Close Brothers Group plc (the “Company”) is committed to high standards of corporate governance, corporate responsibility and risk management in directing and controlling its business. The UK Corporate Governance Code (the “Code”), issued by the Financial Reporting Council, is the governance code which applies to UK companies with a premium listing on the London Stock Exchange.
The version of the Code, published in July 2018, was applicable to the Company throughout the year to 31 July 2021.
It is the board’s view that throughout the year the company has applied the principles and complied with the provisions set out in the Code, with the exception of the two items noted below.
As explained in the 2020 Annual Report, the pension contribution rate of the former chief executive, Preben Prebensen, was higher than that of the general employee population in line with his service contract and the Directors’ Remuneration Policy approved by shareholders in 2017 prior to publication of the Code. Preben served as chief executive for a small part of the 2021 financial year before stepping down on 21 September 2020. For this portion of the year in relation to Preben’s pension, the company was not therefore compliant with provision 38 of the Code, which requires the pension contribution rates of executive directors to be aligned with those available to the workforce. The pension contribution rate of the group’s current chief executive, Adrian Sainsbury, is (like that of the group finance director, Mike Morgan) aligned with the general employee population, and the group is therefore now fully compliant with provision 38 and has been since 21 September 2020.
During the 2021 financial year, an administrative error resulted in the inadvertent exercise of a vested 2017 LTIP award held by Preben Prebensen prior to the expiry of the applicable post-vesting holding period. This inadvertent exercise was not compliant with provision 36 of the Code, which requires a total vesting and holding period for such awards of five years or more. Further information can be found on page 124 of the Directors’ Remuneration Report in the 2021 Annual Report, including steps taken by the company and Preben following identification of the error to put alternative arrangements in place to largely replicate the overall vesting and holding schedule applicable to the LTIP award in question.
More information on the executive directors’ remuneration can be found in the Directors’ Remuneration Report in the 2021 Annual Report. Further detail and examples as to how the company has applied and complied with the Code are set out in the Corporate Governance Report in the 2021 Annual Report.
The board comprises two executive directors, eight independent non-executive directors and the Chairman who contribute a wide range of complementary skills and experience.
Brief biographical details of each director are set out on the Leadership section of the Who we are page of this website.
The non-executive Chairman, Mike Biggs, was considered independent on his appointment as Chairman. The senior independent director is Mark Pain.
The board believes that there is an appropriate balance of executive and non-executive directors on the board, with no individual or small group dominating its decision-making process.
The board has determined its non-executive directors to be independent in character and judgement.
The formal schedule of Matters Reserved for the board is designed to enable the board and executive management to operate within a clear governance framework. The schedule details the areas of the board’s focus which is on activities that enable it to promote shareholders’ interests, including the active consideration of strategy, the monitoring of executive action including sound systems of internal controls, and ongoing board and executive management succession. The board has developed these principles to help it fulfil its responsibilities. The board regularly keeps its work and performance under review.
The board has established four committees, composed entirely of independent non-executive directors, each with responsibility for the review and oversight of activities within its terms of reference.
The Audit Committee is chaired by Oliver Corbett and its other members are Lesley Jones, Patricia Halliday, Tesula Mohindra and Sally Williams. The Committee normally meets five times a year and the external auditor partner attends these meetings. The Committee chairman, Oliver Corbett, is deemed by the board to have recent and relevant financial experience.
The Remuneration Committee is chaired by Bridget Macaskill and its other members are Mike Biggs, Peter Duffy, Lesley Jones and Mark Pain. The Committee normally meets five times a year.
Nomination and Governance Committee
The Nomination and Governance Committee is chaired by Mike Biggs and its other members are Oliver Corbett, Lesley Jones, Bridget Macaskill and Mark Pain. The Committee normally meets no less than three times a year.
The Risk Committee is chaired by Lesley Jones and its other members are Oliver Corbett, Peter Duffy, Patricia Halliday, Bridget Macaskill, Tesula Mohindra, Mark Pain and Sally Williams. The Committee normally meets five times a year.
The Company’s latest Corporate Governance report, as included in its Annual Report 2021, is available below. The report includes a statement from the Chairman and sections on:
- The board
- Governance framework
- Conflicts of Interest
- Board and committee effectiveness
- Risk and control framework
- Risk management framework
- Substantial shareholdings
- Engagement with shareholders
Close Brothers approach to tax
Our approach to tax is part of our wider commitment to responsible finance. For our tax affairs, responsible finance means that we are committed to complying with our tax obligations and doing so in a manner consistent with the spirit as well as the letter of tax laws. This includes a transparent and cooperative relationship with the tax authorities.
In the sections below we outline in more detail the group’s approach to tax and what we do to ensure we deliver on these objectives. Our approach covers all direct and indirect taxes.
Our core businesses – lending, deposit-taking, wealth management and market-making – each have straightforward product offerings. Our tax obligations arise mainly in the UK where our operations and customers are predominately based. Our straightforward business model and approach to our markets reduces the complexity of our tax affairs and helps us maintain a lower risk tax profile.
