IP E-GAME VENTURES, INC.
SECOND AMENDED MANUAL OF CORPORATE GOVERNANCE
(In compliance with SEC Memorandum Circular No. 19, series of 2016, entitled Code of Corporate Governance for Publicly-Listed Companies)
The Board of Directors (the ―”Board“) and Management of IP E-Game Ventures, Inc. (the ―”Corporation“), in compliance with the Securities and Exchange Commission’s (the ―”Commission”) requirements and guidelines, hereby commit themselves to the guiding principles and best practices contained in this Second Amended Manual of Corporate Governance (the ―”Manual“) and acknowledge that the same will be the Corporation’s primary source of guidance on all aspects of governance.
COMMITMENT TO GOOD CORPORATE GOVERNANCE
This Manual shall institutionalize the principles of good corporate governance in the organization of Corporation. It aims to define the responsibilities and accountabilities of the Board and the management of the Corporation (the ―”Management“).
The Board and the Management recognize that a good corporate governance system is integral to the mandate bestowed on them by the Corporation’s stockholders toward sound strategic business management. Thus, the Board and the Management commit themselves to uphold their fiduciary duties, accountabilities and responsibilities to the Corporation, and subscribe to the belief that the pursuit of corporate goals must be bound by high ethical standards.
This Manual shall be submitted to the Commission to enable the Commission to determine the Corporation’s compliance with the Code of Corporate Governance for
Publicly-Listed Companies taking into consideration the nature, size and scope of the business of the Corporation. This Manual shall be made available for inspection by any stockholder at reasonable hours on business days and shall be made available on the Corporation’s website.
DEFINITION OF TERMS
For purposes of this Manual, the following terms are defined as follows:
(a) Corporate Governance – the system of stewardship and control to guide organizations in fulfilling their long-term economic, moral, legal and social obligations towards their stakeholders. Corporate governance is a system of direction, feedback and control using regulations, performance standards and ethical guidelines to hold the Board and senior management accountable for ensuring ethical behavior—reconciling long- term customer satisfaction with stockholder value—to the benefit of all stakeholders and society. Its purpose is to maximize the organization’s long-term success, creating sustainable value for its stockholders, stakeholders and the nation.
(b) Board of Directors – the governing body elected by the stockholders that exercises the corporate powers of a corporation, conducts all its business and controls its properties.
(c) Management – a group of executives given the authority by the Board to implement the policies it has laid down in the conduct of the business of the corporation.
(d) Independent director – a person who is independent of management and the controlling stockholder, and is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director.
(e) Executive director – a director who has executive responsibility of day-to- day operations of a part or the whole of the organization.
(f) Non-executive director – a director who has no executive responsibility and does not perform any work related to the operations of the corporation.
(g) Conglomerate – a group of corporations that has diversified business activities in varied industries, whereby the operations of such businesses are controlled and managed by a parent corporate entity.
(h) Internal control – a process designed and effected by the board of directors, senior management, and all levels of personnel to provide reasonable assurance on the achievement of objectives through efficient and effective operations; reliable, complete and timely financial and management information; and compliance with applicable laws, regulations, and the organization’s policies and procedures.
(i) Enterprise Risk Management – a process, effected by an entity’s Board of Directors, management and other personnel, applied in strategy setting and across the enterprise that is designed to identify potential events that may affect the entity, manage risks to be within its risk appetite, and provide reasonable assurance regarding the achievement of entity objectives.
(j) RelatedParty–shallcovertheCorporation’ssubsidiaries,aswellasaffiliates and any party (including their subsidiaries, affiliates and special purpose entities), that the Corporation exerts direct or indirect control over or that exerts direct or indirect control over the Corporation; the Corporation’s directors; officers; stockholders and related interests (―”DOSRI“), and their close family members, as well as corresponding persons in affiliated companies. This shall also include such other person or juridical entity whose interest may pose a potential conflict with the interest of the Corporation.
(k) Related Party Transactions or RPT – a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged. It shall be interpreted broadly to include not only transactions that are entered into with related parties, but also outstanding transactions that are entered into with an unrelated party that subsequently becomes a related party.
(l) Stakeholders – any individual, organization or society at large who can either affect and/or be affected by the Corporation’s strategies, policies, business decisions and operations, in general. This includes, among others, customers, creditors, employees, suppliers, investors, as well as the government and community in which it operates.
2. BOARD GOVERNANCE
The Board is primarily responsible for the governance of the Corporation. Corollary to setting the policies for the accomplishment of the corporate objectives, it shall provide an independent check on Management.
A. Composition of the Board
The Board shall be composed of members (each, a ―Director‖) with a collective working knowledge, experience or expertise that is relevant to the Corporation’s industry and sector, and a majority of which must be non-executive Directors who possess the necessary qualifications to effectively participate and help secure objective, independent judgment on corporate affairs and to substantiate proper checks and balances. The Board will endeavor to always ensure that it has an appropriate mix of competence and expertise and that its members remain qualified for their positions individually and collectively, to enable it to fulfill its roles and responsibilities and respond to the needs of the organization based on the evolving business environment and strategic direction.
As provided in the Corporation’s Amended Articles of Incorporation and Amended By-Laws, the Board shall be composed of nine (9) Directors who are elected by the stockholders.
The membership of the Board may be a combination of executive and non- executive Directors (which include independent directors) in order that no Director or small group of Directors can dominate the decision-making process.
The Board shall have at least three independent directors, or such number as to constitute at least one-third of the members of the Board, whichever is higher. For this purpose, the Board shall have at least three independent directors, or such number as to constitute at least one-third of the members of the Board, whichever is higher.
It shall be the policy of the Corporation to maintain diversity in the Board in terms of gender, age, ethnicity, culture, skills, competence, and knowledge. Directors shall be elected solely on the basis of merit and qualifications.
To promote effective board performance and continuing qualification of the Directors in carrying-out their duties and responsibilities, all newly- elected Directors shall attend an orientation program prior to the commencement of the Director’s functions. All incumbent Directors shall also attend an annual training program at the dates and times set by the Board.
