made by the board must be ratified by shareholders at the next annual general meeting of the Company;
  17. engaging with the Company’s external auditors and Audit Committee (where there is a separate Audit Committee);
  18. monitoring compliance with all of the Company’s legal obligations, such as those obligations relating to the environment, native title, cultural heritage and occupational health and safety, and
  19. make regular assessment of whether each non-executive director is independent in accordance with the Company’s Policy on Assessing the Independence of Directors.

The board may not delegate its overall responsibility for the matters listed above. However, it may delegate to senior management the responsibility for day-to-day activities in fulfilling the board’s responsibility, provided those matters do not exceed the materiality threshold, as defined below.

Directors are encouraged to request information from senior executives where they consider such information necessary to make informed decisions.

The board must convene regular meetings with sufficient frequency to appropriately discharge its responsibilities. It is usual practice for the board to meet at least once per quarter.

Materiality threshold
The board has agreed on the following guidelines for assessing the materiality of matters.

Materiality – quantitative
Balance sheet items
Balance sheet items are material if they have a value of more than 10% of pro-forma net assets.

Profit and loss items
Profit and loss items are material if they will have an impact on the current year operating result of 10% or more.

Materiality – qualitative
Items are also material if:

  1. they impact on the reputation of the Company;
  2. they involve a breach of legislation or may potentially breach legislation;
  3. they are outside the ordinary course of business;
  4. they could affect the Company’s rights to its assets;
  5. accumulated, they would trigger the quantitative tests;
  6. they involve a contingent liability that would have a probable effect of 10% or more on balance-sheet or profit-and-loss items, or
  7. they will have an effect on operations that is likely to result in an increase or decrease in net income or dividend distribution of more than 10%.

Material contracts
Contracts will be considered material if:

  1. they are outside the ordinary course of business;
  2.  in the opinion of the board they contain exceptionally onerous provisions;
  3. they impact on income or distribution in excess of the quantitative tests;
  4. any default, should it occur, may trigger any of the quantitative or qualitative tests;
  5. they are essential to the activities of the Company and cannot be replaced, or cannot be replaced without an increase in the cost of such a quantum, triggering any of the quantitative tests;
  6. they contain or trigger a change of control provisions;
  7. they are between or for the benefit of related parties, or
  8. they otherwise trigger the quantitative tests.

Any matter that falls within the above guidelines is a matter that triggers the materiality threshold.

Statement of position or authority
The division of responsibilities between the chairman, the lead independent director, if any, and the managing director is set out below.

Responsibilities of the chairman
The chairman is responsible for leadership of the board, for the efficient organisation and conduct of the board’s function and for the briefing of all directors in relation to issues arising at board meetings. The chairman is also responsible for shareholder communication (subject to the role of the responsible officer as set out in the Compliance Procedures) and arranging board performance evaluations. The chairman should facilitate the effective contribution of all directors and promote constructive and respectful relations between directors and between the board and senior management. Any other position that the chairman may hold, either inside or outside the Company, should not hinder the effective performance of the chairman in carrying out his/her role as chairman of the Company.

Responsibilities of the lead independent director
Where the chairman is not an independent director, a lead independent director will be appointed. The lead independent director will take over the role of the chairman when the chairman is unable to act in that capacity as a result of his/her lack of independence.

Responsibilities of the managing director
The managing director is responsible for running the affairs of the Company under delegated authority from the board and implementing the policies and strategy set by the board. In carrying out  his/her responsibilities, the managing director must report to the board in a timely manner on those matters included in the Company’s risk profile, all relevant operational matters and any other matter that is likely to have to fall within the materiality threshold. All reports to the board must present a true and fair view of the Company’s financial condition and operational results. The managing director is also responsible for appointing and, where appropriate, removing senior executives, including the chief financial officer and the company secretary, with the approval of the board. The managing director is responsible for evaluating the performance of senior executives.