Approach to risk management and governance arrangements
Close Brothers Group plc ("CBG") is the parent company of the group, and takes ultimate responsibility for the tax affairs of all group companies.
The CBG board of directors sets the group's tax policy, including the approach to tax risk management and governance. The Audit Committee of the CBG board reviews material developments in the area of taxation at least annually and more frequently as required.
Ensuring compliance with the group’s tax risk management and governance policies is part of our group-wide Enterprise Risk Management Framework, outlined in the Risk Report on pages 48 to 59 of our 2020 Annual Report and Accounts (which can be read at www.closebrothers.com).
The group maintains internal procedures which document the roles and responsibilities in relation to management of all tax types. These procedures ensure that tax sensitive matters are addressed on a timely basis by staff of appropriate experience and seniority. A tax review is required for all new products and services and for significant transactions and business developments which might involve tax risk.
The responsibility for early identification of potentially tax sensitive matters is assigned primarily to senior finance managers (who have timely awareness of developments in their business areas) and to the group’s tax team. The group employs suitably qualified and experienced tax specialists who work closely with their finance colleagues and the wider business, and take the lead role in assessing the need for external advice.
The group regularly reviews all business areas to identify and document tax risks. Tax processes are in place to manage these risks, including testing of the systems and internal controls relied on to produce accurate tax returns.
Level of risk in relation to UK taxation that the group is prepared to accept
We manage tax risk within the risk appetite set by the Board. The group has a low appetite for tax risk.
We seek to minimise uncertainty in relation to our tax affairs by proactively identifying and addressing potential tax issues. Where the tax risk profile of a material transaction or other business development is unclear then typically we will seek external advice, and if the position is still unclear then we discuss with HM Revenue & Customs.
Attitude towards tax planning
CBG takes a conservative approach to tax planning, and has undertaken to abide by the Code of Practice on Taxation for Banks in relation to all group companies. As a result:
- Group companies do not engage in tax planning other than that which supports genuine commercial activity;
- The tax affairs of the group reflect the underlying economic realities of the group's business (unless the relevant tax legislation is clearly designed to give a different result);
- We do not promote products and services to customers unless we reasonably believe the tax result for the customer is not contrary to the intentions of Parliament;
- Remuneration packages for group employees are structured so that the proper amounts of tax and national insurance contributions are paid.
Consideration of our future relationship with the tax authorities will form part of any decision whether to proceed with tax planning.
We also consider the risk of public reputational damage which could result from our participation in tax related arrangements, even where we believe the outcome is otherwise consistent with the above principles.
Subject to the above the group will seek to pursue its commercial objectives in a tax efficient manner.
The group’s approach towards its dealings with tax authorities
The group seeks to maintain a favourable long-term relationship with the tax authorities, and works proactively to achieve this. As a predominately UK group our main tax authority relationship is with HM Revenue & Customs.
Employees of group companies are required to maintain an open, professional, and constructive relationship with the tax authorities. For any material issues, they will seek to work collaboratively to achieve early resolution and hence certainty, and will make full and accurate disclosure of the relevant facts.
We are in regular contact with HM Revenue & Customs personnel, in particular those assigned an ongoing relationship with our group. Where appropriate we can and do discuss tax issues with them in real-time.
We consider that the above statements meet the group’s obligation under para 16(2) Schedule 19 Finance Act 2016 for the year ended 31 July 2021.
Close Brothers Group has a zero tolerance to bribery and corruption. This policy extends to all the group’s business dealings and transactions in all countries in which it or its subsidiaries and associates operate. All directors and employees are required to comply with this policy.
Please click below to view the company's Articles of Association. If you would like a hard copy, contact:
The Company Secretary
Close Brothers Group plc
10 Crown Place
London EC2A 4FT
The board retains overall responsibility for overseeing a system of internal control to ensure that an effective risk management and oversight process operates across the group. The risk management framework and associated governance arrangements are designed to ensure a clear organisational structure with distinct, transparent and consistent lines of responsibility and effective processes to identify, manage, monitor and report the risks to which the group is, or may become, exposed.
For more information on the risk management framework, please click here.
The Companies (Miscellaneous Reporting) Regulations 2018 (the “Regulations”) require companies, where they meet certain qualifying conditions, to include a statement in their strategic report describing how the directors have had regard to the matters set out in section 172 of the Companies Act 2006.
A separate section 172 statement for all companies within the group which meet the qualifying conditions must be made available on a website.
Please find below the section 172 statements for Close Brothers Group plc and its subsidiaries which meet the qualifying conditions, other than in respect of those subsidiaries whose section 172 statement is displayed separately on their own website.
A statement of corporate governance arrangements for Close Brothers Limited, as required by the Regulations, can also be found in the link below:
Under Section 35 of the Pensions Act 1995 (as updated by the Pensions Act 2004 and regulations made under it), the Trustees of the Close Brothers Limited (1979) Pension Plan (the “Plan”) are required to prepare and publish a statement of the principles governing investment decisions. This document constitutes that statement and describes the investment policy of the Plan.