C. Multiple Board Seats
The non-executive directors of the Board may concurrently serve as directors of not more than five (5) publicly listed companies to ensure that each of them has sufficient time to fully prepare for meetings, challenge Management’s proposals/views, and oversee the long-term strategy of the Corporation; provided that, the Chief Executive Officer (―CEO‖) and other executive directors may be covered by a lower indicative limit for membership in other boards. A similar limit may apply to independent or non-executive directors who, at the same time, serve as full-time executives in other corporations.
Each Director shall notify the Board where he/she is an incumbent director before accepting a directorship in another company.
In any case, the capacity of the Directors to diligently and efficiently perform their duties and responsibilities to the boards shall not be compromised.
D. The Chairperson and Chief Executive Officer
The roles of the chairperson (the ―Chairperson‖) and chief executive officer (―CEO‖) of the Corporation shall, as much as practicable, be separate to foster an appropriate balance of power, increased accountability and better capacity for independent decision-making by the Board. A clear delineation of functions shall be made between the Chairperson and CEO upon their election.
The Board shall designate a lead Director among the independent directors if the Chairperson of the Board is not independent, such as if the positions of the Chairperson of the Board and Chief Executive Officer are held by one person. The lead director shall have the following functions:
(i) Serve as an intermediary between the Chairperson and the other directors when necessary;
(ii) Convene and chair meetings of the non-executive directors; and
(iii) Contribute to the performance evaluation of the Chairperson, as required.
If the positions of Chairperson and CEO are unified, the proper checks and balances shall be laid down to ensure that the Board gets the benefit of independent views and perspectives.
The Board shall be headed by a competent and qualified Chairperson. The duties and responsibilities of the Chairperson in relation to the Board may include, among others, the following:
(i) Ensures that the meeting agenda focus on strategic matters, including the overall risk appetite of the corporation, considering the developments in the business and regulatory environments, key governance concerns, and contentious issues that will significantly affect operations;
(ii) Guarantee that the Board receives accurate, timely, relevant, insightful, concise, and clear information to enable it to make sound decisions;
(iii) Facilitate discussions on key issues by fostering an environment conducive for constructive debate and leveraging on the skills and expertise of individual directors;
(iv) Ensure that the Board sufficiently challenges and inquires on reports submitted and representations made by Management;
(v) Assure the availability of proper orientation for first-time directors and continuing training opportunities for all directors; and
(vi) Cause the evaluation of the performance of the Board at least once a year, the discussion thereof, and the oversight and follow-up on such evaluation and discussion.
F. Independent Directors
An Independent Director refers to a person who, ideally:
(i) Is not, or has not been a senior officer or employee of the Corporation unless there has been a change in the controlling ownership of the Corporation;
(ii) Is not, and has not been in the three years immediately preceding the election, a Director of the Corporation; a director, officer, employee of the Corporation’s subsidiaries, associates, affiliates or related companies; or a director, officer, employee of the Corporation’s substantial stockholders and its related companies;
(iii) Has not been appointed in the Corporation, its subsidiaries, associates, affiliates or related companies as Chairperson ―Emeritus,‖ ―Ex–Officio‖ Directors/Officers or Members of any Advisory Board, or otherwise appointed in a capacity to assist the Board in the performance of its duties and responsibilities within three years immediately preceding his election;
(iv) Is not an owner of more than two percent (2%) of the outstanding shares of the Corporation, its subsidiaries, associates, affiliates or related companies;
(v) Is not a relative of a director, officer, or substantial stockholder of the Corporation or any of its related companies or of any of its substantial stockholders. For this purpose, relatives include spouse, parent, child, brother, sister and the spouse of such child, brother or sister;
(vi) Is not acting as a nominee or representative of any director of the Corporation or any of its related companies;
(vii) Is not a securities broker-dealer of listed companies and registered issuers of securities. ―Securities broker–dealer‖ refers to any person holding any office of trust and responsibility in a broker-dealer firm, which includes, among others, a director, officer, principal stockholder, nominee of the firm to the Exchange, an associated person or salesman, and an authorized clerk of the broker or dealer;
(viii) Is not retained, either in his personal capacity or through a firm, as a professional adviser, auditor, consultant, agent or counsel of the Corporation, any of its related companies or substantial stockholder, or is otherwise independent of Management and free from any business or other relationship within the three years immediately preceding the date of his election;
(ix) Does not engage or has not engaged, whether by himself or with other persons or through a firm of which he is a partner, director or substantial stockholder, in any transaction with the Corporation or any of its related companies or substantial stockholders, other than such transactions that are conducted at arm’s length and could not materially interfere with or influence the exercise of his independent judgment;
(x) Is not affiliated with any non-profit organization that receives significant funding from the Corporation or any of its related companies or substantial stockholders; and
(xi) Is not employed as an executive officer of another company where any of the Corporation’s executives serve as directors.
Related companies, as used in this section, refer to (a) the Corporation’s holding/parent company; (b) its subsidiaries; and (c) subsidiaries of its holding/parent company.
The Board’s independent directors shall serve for a maximum cumulative term of nine (9) years, after which the independent director shall be perpetually barred from re- election as a director of the Corporation, but may continue to qualify for nomination and election as a non-independent director. In the instance that the Corporation would like to retain an independent director who has served for nine years, the Board shall provide meritorious justification/s and seek stockholders’ approval during the annual stockholders’ meeting.
G. Qualifications of Directors
In addition to the qualifications for membership in the Board provided for in the Corporation Code, Securities Regulation Code and other relevant laws, the Board may provide for additional qualifications which include, among others, the following:
(i) College education or equivalent academic degree;
(ii) Practical understanding of the business of the corporation;
(iii) Membership in good standing in relevant industry, business or professional organizations; and
(iv) Previous business experience.
(v) Retirement age of seventy-five (75) years, unless the Board decides with a 2/3 vote a higher retirement age for a particular Director with the consent the director
H. Disqualification of Directors
1. Permanent Disqualification
The following shall be grounds for the permanent disqualifications of a director:
(i) Any person convicted by final judgment or order by a competent judicial or administrative body of any crime that (a) involves the purchase or sale of securities, as defined in the Securities Regulation Code; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust company, investment house or as an affiliated person of any of them;
(ii) Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final judgment or order of the Securities and Exchange Commission (the ―Commission‖) or any court or administrative body of competent jurisdiction from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as director or officer of a bank, quasi-bank, trust company, investment house, or investment company; (c) engaging in or continuing any conduct or practice in any of the capacities mentioned in sub-paragraphs (a) and (b) above, or willfully violating the laws that govern securities and banking activities.