Responsibilities of non-executive and/or independent directors
The board determines whether each of the non-executive directors of the Company is independent on a regular basis, in accordance with its Policy on Assessing the Independence of Directors. The board recognises the importance of an appropriate balance between independent and non-independent representation on the board. In making this determination, the board takes into account the skills and experience required, in the context of the Company’s operations and activities. The independent directors may meet without other directors present, if appropriate. The non-executive directors may meet without senior management present at times scheduled from time to time. Such meetings may be facilitated by the chairman or the lead independent director, as appropriate.

Responsibilities of directors and officers
Individual directors should devote the necessary time to the tasks entrusted to them. All directors should consider the number and nature of their directorships and calls on their time from other commitments. Directors and officers of the Company should be aware of their legal obligations, some of which are set out in the Overview of Duties Imposed on Directors of Public Companies.

Responsibilities of senior management
Senior management are responsible for supporting the managing director and assisting the managing director in implementing the general operations and financial business of the Company, in accordance with the delegated authority of the board. Senior management are responsible for reporting all matters that fall within the materiality threshold, at first instance to the managing director or, if the matter concerns the managing director, then directly to the chairman or lead independent director, as appropriate.

Director Selection Process
In determining candidates for the Board, the following process shall occur.

  1. The Nomination Committee (or equivalent) evaluates the range of skills, experience and expertise of the existing Board. In particular, the Nomination Committee (or equivalent) is to identify the particular skills that will best increase the Board’s effectiveness. Consideration is also given to the balance of independent Directors on the Board.
  2. The Nomination Committee (or equivalent) will identify potential candidates by seeking applications from suitably qualified individuals; and/or place advertisements in appropriate media; and/or placing advertisements in appropriate media; and/or engaging external consultants that will present diverse candidates.
  3. The Nomination Committee (or equivalent) interviews selected candidates.
  4. A potential candidate is considered with reference to their skills and expertise in relation to other Board members. The Nomination Committee will also have regard to the other matters identified in this policy, as relevant when identifying and considering candidates for the Board.
  5. If relevant, the Nomination Committee recommends an appropriate candidate for appointment to the Board. Any appointment made by the Board is subject to ratification by shareholders at the next general meeting.

Board Renewal
The Board recognises that Board renewal is critical to performance and the impact of Board tenure on succession planning. Re-appointment of Directors is not automatic.

Size and Composition of the Board
The Board should be structured in such a way that it has a proper understanding of, and competence to deal with, the current and emerging issues of the business and encourages enhanced performance of the Company. Reference is made to the Company’s size and operations as they evolve from time to time. Regard must also be had to the Company’s Diversity Policy in identifying appropriate candidates.

Commitment to the Board
Non-executive Directors shall provide to the Nomination Committee (or equivalent), prior to their appointment or re-election, details of other commitments and an indication of the time involved in carrying out those other commitments. All Directors should consider the number and nature of their directorships and calls on their time from other commitments.

Informing Shareholders
Shareholders shall be informed of the names of candidates submitted for election as directors. In order to enable shareholders to make an informed decision regarding the election, the following information shall be supplied to shareholders for new directors:

  • biographical details (including competencies and qualifications and information sufficient to enable an assessment of the independence of the candidate);
  • a statement by the Board as to whether it supports the nomination of the proposed candidate;
  • details of relationships between the candidate and the Company; the candidate and Directors of the Company; and details of any other relationships that might influence, or reasonably be perceived to influence, in a material respect, his or her capacity to bring an independent judgement to bear on issues before the Board and to act in the best interest of the Company and its security holders;
  • directorships held;
  • particulars of other positions which involve significant time commitments;
  • material adverse information revealed by the checks the Company has performed on the director; and
  • any other particulars required by law.

