Corporate Governance

Introduction and Principles

Petroplus is fully committed to meeting high standards of corporate governance. We comply with the standards established in the “Swiss Code of Best Practice for Corporate Governance”, effective July 1, 2002, and the “SIX Swiss Exchange Directive on Information Relating to Corporate Governance” (“DCG”), effective July 1, 2002 and amended January 1, 2007 for business years beginning on that date.

In 2008, as part of our compliance with the Swiss Code of Obligations, the Company implemented an extensive controls process in all areas of our business including entity level controls, order to cash, procure to pay, information technology, etc. As part of these processes, the Company identified where the risks were in each area and further ensured that appropriate controls were in place to prevent and detect any errors that may arise. The Company also has extensive processes in place to ensure the integrity and transparency of financial statement disclosures including reviews at all levels of management including the Board of Directors. The Company is compliant with the financial control requirements of the Swiss Code of Obligations in 2008.

Petroplus Holdings AG’s Articles of Association stipulate that the BoD consists of a minimum of three members.

Elections and Terms of Office

The Members of the BoD are generally elected for the period of a maximum of three years at the General Meeting of Shareholders. A year is defined as the period between two ordinary shareholders’ meetings. The individual terms of office of the members are coordinated in such a way that every year approximately one third of the members are subject to reelection or election.
The BoD appoints its Chairman and Vice Chairman itself.

Internal Organizational Structure

The BoD is the supreme management body of Petroplus and consists of the Chairman, the Vice-Chairman and the other members. In accordance with the Organizational Regulations of Petroplus Holdings AG (“ROO”), our BoD has established three subcommittees: the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee. Each committee advises the BoD on the matters specified below, often with the assistance of the Senior Management and others involved in the management of Petroplus Holdings AG. The chairperson of each of the subcommittees will inform the BoD of all significant issues discussed at the subcommittee meetings and provide recommendations for decisions required to be made by the BoD. Members of the committees are non-executive members of the BoD and independent. For purposes of committee membership, independent means a non-executive member of the BoD who was not a member of executive management during the past three years and who has had no or comparatively minor business relations with Petroplus Holdings AG. No member of any committee may have any relationship that, in the opinion of the BoD, would interfere with the exercise of his or her independent judgment as a member of the relevant committee.

Audit Committee

The Audit Committee supports the BoD as a consulting, controlling and initiating body in the areas of communicating with internal and external auditors, supervising the independence and objectivity of the internal audit function, reviewing and assessing the independence of external auditors, financial reporting as well as assessing the adequacy and effectiveness of internal control systems. The Audit Committee encourages continuous improvement of, and adherence to Petroplus Holdings AG’s policies, procedures and practices at all levels.
The Audit Committee is composed of at least two members of the BoD as determined by the BoD. Each member of the Audit Committee must be a non-executive and independent director. The committee will meet at least four times a year for the time necessary to fulfill its purpose, which is estimated to be no less than one hour, or more frequently as circumstances dictate.

Nominating and Corporate Governance Committee

The Nominating and Corporate Governance Committee establishes principles for the selection of nominees for election or reelection to the BoD, suggests nominees for election to the BoD and makes recommendations to the BoD concerning corporate governance matters and practices.

The Nominating and Corporate Governance Committee is composed of at least two members of the BoD as determined by the BoD. The majority of the members of the Nominating and Corporate Governance Committee must be non-executive and independent directors. The committee will meet approximately two to four times a year for the time necessary to fulfill its purpose, which is estimated to be no less than one hour, or more frequently as circumstances dictate.

Compensation Committee

The Compensation Committee supports the BoD to assure that the executive officers and the members of the BoD are compensated in a manner consistent with our stated compensation strategy, internal equity considerations, competitive practice and regulatory requirements.

The Compensation Committee is composed of at least two members of the BoD as determined by the BoD. The majority of them shall be non-executive and independent directors. The committee will meet approximately two to four times a year for the time necessary to fulfill its purpose, which is estimated to be no less than one hour, or more frequently as circumstances dictate.

Definition of Areas of Responsibility

While the Board of Directors has delegated the executive management of Petroplus to the CEO and the other members of the Senior Management, the following responsibilities remain with the Board:

− election of the Chairman, the Vice Chairman, the Chairperson and members of the Audit Committee, the Nominating and Corporate Governance Committee and the Compensation Committee;
− definition of the ultimate direction and the handing out of necessary instructions;
− definition and modification of the strategy of the Company as well as the passing of resolutions about the taking up or suspension of business activities;
− establishment of the organization;
− appointment and dismissal of members of the Senior Management and of other signatories of the Company;
− approval of the annual budget and of deviations from it;
− approval of the financial planning and establishment of principles of accounting and financial control;
– determination of the fiscal year of the Company;
− supervision and control of the members of the Senior Management, especially with respect to compliance with laws, the Articles, internal directives and instructions;
− preparation of the annual report and general meetings, as well as the execution of its decisions;
− notification of the judge in case of over-indebtedness or bankruptcy based on Article 725 of the Swiss Code of Obligation (“CO”);
− decisions about contributions on shares not fully paid and in connection with the increase of share capital out of the authorized capital including decisions to delete outdated provision;
− approval of mass redundancies as set out in Article 335d of the CO or similar foreign prescriptions; and
− purchases and sales of real estate, subsidiaries or businesses if the costs exceed CHF 100 million, borrowings of more than CHF 100 million, petroleum contracts that exceed one and a half million barrels per month and extend more than one year or other contracts of more than CHF 500 million a year and all transactions between the Company and the CEO or the other members of the management or persons closely related to those.

Information and Control Instruments
vis-à-vis the Senior Management

Petroplus’ financial reporting is supported through professional reporting and consolidation software. Income Statements and full balance sheets are reported and consolidated on a monthly basis, including other information pertinent to an up-to-date controlling system, such as sales and operating profit details. On a monthly basis each refinery, marketing and other business controllers report detailed analysis on the changes in the financial information. This analysis incorporates changes in the market, operations, and other relevant areas. Additionally, this analysis is compared to the budget, which is approved by the BoD, in the fourth quarter of the previous year. The CFO provides the BoD a summary analysis on the financial and operational results on a monthly basis.

Certain members of Senior Management are regularly involved in the meetings of the BoD and the Audit Committee. The CFO presents the financial information of the Company to the Audit Committee on a quarterly and annual basis.

An Internal Audit function was established in the last quarter of 2006. The Internal Audit function assists the BoD in the discharge of its oversight responsibilities by providing independent and objective assessments of the effectiveness of the Company’s risk management, internal control and governance processes. Internal Audit activities are based on an annual audit plan developed using an appropriate risk-based methodology that covers all operations of the Company. This audit plan will be approved by the BoD after review by the Audit Committee. The results of internal audits are communicated directly to the Chief Financial Officer, the Audit Committee, and the Chairman of the Board as well as to the External Auditors through formal Internal Audit reports. Regular follow-up will be performed to ensure that risk mitigation and control improvement measures are implemented on a timely basis.

The Director of Internal Audit reports directly to the ­Audit Committee to ensure independence from management.

Internal Audit is committed to the Standards for Professional Practice of Internal Auditing set out by the Institute of Internal Auditors

For any further information, please consult Annual Report