The disqualification shall also apply if such person is currently the subject of an order of the Commission or any court or administrative body denying, revoking or suspending any registration, license or permit issued to him under the Corporation Code, Securities Regulation Code or any other law administered by the Commission or Bangko Sentral ng Pilipinas (―BSP‖), or under any rule or regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity involving securities and banking; or such person is currently the subject of an effective order of a self-regulatory organization suspending or expelling him from membership, participation of the organization;
(iii) Any person convicted by final judgment or order by a court or competent administrative body of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting, misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;
(iv) Any person who has been adjudged by final judgment or order of the Commission, court or competent administrative body to have willfully violated, or willfully aided, abetted, counseled, induced or procured the violation of any provision of the Corporation Code, Securities Regulation Code or any other law administered by the Commission or BSP, or any of its rule, regulation or order;
(v) Any person earlier elected as independent director who becomes an officer, employee or consultant of the same corporation;
(vi) Any person judicially declared as insolvent;
(vii) Any person found guilty by final judgment or order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct similar to any of the acts, violations or misconduct enumerated in sub-paragraphs (i) to (v) above;
(viii) Conviction by final judgment of an offense punishable by imprisonment for more than six (6) years, or a violation of the Corporation Code committed within five (5) years prior to the date of his election or appointment; and
(ix) Other grounds as the Commission may provide.
2. Temporary Disqualification
The Board may provide for the temporary disqualification of a director for any of the following reasons:
(i) Refusal to comply with the disclosure requirements of the Securities Regulation Code and its Implementing Rules and Regulations. The disqualification shall be in effect as long as the refusal persists.
(ii) Absence in more than fifty (50%) percent of all regular and special meetings of the Board during his incumbency, or any twelve (12) month period during the said incumbency, unless the absence is due to illness, death in the immediate family or serious accident. The disqualification shall apply for purposes of the succeeding election.
(iii) Dismissal or termination for cause as director of any publicly-listed company, public company, registered issuer of securities and holder of a secondary license from the Commission. This disqualification shall be in effect until he has cleared himself from any involvement in the cause that gave rise to his dismissal or termination.
(iv) If the beneficial equity ownership of an independent director in the corporation or its subsidiaries and affiliates exceeds two percent (2%) of its subscribed capital stock. The disqualification shall be lifted if the limit is later complied with.
(v) If any of the judgments or orders cited in the grounds for permanent disqualification has not yet become final.
A temporarily disqualified director shall, within sixty (60) business days from such disqualification, take the appropriate action to remedy or correct the disqualification. If he fails or refuses to do so for unjustified reasons, the disqualification shall become permanent.
I. Responsibilities, Duties, and Functions of the Board
1. General Responsibility
It is the Board’s responsibility to foster the long-term success of the Corporation, and to sustain its competitiveness and profitability in a manner consistent with its corporate objectives and the best interests of its stockholders and other stakeholders.
The Board shall formulate the Corporation’s vision, mission, strategic objectives, policies and procedures that shall guide its activities, including the means to effectively monitor Management’s performance.
2. Duties and Functions
To ensure a high standard of best practice for the Corporation and its stockholders and other stakeholders, the Board shall conduct itself with honesty and integrity in the performance of, among others, the following duties and functions:
a.) Act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the Corporation and all stockholders.
b.) Adopt a formal and transparent board nomination and election policy that shall include how it accepts nominations from minority stockholders and reviews nominated candidates. The policy shall also include an assessment of the effectiveness of the Board’s processes and procedures in the nomination, election, or replacement of a director. In addition, its process of identifying the quality of Directors shall be aligned with the strategic direction of the Corporation. Upon being adopted, the policy will beincorporated herein by reference and deemed an integral part hereof.
c.) Approve the selection and assess the performance of the Management led by the CEO, and control functions led by their respective heads (Chief Risk Officer, Chief Compliance Officer, and Chief Audit Executive).
d.) Establish an effective performance management framework that will ensure that the Management, including the Chief Executive Officer, and personnel’s performance is at par with the standards set by the Board and senior Management.
e.) Conduct an annual self-assessment of its performance, including the performance of the Chairperson, individual members and committees. Every three years, the assessment shall be supported by an external facilitator, which may be a consulting firm, academic institution, or professional organization.
f.) Implement a system that provides, at the minimum, criteria and process to determine the performance of the Board, the individual directors, committees, and allows for a feedback mechanism from the stockholders.
g.) Ensure and adopt an effective succession planning program for directors, key officers and management to ensure growth and a continued increase in the stockholders’ value, including a policy on the retirement age for directors and key officers as part of management succession and to promote dynamism in the Corporation.
h.) Align the remuneration of key officers and board members with the long-term interests of the Corporation by formulating and adopting a policy specifying the relationship between remuneration and performance, provided that no director shall participate in discussions or deliberations involving his own remuneration.
i.) Oversee the development of and approve the Corporation’s business objectives and strategy, and monitor their implementation, in order to sustain the Corporation’s long- term viability and strength.
j.) Ensure the Corporation’s faithful compliance with all applicable laws, regulations and best business practices.
k.) Establish an Investor Relations Office (“IRO“) to ensure constant engagement with its stockholders. The IRO shall be present at every stockholders’ meeting..
l.) Identify the Corporation’s stakeholders and adopt clear policies and programs to provide a mechanism on the fair treatment and protection of stakeholders and allow stakeholders to communicate with the Corporation and obtain redress for the violation of their rights..
m.) Adopt a formal and transparent board nomination and election policy that shall include how it accepts nominations from minority stockholders and reviews nominated candidates. The policy shall also include an assessment of the effectiveness of the Board’s processes and procedures in the nomination, election, or replacement of a director. In addition, its process of identifying the quality of directors shall be aligned with the strategic direction of the Corporation.
n.) Establish policies, programs and procedures that encourage employees to actively participate in the realization of the Corporation’s goals and in its governance.