Shareholders shall be informed of the names of candidates submitted for election as directors. In order to enable shareholders to make an informed decision regarding the election, the following information shall be supplied to shareholders for existing directors:

  • a statement by the Board as to whether it supports the re-election of the existing Director and whether or not the Board considers the existing Director to be independent;
  • the term of office currently served by any existing Director; and
  • any other particulars required by law.

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Security trading policy

Purpose
The Company’s Share Trading Policy sets out its policy regarding trading in Company securities, which include shares, options, warrants, debentures and any other security on issue from time to time. This policy is separate from and additional to the legal constraints imposed by the common law, the Corporations Act 2001 and the ASX Listing Rules. It applies to key management personnel, including directors and employees of the Company and their associates (including spouses, children, family trusts and family companies), as well as contractors, consultants, advisers and auditors of the Company (collectively referred to as ‘personnel’).

The purpose of this policy is to:

  • impose closed trading periods at various times during the year, particularly in periods leading up to an announcement of results, during which trading of the Company’s securities by personnel is prohibited;
  • set out procedures to reduce the risk of insider trading, and
  • outline the steps to take when buying or selling securities in the Company.

Requirements

A basic explanation on insider trading is provided below, including a description of conduct that may constitute insider trading.

It is illegal to trade in Company securities while in possession of unpublished, price-sensitive information concerning the Company. A person will be guilty of insider trading if:

  1. that person possesses information in relation to the Company that is not generally available to the market, and if it were generally available to the market, would be likely to affect the price or value of the Company’s securities (i.e. information that is price-sensitive), and
  2. that person:
    1. buys or sells securities in the Company;
    2. procures someone else to buy or sell securities in the Company, or
    3. passes on that information to a third party where that person knows, or ought reasonably to know, that the third party would be likely to deal in the securities or procure someone else to deal in the securities of the Company.

Price-sensitive information means information relating to the Company that would, if the information were publicly known, be likely to:

  1. have a material effect on the price or value of the its shares, or
  2. influence persons who invest in securities in deciding whether or not to buy or sell the Company’s shares.

The following are examples of price-sensitive information which, if made available to the market, would be likely to affect the price of the Company’s securities:

  1. drill or exploration results;
  2. entry into or termination of a material contract (such as a major joint venture);
  3. a material acquisition or sale of assets by the Company;
  4. an actual or proposed takeover or merger;
  5. an actual or proposed change to the Company’s capital structure;
  6. a proposed dividend or a change in dividend policy;
  7. a material claim against the Company or other unexpected liability, or
  8. a major change to the board or senior management.

Closed periods
The chairman will generally not allow personnel to deal in the Company’s securities or in financial products issued or created over or in respect of the Company’s securities in the following periods (that is, ‘closed periods’):

  1. within the period of 5 days prior to the release of annual, half-yearly or quarterly results;
  2. within the period of 5 days prior to the annual general meeting, and
  3. if there is in existence price-sensitive information that has not been disclosed because of an ASX Listing Rules exception.

This obligation operates at all times and applies to dealings in the Company’s securities by family members and other associates of personnel, as well as to personal dealings by personnel. Personnel must not communicate price-sensitive information to a person who may deal in the Company’s securities. In addition, personnel should not recommend or otherwise suggest to any person (including a spouse, relative, friend, trustee of a family trust or directors of a family company) the buying or selling of the Company’s securities during closed periods

Additional restrictions on short-term trading
The Company encourages personnel to adopt a long-term attitude to their investment in the Company’s securities. Consequently, personnel must not, at any time, engage in short-term trading or speculative trading of the Company’s securities.

Related companies
Personnel, where they possess inside information, should also not deal in the securities of other companies with which the Company might have an association or be about to enter into such association, such as joint-venture or farm-in partners.

