Corporate Governance & Internal Control

Background and purpose

These guidelines describe the overarching principles for corporate governance and internal control in add energy group as (the Company). The guidelines must be viewed in connection with the Company’s Rules of Procedure as well as in connection with the Company’s Articles of Association and relevant legislation.

Corporate governance

The guidelines for corporate governance are intended to clarify the division of roles between shareholders, the board of directors and general management beyond what follows from legislation and the Rules of Procedure.

A recognized and much used framework for corporate governance is “Norwegian Code of Practice for Corporate Governance” issued by the Norwegian Corporate Governance Board (NCGB). Although the code is aimed primarily at companies listed on Oslo Børs, relevant portions of the code may also be appropriate for companies with diffuse ownership and where their shares may be subject to regular trading.

In view of the above, the following guidelines have been prepared: 

1. Implementation and reporting on corporate governance

The board of directors must ensure that the Company implements sound corporate governance.

The board of directors should define the Company’s basic corporate values and formulate ethical guidelines in accordance with these values. 

 2. Business

The Company’s business should be clearly defined in its Articles of Association.

The Company shall have clear objectives and strategies for its business within the scope of the definition of its business in its Articles of Association.

The annual report should include the objects clause from the Articles of Association and describe the Company’s objectives and principal strategies.

3. Equity and dividends

The Company’s equity capital shall be at a level appropriate to the business engaged in.

The main principles for dividends for Company shareholders shall appear in the Company’s annual report.

4. Equal treatment of shareholders and transactions with close associates

The Company shall have two share classes. The main principles relating to the Company’s two share classes shall appear in the Company’s annual report.

In principle, the Company should not carry out transactions in its own shares. Any transactions in own shares shall be carried out according to the rules in Chapter 9 of the Limited Liability Companies Act.

For material transactions between the Company and shareholders, members of the board of directors or close associates of any such parties, the board shall arrange for a valuation to be obtained from an independent third party. This also applies to transactions between companies in the same group where any of the companies involved have minority shareholders.

Members of the Company’s board of directors shall notify the board if they have any direct or indirect ownership interest in companies intending to enter into an agreement with the Company. The same shall apply to a close associate of a member of the Company’s board of directors. In other respects the rules of the Limited Liability Companies Act shall apply.

5. Negotiability

Negotiability of the Company’s shares shall follow the rules enshrined in the Company’s Articles of Association and the Shareholder Agreement in force at any given time among the shareholders in the Company. The principles for the restrictions on negotiability shall be disclosed in the Company’s annual report.

6. General meetings

The board of directors shall ensure that the Company’s shareholders are sent the supporting information on the resolutions to be considered at the general meeting by the statutory deadlines for ordinary and extraordinary general meetings, respectively.

The resolutions and supporting information distributed shall be sufficiently detailed and comprehensive to allow shareholders to form a view on all matters to be considered at the meeting.

The deadline for shareholders to give notice of their intention to attend the meeting shall be set as close to the date of the meeting as possible.

Shareholders can vote by proxy pursuant to the rules in the Limited Liability Companies Act and the proxy signed when the Company was founded.

The rules in the Limited Liability Companies Act shall apply with regard to the presence of the board of directors and general manager at the Company’s general meetings. The auditor shall be present if the chairman of the board so wishes, or if the auditor deems it necessary.

The chairman of the Company’s general meeting shall be determined in accordance with the Limited Liability Companies Act.

7. Election of the Company’s board of directors

In view of the Company’s size, the Company shall not have a separate nomination committee. The board and its chairman are elected by the Company’s general meeting, in accordance with the Company’s Articles of Association and current Limited Liability Companies Act.

8. The work of the board of directors.

The board of directors shall issue instructions for its own work as well as for the executive management with particular emphasis on clear internal allocation of responsibilities and duties.

The board shall elect a deputy chairman be elected for the purpose of chairing the board in the event that the chairman cannot or should not lead the work of the board.

The board of directors shall evaluate its performance and expertise annually.

9. Risk management and internal control

The board of directors must ensure that the Company has sound internal control and systems for risk management that are appropriate in relation to the extent and nature of the company’s activities. Internal control and the systems should also encompass the company’s corporate values and ethical guidelines.

