Corporate Governance (DCGK)

Group Corporate Governance Statement

Group Corporate Governance Statement / German Corporate Governance Code

Corporate Governance

The German Corporate Governance Code (GCGC) contains nationally and internationally recognised standards of good and responsible corporate governance aimed at promoting the trust of investors in the management and supervision of listed German stock corporations.UNITEDLABELS AG is committed to maintaining and enhancing the confidence of its shareholders, customers, suppliers, employees and the general public by embracing the idea of openness and transparency. It is for this reason that UNITEDLABELS AG complies with the majority of recommendations set out in the German Corporate Governance Code.

The latest Declaration of Conformity with the German Corporate Governance Code, pursuant to Section 161 of the German Stock Corporation Act (Aktiengesetz – AktG), appears at the end of this chapter as well as on the Company's website at http://www.unitedlabels.com/investor-relations/corporate-governance.

 

1) Shareholders and AGM

Our shareholders are given the opportunity to exercise their rights at the General Meeting of Shareholders. The Annual General Meeting takes place in the first eight months of the financial year. This meeting is chaired by the Chairman of the Supervisory Board. The General Meeting of Shareholders passes resolutions on all issues that lie within its remit under the applicable statutory provisions. They include the resolution on the appropriation of net retained earnings reported in the annual financial statements, the ratification of Management Board and Supervisory Board actions, the election of Supervisory Board members as well as resolutions in respect of amendments to the Articles of Association. The General Meeting of Shareholders also provides a platform for dialogue with the Management Board and the Supervisory Board.

Our aim is to make attendance at the General Meeting as easy as possible for our shareholders. For this purpose, all requisite documents are published beforehand on the Internet. In addition to the possibility of authorising a bank, a shareholders' association or any other representative, shareholders are provided with details of a proxy, whom they can authorise to exercise their voting rights at the General Meeting in accordance with their instructions. The attendance figures and results of voting are published on the Internet immediately upon completion of the General Meeting of Shareholders.

 

2) Details of corporate governance practices

 UNITEDLABELS AG has put in place a code of conduct that is binding for all employees within the Group. It encompasses a complete set of standards and instructions on the ethical and compliant conduct of employees in their dealings with each other and with third parties. In particular, the code of conduct is aimed at preventing conflicts of interest, corruption and money laundering, while helping to ensure compliance with rules pertaining to data and environmental protection.

For UNITEDLABELS AG, compliance with these standards is considered a key prerequisite for qualified and transparent corporate management, the goal being to maintain and cement the confidence of shareholders, customers, suppliers, employees and the general public in the Company.

 

3). Procedural methods adopted by the Management Board and Supervisory Board – Composition and duties of committees

The German Stock Corporation Act prescribes a two-tier board structure forUNITEDLABELS AG, comprising a Management Board and a Supervisory Board. Under the two-tier structure, executive management and supervision are strictly separated. The UNITEDLABELSGroup is directed by the Management Board on the basis of statutory provisions and by-laws agreed by the Supervisory Board. Within this context, the Supervisory Board advises and monitors the Management Board with regard to its running of the Company. The Supervisory Board appoints the members of the Management Board; all significant transactions executed by the Management are subject to the prior approval of the Supervisory Board. The Management Board and the Supervisory Board observe the rules of proper corporate governance.

 

 

The Management Board

The Management Board of the Company is the executive management body of the Group and comprises one person. The Management Board is obliged to observe the interests of the Company and increase enterprise value on a sustainable basis. It determines corporate strategy, including that of the Group's subsidiaries. The Management Board is responsible for compliance with statutory provisions and for ensuring these are observed by the companies within the Group.

The Management Board works in close collaboration with the Supervisory Board for the good of the Group. It determines the strategic direction of the Group in consultation with the Supervisory Board and meets with it at regular intervals to discuss progress on the implementation of strategy.

The Management Board informs the Supervisory Board, thoroughly, regularly and on a timely basis, about all issues of relevance to the Company with regard to corporate planning, the course of business, the risk situation, risk management and compliance. This includes the provision of details on any departure from the Group's declared plans and targets, noting any reasons for such divergence.

Management reports and documentation essential to executive decision-making, particularly the annual financial statements, management report, consolidated financial statements, Group management report and auditor’s report, are forwarded to the members of the Supervisory Board possibly before the meeting and generally eight days in advance. In addition, the Chairmen of the Supervisory Board and the Management Board keep in regular contact, even outside of Supervisory Board meetings. If necessary, the members of the Supervisory Board can also be briefed verbally or in writing at short notice or can be called to attend extraordinary meetings.