o.) Set the tone and make a stand against corrupt practices by adopting an anti-corruption policy and program in its Code of Conduct and disseminating the policy and program to employees across the organization through trainings to embed them in the Corporation’s culture.
p.) Establish a suitable framework for whistleblowing that allows employees to freely communicate their concerns about illegal or unethical practices, without fear of retaliation and to have direct access to an independent member of the Board or a unit created to handle whistleblowing concerns.
q.) Adopt a system of check and balance within the Board. A regular review of the effectiveness of such system shall be conducted to ensure the integrity of the decision-making and reporting processes at all times. There shall be a continuing review of the Corporation’s internal control system in order to maintain its adequacy and effectiveness.
r.) Ensure that a sound enterprise risk management (ERM) framework is in place to effectively identify, monitor, assess and manage key business risks. The risk management framework shall guide the Board in identifyingunits/business lines and enterprise-level risk exposures, as well as the effectiveness of risk management strategies.
s.) Formulate and implement policies and procedures that would ensure the integrity and transparency of related party transactions between and among the Corporation and its parent company, joint ventures, subsidiaries, associates, affiliates, major stockholders, officers and directors, including their spouses, children and dependent siblings and parents, and of interlocking director relationships by members of the Board.
t.) Ensure that there is a group-wide policy and system governing RPTs and other unusual or infrequently occurring transactions, particularly those which pass certain thresholds of materiality. The policy shall include the appropriate review and approval of material or significant RPTs, which guarantee fairness and transparency of the transactions. The policy shall encompass all entities within the group, taking into account their size, structure, risk profile and complexity of operations.
u.) Formulate a Board Charter that formalizes and clearly states its roles, responsibilities and accountabilities in carrying out its fiduciary duties. The Board Charter shall serve as a guide to the directors in the performance of their functions and shall be publicly available and posted on the Corporation’s website.
v.) Adopt a Code of Business Conduct and Ethics, which would provide standards for professional and ethical behavior, as well as articulate acceptable and unacceptable conduct and practices in internal and external dealings. The Code of Business Conduct and Ethics shall be properly disseminated to the Board, the Management, and the employees. It shall also be disclosed and made available to the public through the Corporation website.
w.) Ensure the proper and efficient implementation and monitoring of compliance with the Code of Business Conduct and Ethics and internal policies.
x.) Constitute an Audit Committee and such other committees it deems necessary to assist the Board in the performance of its duties and responsibilities.
y.) Establish and maintain an alternative dispute resolution system in the Corporation that can amicably settle conflicts or differences between the Corporation and its stockholders, and the Corporation and third parties, including the regulatory authorities.
z.) Meet at such times or frequency as may be needed. The minutes of such meetings shall be duly recorded. Independent views during Board meetings shall be encouraged and given due consideration.
aa.) Keep the activities and decisions of the Board within its authority under the articles of incorporation and by-laws, and in accordance with existing laws, rules and regulations.
bb.) Appoint a Compliance Officer who shall have the rank of at least senior vice president or an equivalent position with adequate stature and authority in the Corporation, who must not be the Corporate Secretary.
J. Specific Duties and Responsibilities of a Director
A director’s office is one of trust and confidence. A director shall act in the best interest of the Corporation in a manner characterized by transparency, accountability and fairness. He shall also exercise leadership, prudence and integrity in directing the corporation towards sustained progress.
A director shall observe the following norms of conduct:
(i) Conduct fair business transactions with the Corporation, and ensure that his personal interest does not conflict with the interests of the Corporation.
The basic principle to be observed is that a director shall not use his position to profit or gain some benefit or advantage for himself and/or his related interests. He shall avoid situations that may compromise his impartiality. If an actual or potential conflict of interest may arise on the part of a director, he shall fully and immediately disclose it and shall not participate in the decision- making process. A director who has a continuing material conflict of interest shall seriously consider resigning from his position.
A conflict of interest shall be considered material if the director’s personal or business interest is antagonistic to that of the Corporation, or stands to acquire or gain financial advantage at the expense of the Corporation.
(ii)Devote the time and attention necessary to properly and effectively perform his duties and responsibilities.
A director should devote sufficient time to familiarize himself with the Corporation’s business. He shall be constantly aware of and knowledgeable with the Corporation’s operations to enable him to meaningfully contribute to the Board’s work. He shall attend and actively participate in Board and committee meetings, review meeting materials and, if called for, ask questions or seek explanation.
(iii) Act judiciously.
Before deciding on any matter brought before the Board, a director shall carefully evaluate the issues and, if necessary, make inquiries and request clarification.
(iv) Exercise independent judgment.
A director shall view each problem or situation objectively. If a disagreement with other directors arises, he shall carefully evaluate and explain his position. He shall not be afraid to take an unpopular position. Corollarily, he shall support plans and ideas that he thinks are beneficial to the Corporation.
(v) Have a working knowledge of the statutory and regulatory requirements that affect the Corporation, including its articles of incorporation and by-laws, the rules and regulations of the Commission and, where applicable, the requirements of relevant regulatory agencies.
A director shall also keep abreast with industry developments and business trends in order to promote the Corporation’s competitiveness.
(vi) Observe confidentiality.
A director shall keep secure and confidential all non-public information he may acquire or learn by reason of his position as director. He shall not reveal confidential information to unauthorized persons without authority of the Board.
K. Internal Control Responsibilities of the Board
The Corporation shall have an adequate and effective internal control system and an enterprise risk management framework in the conduct of its business, taking into account its size, risk profile and complexity of operations.
The control environment of the Corporation consists of (a) the Board which ensures that the Corporation is properly and effectively managed and supervised; (b) a Management that actively manages and operates the Corporation in a sound and prudent manner; (c) the organizational and procedural controls supported by effective management information and risk management reporting systems; and (d) an independent audit mechanism to monitor the adequacy and effectiveness of the Corporation’s governance, operations, and information systems, including the reliability and integrity of financial and operational information, the effectiveness and efficiency of operations, the safeguarding of assets, and compliance with laws, rules, regulations and contracts.