Guidelines for trading in the Company’s securities

Personnel can deal in the Company’s securities outside of any closed period in the following circumstances:

  1. they have satisfied themselves that they are not in possession of any price-sensitive information that is not generally available to the public;
  2. they have contacted the chairman or, in his/her absence, the managing director and notified him/her of their intention to do so and the chairman or managing director indicates that there is no impediment to them doing so;
  3. where the chairman wishes to deal in securities, he/she has contacted the managing director or, in his/her absence, the company secretary and notified him/her of his/her intention to do so, and the managing director or company secretary indicates that there is no impediment to him/her doing so.

The requirement to provide notice of an intention to trade in the Company’s securities does not apply to the acquisition of securities through director, officer or employee share or option plans. However, the requirement does apply to the trading of the securities once they have been acquired or issued under such plans.

Exclusions

This policy does not apply in the following circumstances:

  1. any issue of securities by the Company pursuant to a prospectus or like disclosure under the Corporations Law, or under employee share and option plans;
  2. trading that does not result in a change in beneficial control of the Company’s shares; e.g. transferring a personal holding of the Company’s shares to a superannuation fund;
  3. the exercise (but not the sale of securities following exercise) of an option or a right under an employee incentive scheme, or the conversion of a convertible security; however, insider trading rules and this policy do apply in relation to the subsequent disposal of any securities acquired under an option – where personnel exercise options while in the possession of price-sensitive information, they must fund the exercise of the options without the financial assistance of a simultaneous sale of some or all shares just acquired, and if the options expire outside a closed period as described this policy, then personnel may simultaneously exercise and sell any securities, subject always to compliance with insider trading laws;
  4. undertakings to accept, or the acceptance of, a takeover offer;
  5. trading under an offer or invitation made to all or most of the security holders, such as a rights issue, a security purchase plan, a dividend distribution reinvestment plan or an equal access buy-back, where the plan that determines the timing and structure of the offer has been approved by the board;
  6. trading in the Company’s securities by a managed securities portfolio where personnel are not in position to influence choices in the portfolio;
  7. where personnel are trustees, trading in the Company’s securities by that trust, provided personnel are not beneficiaries of the trust and any decision to trade during a closed period is taken by the other trustees or by the investment managers independently of personnel;
  8. undertakings to accept, or the acceptance of, a takeover offer, and
  9. trading under a non-discretionary trading plan that has been approved by the chairman and managing director and where:
    1. personnel did not enter into the plan or amend the trading plan during a closed period;
    2. the trading plan does not permit personnel to exercise any influence of discretion over how, when or whether to trade.
      Such a trading plan may not be cancelled during a closed period other than in exceptional circumstances.

Dealing in exceptional circumstances
In specific circumstances, such as financial hardship, the chairman may waive the requirement of personnel to deal in securities during closed periods on the condition that personnel can demonstrate they are not in possession of any price-sensitive information that is not generally available to the public. Should any party, the subject of this Share Trading Policy, wish to trade during a closed period, he/she must submit a written request to the board and satisfy the board that exceptional circumstances exist and that a failure to trade in the Company’s securities would result in exceptional circumstances such as financial hardship.

Any request for permission to trade in during a closed period will be assessed by the full board (or, in the case of a director, the balance of the board) on a case-by-case basis.

ASX notification by directors
Directors must notify the company secretary within 3 business days after any dealings in the Company’s securities (either personally or through a third party). This enables the Company to notify the ASX of the change in the director’s or connected person’s interests within the requisite time frame of no more than 5 business days after the change has occurred.

It is the individual responsibility of directors to ensure they comply with this requirement.

Where a director is granted permission to trade within a closed period, the notification to the ASX must state whether the trade was made during a closed period where prior written approval is required and the date on which that written approval was provided prior to the trade occurring.

Consequences of a breach of the policy
A breach of this policy by any personnel may expose them to criminal and/or civil liability under the Corporations Act (Cth) 2001. The Company will regard a breach of this policy as serious misconduct and it is considered a cause for termination of employment or engagement. Should the application of this Share Trading Policy conflict with the Corporations Act 2001 in any way, the Corporations Act 2001 will prevail.

