Corporate Governance

Financial aspects of corporate governance

The Company has adopted a framework for corporate governance which it believes is suitable for a company of its size with reference to the key points within the Principles of Good Governance and Code of Best Practice, ("the Combined Code") prepared by the Committee on Corporate Governance, published in June 1998, although the board consider the costs of full compliance with the code to outweigh the benefits it would provide to a business the size of Croma Group.

The Board

As at the date of approval of these financial statements, the board consisted of four members, one of whom is a Non-Executive Director.

The board meets throughout the year and all major decisions are taken by the full board. The Group's day to day operations are managed by the executive directors. All directors have access to the Company Secretary and any director needing independent professional advice in the furtherance of his duties may obtain this advice at the expense of the Company.

Corporate governance committees

The Board meets regularly, normally monthly, and covers audit and remuneration committee matters as they arise from time to time.

Audit committee matters;
The Board meets as an audit committee to review the published financial information, the effectiveness of external audit and internal financial controls.

The terms of reference of the Audit Committee are to assist themselves as Directors in discharging their individual and collective legal responsibilities for ensuring that:

the Group's financial and accounting systems provide accurate and up-to-date information on its current financial position;
the Group's published financial statements represent a true and fair reflection of this position; and
the external audit, which the law requires in order to provide independent confirmation that these legal responsibilities are being met, is conducted in a thorough, efficient and effective manner.

The external auditors attend the audit committee meeting and as such it provides them with a direct line of communication to the Directors.

Remuneration Committee matters;
The terms of reference of the Board meeting as the remuneration committee are:

recommend to the board a framework for rewarding senior management, including executive directors, bearing in mind the need to attract and retain individuals of the highest calibre and with the appropriate experience to make a significant contribution to the Group; and
ensure that the elements of the remuneration package are competitive and help in underpinning the performance-driven culture of the Group.

Internal control

The board is responsible for maintaining an appropriate system of internal controls to safeguard shareholders' investment and Group assets.

The directors monitor the operation of internal controls. The objective of the system is to safeguard Group assets, ensure proper accounting records are maintained and that the financial information used within the business and for publication is reliable. Any such system of internal control can only provide reasonable but not absolute assurance against material misstatement or loss.

Internal financial control procedures undertaken by the board include:

review of monthly financial reports and monitoring performance;
prior approval of all significant expenditure including all major investment decisions; and
review and debate of treasury policy.

The board in the context of the Group's overall strategy undertakes risk assessment and the review of internal controls. The review covers the key business, operational, compliance and financial risks facing the Group. In arriving at its judgement of what risks the Group faces, the board has considered the Group's operations in the light of the following:

the nature and extent of risks which it regards as acceptable for the Group to bear within its overall business objective;
the threat of such a risk becoming a reality;
the Group's ability to reduce the incidence and impact of risk on its performance; and
the cost and benefits to the Group of operating the relevant controls.

The board has reviewed the operation and effectiveness of the Group's system of internal control for the financial year and the period up to the date of approval of these financial statements. During the previous year our review found some significant but ultimately not material inaccuracies in the Photobase division in the description of sales invoices, the dates of them, the dates they were submitted to the invoice discounter, and the accounting treatment of them. None of the irregularities resulted in loss of customers, and there were no other consequences of a material nature following communications on the matter with the provider of invoice discount finance. The Board have now concluded the rectification of the systems within this subsidiary company, and are satisfied as to the robust nature of the systems now in place.

Relations with shareholders