(i) The minimum internal control mechanisms for the performance of the Board’s oversight responsibility includes the following:
a.) Definition of the duties and responsibilities of the CEO who is ultimately accountable for the Corporation’s organizational and operational controls;
b.) Selection of the person who possesses the ability, integrity and expertise essential for the position of CEO;
c.) Evaluation of proposed senior management appointments;
d.) Selection and appointment of qualified and competent management officers; and
e.) Review of the Corporation’s human resource policies, conflict of interest situations, compensation program for employees, and management succession plan.
(ii) The Corporation shall take into consideration that the scope and particulars of the systems of effective organizational and operational controls may differ among corporations depending on, among others, the following factors: nature and complexity of the business and the business culture; volume, size and complexity of transactions; degree of risks involved; degree of centralization and delegation of authority; extent and effectiveness of information technology; and extent of regulatory compliance.
(iii) The Corporation shall establish an internal audit system that can reasonably assure the Board, Management and stockholders that its key organizational and operational controls are faithfully complied with. This internal audit function shall provide independent and objective assurance and consulting services designed to add value and improve the Corporation’soperations. The Board shall appoint an Internal Auditor to perform the audit function, and may require him to report to a level in organization that allows the internal audit activity to fulfill its mandate. The Internal Auditor shall be guided by the International Standards on Professional Practice of Internal Auditing.
(iv) The internal audit shall serve the following functions, among others:
a.) Provide an independent risk-based assurance service to the Board, Audit Committee and Management, focusing on reviewing the effectiveness of the governance and control processes in (1) promoting the right values and ethics, (2) ensuring effective performance management and accounting in the organization, (3) communicating risk and control information, and (4) coordinating the activities and information among the Board, external and internal auditors, and Management;
b.) Perform regular and special audit as contained in the annual audit plan and/or based on the Corporation’s risk assessment;
c.) Perform consulting and advisory services related to governance and control as appropriate for the organization;
d.) Perform compliance audit of relevant laws, rules and regulations, contractual obligations and other commitments, which could have a significant impact on the organization;
e.) Review, audit and assess the efficiency and effectiveness of the internal control system of all areas of the Corporation;
f.) Evaluate operations or programs to ascertain whether results are consistent with established objectives and goals, and whether the operations or programs are being carried out as planned;
g.) Evaluate specific operations at the request of the Board or Management, as appropriate; and
h.) Monitor and evaluate governance processes.
L. Board Meetings and Quorum Requirement
As provided in the Corporation’s Amended By-Laws, regular meetings of the Board shall be held at least twice a year on such dates as the Chairperson, or in his absence, the President, may determine, or upon the request of a majority of the directors and shall be held at such places as may be designated in the notice.
Each Director shall attend and actively participate in all meetings of the Board and Committees in person or through tele-/videoconferencing conducted in accordance with the rules and regulations of the Commission, except when justifiable causes, such as, illness, death in the immediate family and serious accidents, prevent them from doing so. In Board and Committee meetings, the Director shall review meeting materials and if called for, ask the necessary questions or seek clarifications and explanations.
Independent directors shall always attend Board meetings. However, as provided in the Corporation’s Amended By-Laws, their absence shall not affect the quorum requirement.
The non-executive directors shall have separate periodic meetings with the External Auditor and heads of the internal audit, compliance and risk functions, without any executive directors present to ensure that proper checks and balances are in place within the Corporation. The meetings shall be chaired by the lead independent director, if any.
To monitor the directors’ compliance with the attendance requirements, the Corporation shall submit to the Commission, on or before January 30 of the following year, a sworn certification about the directors’ record of attendance in Board meetings. The certification may be submitted through SEC Form 17-C or in a separate filing.
M. Remuneration of Directors and Officers
The Corporation may establish formal and transparent procedures for the development of a policy on executive remuneration or determination of remuneration levels for individual directors and officers depending on the particular needs of the Corporation. No director shall participate in deciding on his remuneration.
The Board shall align the remuneration of key officers and board members with the long-term interests of the Corporation. In doing so, the Board shall formulate and adopt a policy considering the following: (1) the level of remuneration is commensurate to the responsibilities of the role; (2) no Director shall participate in deciding on his remuneration; and (3) remuneration pay-out schedules shall be sensitive to risk outcomes over a multi-year horizon.
The Corporation’s annual reports and information and proxy statements shall include a clear, concise and understandable disclosure of all fixed and variable compensation that may be paid, directly or indirectly, to its directors and top four (4) management officers during the preceding fiscal year.
To protect the funds of the Corporation, the Commission may, in exceptional cases, e.g., when a corporation is under receivership or rehabilitation, regulate the payment of the compensation, allowances, fees and fringe benefits to its directors and officers.
N. Board Committees
The Board shall establish board committees that focus on specific board functions to aid in the optimal performance of its roles and responsibilities. Each board committee shall have its own Committee Charters which shall state their respective purposes, memberships, structures, operations, reporting processes, resources and other relevant information.
(i) The Audit Committee shall assist the Board in enhancing its oversight capability over the Corporation’s financial reporting, internal control system, internal and external audit processes, and compliance with applicable laws and regulations. It shall be composed of The Audit Committee, which shall be composed of at least three (3) appropriately qualified non-executive directors, the majority of whom, including the Chairperson, shall be independent. All of the members of the committee must have relevant background, knowledge, skills, and/or experience in the areas of accounting, auditing and finance. The Chairperson of the Audit Committee shall not be the Chairperson of the Board or of any other committees. The Audit Committee shall have the following functions:
a) Recommend the approval of the Internal Audit Charter (IA Charter), which formally defines the role of Internal Audit and the audit plan as well as oversees the implementation of the IA Charter;
b) Through the Internal Audit (IA) Department, monitors and evaluates the adequacy and effectiveness of the corporation’s internal control system, integrity of financial reporting, and security of physical and information assets. Well-designed internal control procedures and processes that will provide asystem of checks and balances shall be in place in order to (a) safeguard the Corporation’s resources and ensure their effective utilization, (b) prevent occurrence of fraud and other irregularities, (c) protect the accuracy and reliability of the Corporation’s financial data, and (d) ensure compliance with applicable laws and regulations;
c) Oversee the Internal Audit Department, and recommends the appointment and/or grounds for approval of an internal audit head or Chief Audit Executive (CAE). The Audit Committee shall also approve the terms and conditions for outsourcing internal audit services;
d) Establish and identify the reporting line of the Internal Auditor to enable him to properly fulfill his duties and responsibilities. For this purpose, the Internal Auditor shall directly report to the Audit Committee;
e) Review and monitor Management’s responsiveness to the Internal Auditor’s findings and recommendations;
f) Prior to the commencement of the audit, discuss with the External Auditor the nature, scope and expenses of the audit, and ensure the proper coordination if more than one audit firm is involved in the activity to secure proper coverage and minimize duplication of efforts;
g) Evaluateanddeterminethenon-auditwork,ifany,ofthe,and periodically reviews the non-audit fees paid to the External Auditor in relation to the total fees paid to him and to the Corporation’s overall consultancy expenses. The committee shall disallow any non-audit work that will conflict with his duties as an External Auditor or may pose a threat to his independence. The non-audit work, if allowed, shall be disclosed in the corporation’s Annual Report and Annual Corporate Governance Report;
h) Review the quarterly, half-year and annual financial statements before their submission to the Board, with particular focus on the following matters:
● Any change/s in accounting policies and practices
● Major judgmental areas
● Significant adjustments resulting from the audit
● Going concern assumptions
● Compliance with accounting standards
● Compliance with tax, legal and regulatory requirements.