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Summary of code of conduct

The board has adopted a Code of Conduct that requires directors, management and employees to deal with the Company’s customers, suppliers, competitors and each other with honesty, fairness and integrity, and to observe the rule and spirit of the legal and regulatory environment in which the Company operates. The code prohibits directors, management and employees from involving themselves in situations where there is a real or apparent conflict of interest between them as individuals and the interests of the Company. The Company also has a policy on financial and other inducements. Directors, management and employees are required to respect the confidentiality of all information of a confidential nature acquired in the course of the Company’s business. Directors, management and employees must protect the assets of the Company to ensure availability for legitimate business purposes. The Company acknowledges its responsibility to shareholders, the community, and the individual. The Company will use its best endeavours to ensure a safe work place and maintain proper occupational health and safety practices.

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Summary of policy on continuous disclosure

The board has adopted a policy on ASX Listing Rule Compliance. This policy sets out the obligations of directors, officers and employees to ensure the Company satisfies its continuous disclosure obligations. It provides information as to what a person should do when he/she becomes aware of information that could have a material effect on the Company’s securities. The policy also sets out the consequences of non-compliance and a person’s confidentiality obligations.

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Shareholder communication policy

The board aims to ensure that the shareholders are informed of all major developments affecting the Company.

Electronic communication

The Company makes available on its website the following information on a regular and up-to-date basis.

  • Information briefings to the media and analysts.
  • Notices of meetings and explanatory materials.
  • Financial information, including annual reports.
  • All other Company announcements.

The Company provides shareholder materials directly to shareholders through electronic means. A shareholder may request that a hard copy of the Company’s annual report be posted to them. In addition to the above, provision is made on the Company’s website for shareholders to register to receive information updates.

Meetings
The Company considers general meetings to be an effective means to communicate with shareholders and the information provided in its notices of meetings is presented in a clear, concise and effective manner.

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Summary of Diversity Policy

The board has adopted a Diversity Policy that describes the Company’s commitment to ensuring that its directors, officers and employees possess a diverse mix of skills and talent, in order to enhance Company performance. The Diversity Policy addresses equal opportunities in the hiring, training and career advancement of directors, officers and employees and outlines the process by which the board will set measurable objectives to achieve the aims of its Diversity Policy, with particular focus on gender diversity within the Company. The board is responsible for monitoring Company performance in meeting the Diversity Policy requirements, including the achievement of diversity objectives.

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Summary of Risk Management Policy

The board has adopted a Risk Management Policy. Under that policy, the board delegates day-to-day management of risk to the managing director (or equivalent). The policy sets out the role of the managing director (or equivalent) and accountabilities. It also contains the Company’s risk profile and describes some of the policies and practices the Company has in place to manage specific business risks.

The managing director is required to report on the progress of, and on all matters associated with risk management on a regular basis. The managing director must report to the board on the effectiveness of the Company’s management of its material business risks at least annually.

The board is responsible for approving the Company’s policies on risk oversight and management and satisfying itself at least annually that management have developed and implemented a sound system of risk management and internal control.

The board also receives a written assurance from the managing director (or equivalent) and the chief financial officer that, to the best of their knowledge and belief, the declaration provided by them in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in relation to financial reporting risks.

This policy incorporates some material from Principle 7: Recognise and Manage Risk – Guide for Small-Mid Market Capitalised Companies produced by ASX Markets Supervision Pty Ltd (‘ASXMS’), Deloitte Touche Tohmatsu and Blakiston & Crabb.

Principle 7: Recognise and Manage Risk Guide for small–mid market capitalised companies was provided as general information only and does not consider specific objectives, situations or needs. The guide was not intended to be relied upon or disclosed or referred to in any document. ASXMS accepts no duty of care or liability to you or anyone else regarding the application of the guide in the document and we are not responsible to you or anyone else for any loss suffered in connection with the use of the guide in this document, or any of the content contained in this document.