The board shall also set requirements for sound internal control and appropriate systems for risk reporting and risk management in the Company.

10. Remuneration of the board of directors

The remuneration of the board of directors shall reflect the board’s responsibility, expertise, time commitment and the complexity of the company’s activities.

The remuneration of the board of directors shall not be linked to the company’s performance, nor shall options or similar instruments be granted to the board.

As a rule, members of the board of directors and/or companies with which they are associated shall not take on specific assignments for the Company in addition to their directorship. If they do nonetheless take on such assignments this should be disclosed to the full board. The remuneration for such additional duties should be
approved by the board.

The annual report should provide information on all remuneration paid to each member of the board of directors, and any remuneration in addition to normal directors’ fees should be specifically identified.

11. Remuneration of the executive management

Remuneration of the general manager shall be in accordance with the signed agreement, the main principles of which shall appear in the Company’s annual report.

12. Information and communication

The Company shall prepare annual accounts in accordance with the requirements of current accounting legislation. The Company’s annual accounts shall be adopted by the board by no later than 120 days after the end of the financial year.

Interim reports shall be prepared and adopted by the board by no later than 45 days after the end of the reporting period.

The reporting of financial and other information shall be based on openness and in accordance with the requirement for equal treatment of shareholders.

Communication with the Company’s shareholders beyond the Company’s general meeting shall be taken care of by the chairman of the board and shall satisfy the requirement for equal treatment of shareholders.

13. Auditor 

The auditor shall present the main features of the plan for the audit of the Company to the chairman of the board of directors. The plan shall have been reviewed with the general manager, but the meeting with the chairman of the board shall take place without the executive management being present.

The auditor shall attend the meeting of the board of directors that deals with the annual accounts and at this meeting shall report material uncertainty regarding the annual accounts and all material matters on which there has been disagreement between the auditor and the executive management.

In connection with submitting the annual accounts the auditor may be asked to comment on the Company’s internal control procedures, including weaknesses and proposals for improvement identified during the conduct of the audit.

The auditor may be engaged to provide services to the Company within the rules that apply to the auditor’s independence. In case of doubt the matter shall be submitted to the chairman of the board.

The Company’s annual report shall specify the services provided by the auditor beyond ordinary auditing. Audit fees shall be reported to the general meeting.

Internal control

Internal control includes activities and measures implemented to balance the relationship between achieving business objectives and related risks to an acceptable level. Furthermore, internal control may include requirements for processes, systems and documentation on the part of the Company. 

The following guidelines shall apply to internal control in the areas of defined risk components:

1. Risk assessments 

In order to control risk, one needs an accurate picture of what the risks actually are. The documentation that the board is base its decisions on must be prepared with this in mind.

An understanding of the inherent risk in the Company’s processes and a description of risk to the board of the Company will be crucial for reaching correct decisions and achieving the Company’s paramount objectives.

The general manager will draw up guidelines for presenting items of business, documentation and processes and present them to the Company’s board.

2. Control environment

The control environment involves what signals the board and general manager give, i.e. that there is a focus on the importance of proper internal control and that this is communicated. The board’s periodic review of risk and preparation of corporate governance and ethics guidelines contributes to a sound control environment and provides guidance that will lay the foundation for proper internal control in the Company.

3. Information systems

The Company’s information systems shall help to ensure effective, timely and reliable reporting of information. The general manager will spend time to put together adequate manual and electronic information systems, including a focus on information and IT security.

4. Control activities

The following central control activities shall be put in place:

• All investment decisions relating to new investment shall be made by the Company’s board of directors.

5. Monitoring control activities

Monitoring control activities is a process for assessing whether control activities work appropriately over time. The assessment covers both the design of internal control and whether the control activities are effective.

Periodically the board of directors may ask the general manager to conduct an evaluation of internal control and submit it to the board. The board may then ask the auditor to perform an external review of this.

These guidelines for corporate governance and internal control have been adopted at a meeting of the board of directors of 1 September 2008.

All amendments shall be approved at meetings of the board, after which revised guidelines will be distributed.

________________                     _________________

Per Arne Jensen                          Ådne Grødem                             
Chairman of the Board                 Board Member       

_________________                    __________________         

Svein Ilebekk                              Noel Hammonds                
Board Member                            Board Member