 

The Supervisory Board

The Supervisory Board of UNITEDLABELS AG consists of three members, who are elected by the General Meeting of Shareholders.

The Supervisory Board appoints the members of the Management Board and represents the Company in its dealings with the Management Board. It supervises and advises the Management Board with regard to the governance of the Company and resolves on all significant transactions of the Company for which prior approval is required. It regularly discusses the Group's business development, planning and strategy. The Supervisory Board deals with monthly information and quarterly reports at its regular meetings. It scrutinises the annual financial statements of UNITEDLABELS AG, the consolidated financial statements and the management reports of the Company and the Group, drawing on services of the auditor, who reports directly to the Supervisory Board, and decides whether to adopt and approve its findings.

The Supervisory Board has issued rules of procedure to guide it in its work. These deal mostly with regulating the composition of the Board and the areas of responsibility of its members, the summoning of the Board, preparation and management of meetings and regulation of committees and decision-making powers. As the Supervisory Board consists of just three members and an audit committee merely comprising two members is not in a position to pass its own resolutions as it is deemed inquorate, the Supervisory Board sees no need for the establishment of an audit committee. Its duties are discharged by the Supervisory Board as a whole. In line with the recommendations of Section 5.4.2 of the German Corporate Governance Code, UNITEDLABELS AG is of the opinion that the Supervisory Board should include an appropriate number of independent members, while taking into account the shareholder structure. With this in mind, all three Supervisory Board members of the Group are independent members. Furthermore, Mr. Ulrich Späing, as a member of the Supervisory Board, is an independent financial expert who, due to his professional practice, has special knowledge and experience in the application of accounting principles and internal control procedures.

The Supervisory Board sees no need for suitably qualified committees for the purpose of enhancing the efficiency of the Supervisory Board's work in respect of the Company and specific circumstances, given the fact that the Supervisory Board is comprised of just three people.

Details regarding the principal activities and advisory duties of the Supervisory Board during the 2017 financial year are provided in the Report of the Supervisory Board, which forms part of the 2017 Annual Report.

The Chairman of the Supervisory Board is available – within reasonable limits – to discuss with investors issues relating to the Supervisory Board.

 

Measures to promote equal opportunities for women and men in executive positions

Under German legislation on equal opportunities for women and men in executive positions within the private and public sector, which came into force on 1 May 2015, the management boards and supervisory boards of specific entities based in Germany are obliged to define and determine, for the first time, target figures in respect of the proportion of women to be appointed to the supervisory board, the management board and the two managerial echelons below the management board, in addition to determining a date by which the respective targets shall be met. These entities were required to decide on their target figures, including the timelines for implementation, by 30 September 2015. Under the statutory requirements, the entities in question were prohibited from exceeding the deadline of 30 June 2017 when determining the date by which their targets were to be implemented.

On 25 August 2015, the Supervisory Board of UNITEDLABELS AG resolved that there was no reason for altering the current composition of the Supervisory Board (three male members) and the Management Board (then two male members) in the period up to 30 June 2017. At the same time, however, it noted that its objective was to take into account the issue of quotas to a larger extent when appointing members to governing bodies in the future. It reaffirmed its commitment to this objective for the period up to 1 July 2020.

On 25 August 2015, the Management Board of UNITEDLABELS AG resolved that the proportion of women appointed to the first managerial echelon shall be increased to 50% by the end of 2015. This resolution was implemented accordingly. As at 30 June 2017, the managerial echelon below this level (management circle) consisted of two male executives and two female executives. Thus, the target was met in this respect. The Management Board subsequently decided to maintain its target figure in respect of the proportion of women.

 

Description of diversity concept for the composition of the Management Board and Supervisory Board

Above and beyond the targets presented in this statement and in the corporate governance report with regard to the composition of the Management Board and Supervisory Board, UNITEDLABELS AG does not currently have in place a diversity concept in respect of the composition of the body authorised to represent the Company and the Supervisory Board. Plans to draw up a detailed diversity concept are being discussed.

 

Compensation report

For details relating to compensation, please refer to the relevant sections incorporated within the Group management report and the notes to the consolidated financial statements. These also include so-called model tables with regard to Management Board compensation.

 

Disclosable share transactions by the Management Board and the Supervisory Board

Under Article 19 of the Market Abuse Regulation (MAR), members of the Management Board and the Supervisory Board as well as related parties are obliged to disclose the purchase and sale of shares in UNITEDLABELS AG or of other financial instruments based on those shares in cases where the value of the transactions effected over the course of a calendar year is equal to or in excess of €5,000 in total. UNITEDLABELS AG was notified of the following transactions for the 2017 financial year: 

 

Transparency

UNITEDLABELS AG is committed to providing consistent, comprehensive and prompt information. All reports relating to the business performance and results of UNITEDLABELS AG are issued in accordance with applicable deadlines in the form of an annual report, quarterly reports and an interim report for the first half of the year. Additionally, UNITEDLABELS AG attends press conferences and analysts' meetings.

