Corporate governance standards and scope of application

GRI:[ ]
  • 102-18
  • 102-45

Grupa LOTOS S.A. seeks to ensure that its investor relations are carried out as between equal partners, in a manner satisfying to both parties. The key objectives of implementing the Corporate Governance Rules at Grupa LOTOS S.A. are to ensure:

  • transparency of its operations as a listed company,
  • trust in its relations with stakeholders,
  • openness and consistent shareholder value creation.

From its stock market flotation in June 2005, Grupa LOTOS S.A. complied with most of the recommendations set out in the then effective code of ‘Best Practice at Public Companies’. Then, from the beginning of 2008, it followed the ‘Best Practice for WSE Listed Companies’, as amended by the WSE Supervisory Board’s Resolution of October 19th, 2011. As of January 1st, 2016. The Company implemented the revised set of Best Practices for Companies Listed on the Stock Exchange 2016. From July 1st, 2021 The Company applies the principles set out in the Code of Best Practice for WSE Listed Companies 2021 (the "Code of Best Practice for WSE Listed Companies 2021"), as notified on July 30th, 2021. The corporate governance code is publicly available on the website of the Warsaw Stock Exchange at:

Corporate governance principles that Grupa LOTOS S.A. did not apply since 2021 with comments on reasons for the non-compliance

Principle No. in Best Practice 2021 Grupa LOTOS S.A. comment
2.1. The company should have a diversity policy for the management board and the supervisory board, adopted by the general meeting, respectively. The diversity policy sets out divesity objectives and criteria in areas such as gender, field of study, expertise, age and work experience, among others and indicated when and how the achievement of these objectives will be monitored. In terms of gender diversity, the condition for ensuring the diversity of the company’s bodies is taht the minority partocipation in a given body in no less than 30% As at the date of issue of this report, the Company did not habe in place a uniform divesity policy with respect to its Management Board and Supervisory Board which would define relevant objectives, criteria and methods of measuring diversity among members of these bodies. However Grupa LOTOS S.A. does not regard such a policy to be prerequisite for ensureing the highest standards of performance and effective discharge of duties by the Management Boad and Supervisory Board given its staus as a state-controlled company, which means that members of its governing bodies are appointed in accordance with the legal regulations applicable to such entities. With respect to the qualifications and other requirements expected to be met by candidates to its management and supervisort bodies, the Company applies the criteria set out in the Commercial Companies Code of Sempember 15th, 2000 and the State Property Management Act of December 16th, 2016. The criteria defined by legislatos are aimed to ensure that persons holding managerial and supervisory positions at state-controlled companies have the relevant educational backgrounds and adequate professional expeience to undertake such roles
2.2 The persons deciding on the election of the members of the management or supervisory board of the company should ensure the comprehensiveness of these bodies by selecting persons to ensure diversity in their composition, making it possible, inter alia, to achieve the target ratio ‘of minimum minority participation set at not less than 30%, in accordance with the ‘objectives set out in the adopted diversity policy referred to in principle 2.1. Members of the Management Board and Supervisory Board of Grupa LOTOS S.A. are appointed in accordance with the principle of equal access by both men and women. Looking at the current ‘composition of the governing bodies, their diversity in terms of gender, education, experience and age is ensured in practice among members of the Management Board and the Supervisory Board. As at the date of issue of this report, the Company did not have a uniform diversity policy document which would define its diversity objectives and pertinent metrics. Accordingly, the non- compliance with principle 22 results from the non-compliance with principle 2.1.
2.11.6 Information on the extent to which the diversity policy has been implemented with respect to the Management Board and the Supervisory Board, including the achievement of the objectives referred to in principle 2.1. As at the date of issue of this report, the Company had not adopted a uniform diversity policy document with respect to the appointment of members of its Management Board and Supervisory Board. Accordingly, the non-compliance with principles 2.11,6 results from the non-compliance with principle 2.1. and 2.2.
4.1 The company should enable shareholders to participate in a general meeting by means of electronic communication (e- meeting) if this is justified in view of the shareholders’ ‘expectations notified to the company, provided that the company is able to provide the technical infrastructure necessary for holding such a general meeting. So far, the Company has not provided appropriate facilities enabling its Shareholders to participate in General Meetings by electronic means of communication. In the Company’s opinion, no risks arise from the non-compliance with principle 4.1 as the Company ensures that shareholders can attend the General Meeting in person or by proxy. The Company has not received any requests from Shareholders concerning such form of General Meetings. Furthermore, the General Meetings are held at the Company’s registered office in Gdarisk, which facilitates attendance by Shareholders or their proxies. In fulfilment of the disclosure requirements prescribed by law, the Company promptly (no later than within 24 hours after the closing of a General Meeting), issues a current report with information on the resolutions passed at that General Meeting, voting results and objections raised, if any, posting such information simultaneously on its corporate website. The Company also publishes the questions asked by Shareholders and answers given to them during each General Meeting. In the Company’s opinion, these measures are adequate to ensure the Shareholders’ ability to attend and exercise their rights at General Meetings. However, the Company may begin to apply this principle in the future.
Source: the Company