i) Review the disposition of the recommendations in the External Auditor’s management letter;
j) Perform oversight functions over the corporation’s Internal and External Auditors. It ensures the independence of Internal and External Auditors, and that both auditors are given unrestricted access to all records, properties and personnel to enable them to perform their respective audit functions;
k) Coordinate, monitor and facilitate compliance with laws, rules and regulations;
l) Recommend to the Board the appointment, reappointment, removal and fees of the External Auditor, duly accredited by the Commission, who undertakes an independent audit of the corporation, and provides an objective assurance on the manner by which the financial statements shall be prepared and presented to the stockholders; and
m) In case the Corporation does not have a Board Risk Oversight Committee and/or Related Party Transactions Committee, performs the functions of said committees as provided under Recommendations 3.4 and 3.5 of the Code of Corporate Governance for Publicly-Listed Companies.
The Audit Committee shall meet with the Board at least every quarter without the presence of the CEO or other management team members, and periodically meets with the head of the internal audit.
(ii) The Corporate Governance Committee, which shall be tasked to assist the Board in the performance of its corporate governance responsibilities, including the functions that were formerly assigned to a Nomination and Remuneration Committee, shall be composed of at least three (3) members, all of whom shall be independent directors, including the Chairperson. The Corporate Governance Committee shall have the following functions:
a) Oversee the implementation of the corporate governance framework and periodically reviews the said framework to ensure that it remains appropriate in light of material changes to the corporation’s size, complexity and business strategy, as well as its business and regulatory environments;
b) OverseetheperiodicperformanceevaluationoftheBoardand its committees as well as executive management, and conducts an annual self-evaluation of its performance;
c) Ensure that the results of the Board evaluation are shared, discussed, and that concrete action plans are developed and implemented to address the identified areas for improvement;
d) Recommend continuing education/training programs for directors, assignment of tasks/projects to board committees, succession plan for the board members and senior officers, and remuneration packages for corporate and individual performance;
e) Adopt corporate governance policies and ensures that these are reviewed and updated regularly, and consistently implemented in form and substance;
f) Propose and plan relevant trainings for the members of the Board;
g) Determine the nomination and election process for the Corporation’s directors and has the special duty of defining the general profile of board members that the Corporation may need and ensuring appropriate knowledge, competencies and expertise that complement the existing skills of the Board; and
h) Establish a formal and transparent procedure to develop a policy for determining the remuneration of directors and officers that is consistent with the corporation’s culture and strategy as well as the business environment in which it operates.
O. The Chief Executive Officer
The CEO has the following roles and responsibilities, among others:
i. Determine the Corporation’s strategic direction and formulate and implement its strategic plan on the direction of the business;
ii. Communicate and implement the Corporation’s vision, mission, values and overall strategy and promotes any organization or stakeholder change in relation to the same;
iii. Oversee the operations of the corporation and manages human and financial resources in accordance with the strategic plan;
iv. Has a good working knowledge of the Corporation’s industry and market and keeps up-to-date with its core business purpose;
v. Direct, evaluate, and guide the work of the key officers of the Corporation;
vi. Manage the Corporation’s resources prudently and ensure a proper balance of the same;
vii. Provide the Board with timely information and interface between the Board and the employees;
viii. Build the corporate culture and motivate the employees of the Corporation; and
ix. Serve as the link between internal operations and external stakeholders.
P. The Corporate Secretary
The Corporate Secretary, who must be a Filipino citizen and a resident of the Philippines, is an officer of the corporation. The Corporate Secretary shall not concurrently act as a member of the Board or as Compliance Officer. He/She shall:
i. Assist the Board and the board committees in the conduct of their meetings, including preparing an annual schedule of Board and committee meetings and the annual board calendar, and assisting the chairs of the Board and its committees to set agendas for those meetings;
ii. Be responsible for the safekeeping and preservation of the integrity of the minutes of the meetings of the Board and its committees, as well as the other official records of the Corporation;
iii. Be loyal to the mission, vision and objectives of the Corporation;
iv. Work fairly and objectively with the Board, Management and stockholders and contribute to the flow of information between the Board and Management, the Board and its committees, and the Board and its stakeholders, including stockholders;
v. Have appropriate administrative and interpersonal skills;
vi. Keep abreast on relevant laws, rules and regulations, all governance issuances, relevant industry developments and operations of the Corporation, and advise the Board and the Chairperson on all relevant issues as they arise;
vii. Advise on the establishment of board committees and their terms of reference;
viii. Inform the members of the Board, in accordance with the by- laws, of the agenda of their meetings, and ensure that the members have before them accurate information that will enable them to arrive at intelligent decisions on matters that require their approval;
ix. Attend all Board meetings, except when justifiable causes, such as, illness, death in the immediate family and serious accidents, prevent him/her from doing so;
x. Ensure that all Board procedures, rules and regulations are strictly followed by the members;
xi. Perform required administrative functions;
xii. Oversee the drafting of the by-laws and ensure that they conform with regulatory requirements;
xiii. Attend annual trainings on corporate governance; and
xiv. Perform such other duties and responsibilities as may be provided by the Commission.
