Corporate Governance

As Non-Executive Chair, I have ultimate responsibility for the leadership of the Board and the Group’s approach to corporate governance.

The Board recognises the importance of good corporate governance as one of the foundations of a sustainable corporate growth strategy and sound decision making and has considered the corporate governance codes available and which would best suit the Company given its specific stage of development, the sector in which it operates and the Company’s size. The Board considers the Corporate Governance Code 2018 published by the Quoted Companies Alliance (the “QCA Code”) to be the most suitable code for the Company.

The Board has reviewed the Company’s corporate governance and how it complies with the Principles of the QCA Code and this is explained in the Corporate Governance Statement below together with the disclosures required by the Code.

The Directors recognise the value and importance of high standards of corporate governance and as such the Company takes steps to ensure compliance by the Board and applicable employees with the terms of the QCA Code. The information set out in the Corporate Governance Statement below outlines the structures, processes and procedures by which the Board ensures that high standards of corporate governance are maintained throughout the Group.

Christopher Train

Chair

Page last updated 19 April 2023

Statement of compliance with QCA Code

The QCA Code sets out ten principles which should be applied. The principles are set out below with an explanation of how the Company applies each principle and the reasons for any instances of non-compliance.

Principle 1: Establish a strategy and business model which promotes long term value for shareholders.

The Company’s mission is to become a globally recognised and highly profitable designer, manufacturer and licensor of membrane free electrolyser technology with a minimum 4GW production capacity by 2030.

The details of our strategy and the key challenges for the Group are set out in the Strategic Report in the Company’s 2022 Annual Report & Accounts.

The Group’s strategy and business model are developed by the Chief Executive Officer, the Chief Financial Officer and the senior management team, and approved by the Board in line with the Group’s vision and mission. Progress is actively tracked and reviewed by the Directors, as well as by the Company’s independent Chair and Non-Executive Directors to ensure it establishes a balance between the interests of management and the Company’s stakeholders. The senior management team, led by the Chief Executive Officer, is responsible for their effective delivery and implementation.

Principle 2: Seek to understand and meet shareholder needs and expectations.

The Board places great importance on having positive relationships with all shareholders and seeks to ensure that an appropriate and proactive level of communication takes place through multiple platforms. Significant developments are disseminated through London Stock Exchange announcements and regular updates on the Company website.

The Board also uses the Annual General Meeting to communicate with shareholders and to give them the opportunity to ask questions and present their views to the whole Board. The Board welcomes the attendance and participation of all shareholders.

The Chief Executive Officer and the Chief Financial Officer extensively engage with the Company’s institutional brokers and investor relations (“IR”) consultants and meet regularly with investors and analysts to provide them with updates on the business and to obtain feedback regarding the market’s expectations of the Group. The Chair and Non-Executive Directors also engage and meet with investors as and when deemed valuable to investors.

CPH2’s investor relations activities encompass dialogue with both institutional and private investors and are co-ordinated by the Chief Executive Officer and Chief Financial Officer.

The Group’s main point of contact for shareholder engagement is with its brokers and IR Consultants, however, contact details are also available on the Group’s website to support open channels of communication and feedback (investor@cph2.com).

Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long term success.

CPH2’s business is at the heart of the green hydrogen industry and the Directors believe is playing a significant part in the drive towards clean energy and net zero targets.

The Board’s primary goal is to create shareholder value in a responsible way that serves all stakeholders. The Board considers its key stakeholders to be its employees, customers, shareholders, suppliers and the communities and environment in which it operates.

The Company’s values inspiring the senior management team and its staff to be Passionate, Innovative, Open and Genuine, are at the core of what CPH2 does, and provide the framework for all engagement with its stakeholders. The Company acts with integrity, focuses on creating results and more importantly values people – from its members of staff to those who form the communities it engages with.

Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation.

The Board has ultimate responsibility for the Group’s risk management process and will be supported in this by the Audit Committee, which oversees the risks facing the Group, and the effectiveness of the systems to manage and mitigate those risks. These internal controls will be regularly reviewed and risk management processes will evolve to reflect the ongoing position, structure and sophistication of the Group.