Information is also furnished by means of press releases as well as via ad hoc announcements where required by law. All notifications and releases can be accessed on the Internet at www.unitedlabels.com/investor-relations. The scheduled dates with regard to the most important recurrent events and publications – such as the Annual General Meeting, the annual report and interim financial reports – have been compiled in a financial calendar, which is published well in advance and can be accessed from the company's website at http://www.unitedlabels.com/investor-relations/financialcalendar.

UNITEDLABELS AG has established compliance structures tailored to the current size of the Company. In response to growing regulatory demands and recent business development, it plans to refine these structures as it moves forward. It has created an insider register as required, and all relevant parties have been informed of their statutory obligations as well as possible sanctions. The decision was made not to present further information relating to these structures in the Corporate Governance Report.

 

Corporate Governance on the Internet

The latest Declaration of Conformity with the German Corporate Governance Code and those of previous years appear on the Company's website at www.unitedlabels.com under the heading Investor Relations/Corporate Governance.

 

Code of Conduct for manufacturers

The UNITEDLABELS Group has drawn up a Code of Conduct for manufacturers for the purpose of promoting compliance with ethical standards in an environment dominated by global production. The UNITEDLABELS Group comprises the headquarters UNITEDLABELS AG (Germany), UNITEDLABELS Belgium, N.V. (Belgium), UNITEDLABELS Comicware Ltd. (Hong Kong), UNITEDLABELS Ibérica S.A.(Spain), UNITEDLABELS Ltd. (United Kingdom), UNITEDLABELS Italia Srl. (Italy), House of Trends europe GmbH (Germany), Open Mark United Labels GmbH (Germany) and Elfen-Service GmbH (Germany). The Code of Conduct is based on the standards set out by the International Labour Organization (ILO) and the United Nations as well as the national legislation of the respective countries in which products are manufactured. The full Code of Conduct has been published on the company's websiteatwww.unitedlabels.com/company/code-of-conducts.

 


 

Declaration of Conformity of March 2018 pertaining to the German Corporate Governance Code, as issued by the Management Board and Supervisory Board of UNITEDLABELS AG in accordance with Section 161 AktG.

 

 

This Declaration follows the Declaration of March 2017, which was subject to the German Corporate Governance Code in the version of 5 May 2015. The latest Declaration is subject to the provisions of the German Corporate Governance Code in the version of 7 February 2017.

 

The Management Board and Supervisory Board of UNITEDLABELS AG hereby declare that the Company in the past fundamentally complied with the recommendations of the Commission of the German Corporate Governance Code, as published by the Federal Ministry of Justice and Consumer Protection in the official section of the Federal Gazette, and that it will continue to comply with them in the future. The Declaration relates to the Code in the version of 7 February 2017, which was published in the official section of the Federal Gazette on 24 February 2017.

Furthermore, the Management Board and the Supervisory Board hereby declare that the Company departed from the following recommendations of the Government Commission of the German Corporate Governance Code and is also likely to depart from these recommendations in the future:

  

  1. Section 4.2.1:

The Management Board shall be comprised of several persons and have a Chairman or Spokesman. By-laws shall govern the work of the Management Board, in particular the allocation of duties among individual Management Board members, matters reserved for the Management Board as a whole, and the required majority for Management Board resolutions (unanimity or resolution by majority vote).

 

The recommendations have not been implemented. The Management Board of UNITEDLABELS AG is comprised of one person. The Supervisory Board is of the general opinion that appointing a second Management Board member would be apposite. Such an appointment shall be made, at the very latest, when the Company is generating sustained profits. Insofar as at least one additional Management Board member is appointed, the Management Board shall be furnished with a Chairman or Spokesman as well as Terms of Reference (i.e. rules of procedure) that specify the assignment of responsibilities and the basis of collaboration within the Management Board.

 

  1. Section 5.1.2:

The GCGC recommends that the aspect of diversity should be taken into account with regard to the composition of the Management Board. As the Management Board only consists of one member, it is in no position to apply the aspect of diversity. When discussing the possible expansion of the Management Board, the Supervisory Board will address the issue of diversity when resolving on the composition of the board.