Q. The Compliance Officer
The Board shall appoint a Compliance Officer who shall be in charge of the compliance functions. The Compliance Officer must not be a member
of the Board.
He/She shall perform the following duties:
1.Ensure proper onboarding of new directors (i.e., orientation on the Corporation’s business, charter, articles of incorporation and by-laws, among others);
2. Monitor, review, evaluate and ensure compliance by the Corporation, its officers and directors, with the relevant laws, this Revised Manual, rules and regulations of regulatory agencies;
3. Report the matter to the Board if violations are found and recommend the imposition of appropriate disciplinary action;
4. Ensure the integrity and accuracy of all documentary submissions to regulators;
Appear before the Commission when summoned in relation to compliance with this Revised Manual;
Collaborate with other departments to properly address compliance issues, which may be subject to investigation;
Identify possible areas of compliance issues and works towards the resolution of the same;
Ensure the attendance of board members and key officers to relevant trainings;
Attend annual trainings on corporate governance; and
Performs such other duties and responsibilities as may be provided by the SEC.
Issue a certification every January 30th of the year on the extent of the Corporation’s compliance with this Manual for the completed year and, if there are any deviations, explain the reason for such deviation.
R. The External Auditor
The Audit Committee shall enforce a robust process for approving and recommending the appointment, reappointment, removal, and fees of the External Auditor. The appointment, reappointment, removal, and fees of the External Auditor shall be recommended by the Audit Committee, approved by the Board and ratified by the stockholders. For removal of the External Auditor, the reasons for removal or change shall be disclosed to the regulators and the public through the Corporation’s website and required disclosures.
The Audit Committee Charter shall include the Audit Committee’s responsibility on assessing the integrity and independence of External Auditors and exercising effective oversight to review and monitor the External Auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant Philippine professional and regulatory requirements. The Audit Committee Charter shall also contain the Audit Committee’s responsibility on reviewing and monitoring the External Auditor’s suitability and effectiveness on an annual basis.
The Corporation shall disclose the nature of non-audit services performed by its External Auditor in the Annual Report to deal with the potential conflict of interest. The Audit Committee shall be alert for any potential conflict of interest situations, given the guidelines or policies on non-audit services, which could be viewed as impairing the External Auditor’s objectivity.
3. ADEQUATE AND TIMELY INFORMATION
To enable the members of the Board to properly fulfill their duties and responsibilities, Management shall provide them with complete, adequate and timely information about the matters to be taken in their meetings.
Reliance on information volunteered by Management would not be sufficient in all circumstances and further inquiries may have to be made by a member of the Board to enable him to properly perform his duties and responsibilities. Hence, the members shall be given independent access to Management and the Corporate Secretary.
The information may include the background or explanation on matters brought before the Board, disclosures, budgets, forecasts and internal financial documents.
The members, either individually or as a Board, and in furtherance of their duties and responsibilities, shall have access to independent professional advice at the Corporation’s expense.
4. ACCOUNTABILITY AND AUDIT
A.) The Board is primarily accountable to the stockholders. It shall provide them with a balanced and comprehensible assessment of the Corporation’s performance, position and prospects on a quarterly basis, including interim and other reports that could adversely affect its business, as well as reports to regulators that are required by law.
Thus, it is essential that Management provide all members of the Board with accurate and timely information that would enable the Board to comply with its responsibilities to the stockholders.
Management shall formulate, under the supervision of the Audit Committee, the rules and procedures on financial reporting and internal control in accordance with the following guidelines:
(i) The extent of its responsibility in the preparation of the financial statements of the Corporation, with the corresponding delineation of the responsibilities that pertain to the external auditor, shall be clearly explained;
(ii) An effective system of internal control that will ensure the integrity of the financial reports and protection of the assets of the Corporation for the benefit of all stockholders and other shakeholders;
(iii) On the basis of the approved audit plans, internal audit examinations shall cover, at the minimum, the evaluation of the adequacy and effectiveness of controls that cover the Corporation’s governance, operations and information systems, including the reliability and integrity of financial and operation information, effectiveness and efficiency of operations, protection of assets, and compliance with contracts, laws, rules and regulations;
(iv) The Corporation shall consistently comply with the financial reporting requirements of the Commission;
(v) The external auditor shall be rotated or changed every five (5) years or earlier, or the signing partner of the external auditing firm assigned to the Corporation, shall be changed with the same frequency. The Internal Auditor shall submit to the Audit Committee and Management an annual report on the internal audit department’s activities, responsibilities and performance relative to the audit plans and strategies as approved by the Audit Committee. The annual report shall include significant risk exposures, control issues and such other matters as may be needed or requested by the Board and Management. The Internal Auditor shall certify that he conducts his activities in accordance with the International Standards on the Professional Practice of Internal Auditing. If he does not, he shall disclose to the Board and Management the reasons why he has not fully complied with the said standards.
B.) The Board, after consultations with the Audit Committee, shall recommend to the stockholders an external auditor duly accredited by the Commission who shall undertake an independent audit of the Corporation, and shall provide an objective assurance on the manner by which the financial statements shall be prepared and presented to the stockholders. The external auditor shall not, at the same time, provide internal audit services to the Corporation. Non-audit work may be given to the external auditor, provided it does not conflict with his duties as an independent auditor, or does not pose a threat to his independence.
If the external auditor resigns, is dismissed or ceases to perform his services, the reason/s for and the date of effectivity of such action shall be reported in the Corporation’s annual and current reports. The report shall include a discussion of any disagreement between him and the Corporation onaccounting principles or practices, financial disclosures or audit procedures which the former auditor and the Corporation failed to resolve satisfactorily. A preliminary copy of the said report shall be given by the Corporation to the external auditor before its submission.
If the external auditor believes that any statement made in an annual report, information statement or any report filed with the Commission or any regulatory body during the period of his engagement is incorrect or incomplete, he shall give his comments or views on the matter in the said reports.