The Board takes reasonable steps to identify, assess and mitigate risks, particularly principal risks, and mitigate these risks wherever possible. The Group’s principal risks are set out in the Strategic Report in the Company’s 2022 Annual Report & Accounts.

The Group’s controls are designed to manage and control risks rather than eliminate them. Mitigation can only provide reasonable, but not absolute, assurance against material misstatement or loss. As such, the Group maintains appropriate insurance cover for its activities, with the types of cover and insured values being reviewed on a periodic basis by the Board. The Group continues to align its activities to the quality management standards set by ISO (International Organisation for Standardisation) to ensure the quality, safety, and efficiency of products, services, and systems.

Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair.

The objective is to maintain a balanced Board between Executive and Non-Executive Directors, industry experience and commercial, strategy, industry, governance and financial expertise.

The Board has reviewed the independence of the Non-Executive Directors, Chris Train, Natalie Fortescue and Rick Smith and all, including Rick Smith who holds options in the Company, are considered by the Board to be independent.

Rick Smith has substantial experience as a senior executive within a number of large organisations and as a consultant to private equity firms. His contribution to CPH2 in its early stages of development was invaluable and he was compensated with the grant of options. In view of his experience, the Board believes he is an ideal Non-Executive Director and Remuneration Committee Chair.

The Board comprises three Independent Non- Executive Directors, including the Chair, and two Executive Directors. The Chair is responsible for leadership of the Board and the Board’s approach to corporate governance. The Board adheres to the QCA Code recommendation that a board should have at least two independent directors.

The Board meets regularly and is provided with information on a timely basis. The Board works as a team exploiting its members’ in-depth experience of strategy, technology, international and financial matters. Meetings are characterised by debate and active idea generation and management are rigorously challenged and held to account.

The Board also seeks to develop and improve the information flow of the business to better inform it of the progress, challenges and opportunities it faces. The Board has established Committees covering audit, risk and remuneration.

Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities.

The CPH2 Board and its subsidiary Boards have a strong breadth and depth of highly relevant experiences for the business including public company and governance, sector, strategy, commercial, engineering and technology, manufacturing, financial and public market matters. The Board regularly reviews the composition of both the CPH2 Board and the Group Board to ensure that it has the necessary skills to support the ongoing development and growth of the business.

The Board is satisfied that it has a suitable mix of skills, experience and competencies on both the CPH2 Board and Group Boards covering all essential disciplines to bring a balanced perspective that is beneficial both strategically and operationally to enable the Group to deliver its strategy for the benefit of its shareholders over the medium to long-term. Summary biographies of each Board member are shown in the section “Board of Directors” set out in the Investors section of the Group’s website.

The Board fully subscribes to the principle of diversity across the Board and the wider business, and endeavours to make sure that actions across the business continue to support the Board’s commitment to diversity.

Directors are required to keep their skills sets up to date through membership of professional bodies, attendances at conferences and forums, through their various external appointments and with ongoing training and development. The Directors regularly share sector updates and news articles to stay up to date with relevant industry developments.

The Directors have access to the advice and guidance of the Company Secretary who is responsible for ensuring that Board procedures and applicable rules and regulations are observed. The Directors are kept abreast of changes in relevant legislation and regulations, with the assistance of the Group’s advisers where appropriate.

All Directors are able to take independent professional advice, if required, in relation to their duties and at the Company’s expense.

Principle 7: Evaluate board performance based on clear and relevant objectives, seeking continuous improvement.

A process of formal annual Board evaluation has been implemented and conducted by way of a questionnaire, taking into account the Financial Reporting Council’s Guidance on Board Effectiveness.

All Directors will undergo a performance evaluation before being proposed for re-election to ensure that their performance is and continues to be effective, that, where appropriate, they continue to be independent and that they remain committed to their roles. They will be individually assessed on an annual basis through which their performance against predetermined objectives will be reviewed and their personal and professional development needs considered. These evaluations should allow Directors to identify areas for improvement or training.