 

  1. Section 5.3.1:

The GCGC recommends the establishment of committees with sufficient expertise, depending on the specifics of the enterprise and the number of its members. The Supervisory Board comprises only three members. Therefore, no committees have been formed. The Supervisory Board sees no need for suitably qualified committees for the purpose of enhancing the efficiency of the Supervisory Board's work in respect of the Company and specific circumstances, given the fact that the Supervisory Board is comprised of just three people.

 

  1. Section 5.3.2:

As the Supervisory Board consists of just three members and an audit committee merely comprising two members is not in a position to pass its own resolutions as it is deemed inquorate, the Supervisory Board sees no reason for the establishment of an audit committee. Its duties are discharged by the Supervisory Board as a whole.

 

  1. Section 5.3.3:

The Supervisory Board comprises only three members. They are elected exclusively by shareholders. The Supervisory Board therefore sees no need for the establishment of a nomination committee.

 

  1. Section 5.4.1:

The GCGC recommends that an age limit shall be stipulated for the members of the Management Board and the Supervisory Board.

Additionally, the Supervisory Board shall determine concrete objectives regarding its composition and shall prepare a profile of skills and expertise for the entire Board. Within the Company-specific situation the composition of the Supervisory Board shall reflect appropriately the international activities of the company, potential conflicts of interest, the number of independent Supervisory Board members within the meaning of Section 5.4.2, an age limit and a regular limit to Supervisory Board members' term of office, both to be specified, as well as diversity. Proposals by the Supervisory Board to the General Meeting shall take these targets into account, while simultaneously aiming at fulfilling the overall profile of required skills and expertise of the Supervisory Board. The status of implementation shall be published in the Corporate Governance Report.

The proposal for a candidate shall be accompanied by a curriculum vitae, providing information on the candidate's relevant knowledge, skills and experience; it shall be supplemented by an overview of the candidate's material activities in addition to the Supervisory Board mandate, and shall be updated annually for all Supervisory Board members and published on the company's website.

The composition of the Supervisory Board has to be suitably aligned with the interests of the Company, the objective being to ensure that the Supervisory Board is in a position to monitor and advise the Management Board. Therefore, in selecting the candidates to be put forward for election by the General Meeting of Shareholders, the Supervisory Board restricts its decision-making to the professional and personal expertise of the candidates in question. For reasons of ensuring equal opportunities, other factors such as gender, nationality or age have been and continue to be of no significance to these proposals. Beyond these selection criteria, the Company is of the opinion that the aspects detailed in the Code are generally worth taking into account, and the Supervisory Board will indeed take them into consideration when deciding on the respective proposals for the election of candidates, while closely observing the company-specific situation at the time of making this decision. However, for the reasons outlined above, which also include the comparatively small number of Supervisory Board roles to be filled, the Company is not in a position to commit itself to these recommendations.

For these reasons, neither concrete objectives regarding the composition of the Supervisory Board have been determined nor has a profile of skills and expertise been drawn up for the Board as a whole. Therefore, the Corporate Governance Report does not include details of an implementation status as proposed under Section 5.4.1 para. 4 sentence 2 GCGC.

As regards the inclusion of a curriculum vitae in respect of proposals for candidates by the Supervisory Board and the publication of curricula vitae of all Supervisory Board members together with an overview of material activities, the Management Board and the Supervisory Board are of the opinion that the Company already provides comprehensive information about Supervisory Board candidates and members by fulfilling its statutory disclosure obligations in the convening notice for the General Meeting and in the notes to the financial statements and consolidated financial statements. Furthermore, the publication of curricula vitae would constitute an inappropriate infringement of the Supervisory Board candidates' and members' right to informational self-determination. 

 

  1. Section 5.4.6 paragraph 1:

Section 5.4.6 Paragraph 1 of the GCGC recommends that status as Chair or deputy Chair of the Supervisory Board, as well as Chair or membership of a committee, shall be taken into consideration in the context of Supervisory Board compensation.

The level of compensation payable to members of the Supervisory Board is specified in Section 10 of the Articles of Association. As no committees exist, the chair and membership in committees are not taken into consideration as regards the compensation of the Supervisory Board.

 

  1. Section 7.1.2:

Section 7.1.2 of the GCGC recommends that the consolidated financial statements shall be publicly accessible within 90 days of the end of the financial year; interim reports shall be publicly accessible within 45 days of the end of the reporting period. As the Company is of the opinion that the quality of its financial reports should take precedence over the observance of said deadlines, it may not be in a position to apply the publication schedules recommended by the German Corporate Governance Code. Instead, the consolidated financial statements and the interim reports are published in accordance with statutory requirements and the deadlines prescribed by German Stock Exchange (Deutsche Börse) for the Prime Standard.

 

 

Münster, March 2018

 

The Management Board                           The Supervisory Board