5. STOCKHOLDERS’ RIGHTS AND PROTECTION OF MINORITY STOCKHOLDERS’ INTERESTS
A.) The Board commits to treat all stockholders fairly and equitably, and also recognize, protect and facilitate the exercise of their rights as provided under the Corporation Code, namely:
(i) Right to vote on all matters that require their consent or approval;
(ii) Voting procedures that would govern the Annual and Special Stockholders’ Meeting;
(iii) Pre-emptive right to all stock issuances of the Corporation;
(iv) Right to inspect corporate books and records;
(v) Right to information;
(vi) Right to dividends;
(vii) Appraisal right;
(viii) Right to propose the holding of meetings and to include agenda items ahead of the scheduled Annual and Special Stockholders’ Meeting;
(ix) Right to nominate candidates to the Board; and
(x) Nomination process.
B.) The Board shall be transparent and fair in the conduct of the annual and special stockholders’ meetings of the corporation. The stockholders shall be encouraged to personally attend such meetings.
The Board shall also encourage active stockholder participation by sending the Notice of Annual and Special Stockholders’ Meeting with sufficient and relevant information at least twenty-eight (28) days before the meeting, and by making the result of the votes taken during the most recent Annual or Special Stockholders’ Meeting publicly available the next working day. In addition, the Minutes of the Annual and Special Stockholders’ Meeting shall be available on the Corporation’s website within five (5) business days from the end of the meeting.
If a stockholder cannot attend, the stockholder shall be apprised ahead of time of their right to appoint a proxy. Subject to the requirements of the by-laws, the exercise of that right shall not be unduly restricted and any doubt about the validity of a proxy shall be resolved in the stockholder’s favor.
It is the duty of the Board to promote the rights of the stockholders, remove impediments to the exercise of those rights and provide an adequate avenue for them to seek timely redress for breach of their rights.
The Board shall take the appropriate steps to remove excessive or unnecessary costs and other administrative impediments to the stockholders’ meaningful participation in meetings, whether in person or by proxy. Accurate and timely information shall be made available to the stockholders to enable them to make a sound judgment on all matters brought to their attention for consideration or approval.
Although all stockholders should be treated equally or without discrimination, the Board shall give minority stockholders the right to propose the holding of meetings and the items for discussion in the agenda that relate directly to the business of the Corporation.
6. GOVERNANCE SELF-RATING SYSTEM
The Board may create an internal self-rating system that can measure the performance of the Board and Management in accordance with the criteria provided for in this Code.
The creation and implementation of such self-rating system, including its salient features, may be disclosed in the Corporation’s annual report.
7. DISCLOSURE, TRANSPARENCY AND ACCESS TO RELEVANT INFORMATION
The essence of corporate governance is transparency. The more transparent the internal workings of the corporation are, the more difficult it will be for Management and dominant stockholders to mismanage the Corporation or misappropriate its assets.
The Board shall establish corporate disclosure policies and procedures to ensure a comprehensive, accurate, reliable and timely report to stockholders and other stakeholders that gives a fair and complete picture of a Corporation’s financial condition, results and business operations.
The Corporation shall adopt a policy requiring all directors and officers to disclose/report to the Corporation any dealings in the Corporation’s shares within three (3) business days.
The Board shall fully disclose all relevant and material information on individual board members and key executives to evaluate their experience and qualifications, and assess any potential conflicts of interest that might affect their judgment.
The Corporation shall provide a clear disclosure of its policies and procedure for setting Board and executive remuneration, as well as the level and mix of the same in the Annual Corporate Governance Report. Also, the Corporation shall disclose the remuneration on an individual basis, including termination and retirement provisions.
The Corporation shall disclose its policies governing Related Party Transactions (―RPTs‖) and other unusual or infrequently occurring transactions. The material or significant RPTs reviewed and approved during the year shall be disclosed in its Annual Corporate Governance Report.
The Corporation shall make a full, fair, accurate and timely disclosure to the public of every material fact or event that occurs, particularly on the acquisition or disposal of significant assets, which could adversely affect the viability or the interest of its stockholders and other stakeholders. Moreover, the Board of the offeree company shall appoint an independent party to evaluate the fairness of the transaction price on the acquisition or disposal of assets.
The Board shall have a clear and focused policy on the disclosure of non-financial information, with emphasis on the management of economic, environmental, social and governance (―EESG‖) issues of its business, which underpin sustainability. Corporation shall adopt a globally recognized standard/framework in reporting sustainability and non-financial issues.
The Corporation shall include media and analysts’ briefings as channels of communication to ensure the timely and accurate dissemination of public, material and relevant information to its stockholders and other investors.
It is therefore essential that all material information about the Corporation which could adversely affect its viability or the interests of its stockholders and other stakeholders shall be publicly and timely disclosed. Such information shall include, among others, earnings results, acquisition or disposition of assets, off balance sheet transactions, related party transactions, and direct and indirect remuneration of
members of the Board of Management. All such information shall be disclosed through the appropriate Exchange mechanisms and submissions to the Commission.
The Board shall therefore commit at all times to full disclosure of material information dealings. It shall cause the filing of all required information through the appropriate Exchange mechanisms for listed companies and submissions to the Commission for the interest of its stockholders and other stakeholders.
8. SUSTAINABILITY AND SOCIAL RESPONSIBILITY
The Corporation shall recognize and give importance to the interdependence between business and society, and promote a mutually beneficial relationship that allows the Corporation to grow its business, while contributing to the advancement of the society where it operates.
9. REGULAR REVIEW OF THE MANUAL AND THE SCORECARD
To monitor the compliance by the Corporation with the Code of Corporate Governance, the Commission may require the Corporation to accomplish annually a scorecard on the scope, nature and extent of the actions they have taken to meet the objectives of this Code.
The Commission shall periodically review this Manual to ensure it meets its objectives.
10. ADMINISTRATIVE SANCTIONS
A fine of not more than Two Hundred Thousand Pesos (P200,000.00) shall, after due notice and hearing, be imposed for every year that the Corporation violates the provisions of the Code of Corporate Governance, without prejudice to other sanctions that the Commission may be authorized to impose under the law; provided, however, that any violation of the Securities Regulation Code punishable by a specific penalty shall be assessed separately and shall not be covered by the aforementioned fine.
Respectfully submitted as of this 31st day of May 2017 in Makati City.
IP E-GAME VENTURES, INC.