In addition, the Non-Executive Directors will meet, without the Chair present, and will evaluate the Chair’s performance.

An evaluation process will also be carried out in relation to each of the Board Committees.

The Board regularly reviews its composition, particularly in conjunction with succession planning, and may utilise the results of performance evaluations when considering the composition and/or succession planning.

Principle 8: Promote a corporate culture that is based on ethical values and behaviours.

The Board understands that a high level of corporate culture and conduct leads to a successful business.

The Board seeks to promote and maintain a culture of integrity across all divisions within the Group and to ensure that the highest standards of integrity and ethics are demonstrated through the Company’s objectives, strategy and business model. An open culture is encouraged within the Group, with employee feedback sought and regular progress and performance updates provided to all employees.

To continue its success, and to be a global leader in the sector, the Board recognises that it is vital to continue attracting and retaining the best talent. The Group works hard to create an environment in which employees at all levels can thrive, develop and achieve their ambitions, but do so in ways that first and foremost promote the Group’s values to be passionate, innovative, open and genuine. Employees will be encouraged to join sub-committees as and when they are created.

The Group has a Code of Conduct, an Anti-Bribery and Corruption Policy and a Modern Slavery Statement. The Group also has policies and procedures relating to whistleblowing which state the Company’s commitment to conducting its business with honesty and integrity, its expectation that staff will maintain high standards, and which encourages prompt disclosure of any suspected wrongdoing. The Company has an induction process in place for all new employees that covers the relevant policies and procedures, which will develop as the Company grows. It also offers ongoing training and refreshers for existing employees where appropriate.

Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board.

Whilst the Company recognises the importance of high standards of corporate governance, the Board has sought to address the matter in a proportionate way having regard to the size and resources of the Group. This will be regularly reviewed as the Group grows.

The long-term success of the Group is the responsibility of the Board of Directors, which comprises three Non-Executive Directors, including the Chair, and two Executive Directors. The Board as a whole is responsible for directing, providing appropriate advice, and supervising the Company’s business strategy, and is responsible to shareholders for the Group’s financial and operational performance, as well as its risk management. The Board has introduced a formal schedule of matters reserved to the Board. The Board is ultimately responsible for the strategy and overseeing the performance of the Group.

Executive Directors have responsibility for the operational management of the Group’s activities. The Non-Executive Directors are responsible for bringing independent and objective oversight and judgement to Board decisions. The Chair has ultimate responsibility for the operation, leadership and governance of the Board and the Group’s approach to corporate governance.

The Chief Executive Officer has ultimate responsibility for implementing and delivering the strategic and commercial objectives of the Board and managing the day-to-day business activities of the Group. The Company Secretary is responsible for ensuring that Board procedures are followed, and applicable rules and regulations are complied with.

The Board has established an Audit Committee and a Remuneration Committee, each with formal terms of reference. Each Board Committee is chaired by a Non-Executive Director and membership of both Committees during the last financial year comprised exclusively of Non-Executive Directors.

The Board met on 10 occasions during the financial year ended 31 December 2022; there were also 2 Remuneration Committee meetings and 1 Audit Committee meeting during the year. All such meetings were quorate and followed a formal agenda.

Further information on the Audit and Remuneration Committees is set out under ‘Audit Committee’ and ‘Remuneration Committee’ below and under ‘Audit Committee’ and ‘Remuneration Committee’ in the Company’s 2022 Annual Report & Accounts.

Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

The Board recognise the importance of providing shareholders with clear and transparent information on the Group’s activities, strategy and financial position and does so in a number of ways, including:

• >  the Group’s Annual Report and Accounts;
• >  full year and half year announcements;
• >  other regulatory announcements;
• >  the Annual General Meeting;
• >  update meetings with existing shareholders; and
• >  disclosure of all votes in a clear and transparent manner.

A range of corporate information, including annual reports will be available to shareholders, investors, and the public through the Group’s website.

Page last updated 19 April 2023