Furthermore, on October 14th, 2021, in EIB Report 2/2021, the Company reported incidental non-compliance with Principle 4.8 included in Best Practice, Section 2, GENERAL MEETING, SHAREHOLDER RELATIONS. Draft resolutions of the general meeting on matters put on the agenda of the general meeting should be tabled by shareholders no later than three days before the general meeting.

Comment: Pursuant to the Company’s declaration of compliance with the Best Practice for WSE Listed Companies 2021 (“Best Practice 2021”), the Company includes in notices of general meetings a standard recommendation that shareholders submit draft resolutions of the General Meeting concerning matters on the agenda of the General Meeting no later than three days before the date of the General Meeting.

Since July 1st, 2021, i.e. the date the Best Practice 2021 came into effect, there have been no incidents of failure to comply with this principle.

Internal control and financial reporting risk management systems

The Management Board of Grupa LOTOS S.A. is responsible for the internal control function and its effective application in the financial reporting process. The Internal Audit Office of Grupa LOTOS S.A. makes an annual assessment of the internal control framework. Its findings show that in 2021 there were no changes in the internal control system that would affect the financial reporting process. Taking into account the assumptions adopted in assessing the systems, the Company has put in place organisational and process solutions making up the internal control, corporate governance, compliance and risk management framework. The solutions set out in the assessment model (good business practices) have been implemented in each of the systems and are applied in practice.

Financial statements are prepared, approved and released to the public in line with an internal procedure, whereunder oversight of the financial reporting process lies within the remit of the Head of the Finance and Accounting Centre’s Office, Chief Accountant. Responsibility for preparing the consolidated and separate financial statements lies with the Financial Reporting Office of Grupa LOTOS S.A.

The LOTOS Group’s consolidated financial statements and Grupa LOTOS S.A.’s separate financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRSs”) endorsed by the European Union, issued and effective as at December 31st, 2021.

The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs), based on the financial statements of Grupa LOTOS S.A. and the entities controlled by Grupa LOTOS S.A.

Consolidated financial statements include adjustments which are absent from the accounting books of the Group’s entities applying accounting standards other than IFRSs, and which have been introduced to ensure consistency of the entities’ financial information with the IFRSs.

In order to ensure accounting uniformity, the accounting policies effective at the Company were implemented across the LOTOS Group companies for application in preparing their consolidation packages.

Structure of the LOTOS Group

As at 31 December 2021

Lotos-grafiki-ENG_Schemat Lotos-grafiki-ENG_Schemat

In addition, Grupa LOTOS S.A. holds:

  • ­8.97% stake in the share capital of P.P.P. „Naftoport” Sp. z o.o. (a company belonging to the PERN Group from Płock)
  • ­17.3% stake in Grupa Azoty Polyolefins S.A.

Source: Company

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