The Directors acknowledge the importance of high standards of corporate governance and are pleased to confirm that the Group has continued to comply with the Quoted Companies Alliance Code 2018 on Corporate Governance (the “QCA Code”).
During the year, the Group has carried out an annual Board effectiveness review. This was an internal review led by the Chairman involving all of the Directors. The format taken this year was an open forum discussion in which the overall approach, effectiveness and areas for improvement were discussed and considered.
No specific failings in effectiveness were identified and the review served to reinforce the Board’s focus on the monitoring and management of risk and a renewed focus on ESG.
RISK MANAGEMENT AND INTERNAL CONTROLS
Risk management is a key area of focus for the Board, which is responsible for maintaining a sound system of internal controls to safeguard shareholders’ investments and the Group’s assets. Such a system is designed to reduce and manage the risk of failing to achieve the Group’s objectives. It is designed to provide a reasonable assurance against material misstatement or loss. The Board has considered the need for an internal audit function but has concluded that the internal control system in place is currently the most appropriate solution given the size and complexity of the Group. The Board revisits this decision periodically.
The Board is responsible for the identification and evaluation of major risks faced by the Group and for determining the appropriate course of action to manage those risks. The Company maintains a risk register which the Board considers regularly. The risk register assesses both the risks and the controls in place to prevent the risk crystallising as well as any mitigation which would exist should they materialise. A summary of the principal risks and uncertainties, together with the relevant mitigation can be found in within the latest Annual Report and Accounts on pages 18 and 19.
The Group takes a proactive approach to risk management which starts at the strategic level with the Group identifying areas of the law in which it will not operate. The Group then recruits to this risk profile. The recruitment process is controlled by a senior management team who are qualified and experienced solicitors with many years’ experience of recruiting consultants to Keystone. The Group focuses on attracting experienced and well qualified lawyers with a client following from highly respected law firms, thereby reducing the risk profile of the lawyer base.
As a law firm, Keystone is regulated by the Solicitors Regulatory Authority (“SRA”) as well as being subject to other legal regulation governing its industry and the economy as a whole (e.g. anti-money laundering legislation, data protection rules (“GDPR”) etc.). As such, the Group has a dedicated compliance department, led by the Group’s Compliance Officer and staffed by employed qualified solicitors, whose role it is to ensure compliance with all such regulation as well as handling any complaints or claims received from the Group’s clients. The structure of Keystone ensures that this department is wholly independent of the lawyers, whilst the “open door” collegiate culture of the Group ensures that lawyers are more than happy to seek support and guidance from the team where they identify issues of potential concern. This department reports to the Chief Executive who is fully appraised of any regulatory matters being handled, complaints/claims made as well as the status of these, and the Board receives regular updates as to the status of any significant regulatory matter, any claims made or complaints which the CEO believes may proceed to a claim.
The Group uses technology, with each new matter taken on being subjected to a risk questionnaire, as well as more traditional methods, such as file audits, to proactively monitor matters and actively engages with consultants to assess, understand and manage any risk that should arise. The Group’s standard terms of business, provided to each client at the start of each engagement, advises the clients of the Group’s complaints procedure; this procedure directs the clients directly to the compliance department. Furthermore, under the terms of the compliance agreement, which each consultant enters into with the Group, the consultants are required to report all risks, complaints and regulatory matters to the compliance function.
As the most significant risk for a law firm is associated with claims for professional negligence, one of the Group’s significant contracts (and, as such, an item which requires Board sign off) is the renewal of the professional indemnity insurance. This ensures that the Board is the body which is ultimately responsible for assessing the appropriateness of the level of cover which the Group holds.
The financial procedures and controls of the Group are under the stewardship of the Finance Director (see Directors’ biographies on page 13). These processes and controls are reviewed as part of the Group’s audit on an annual basis, which includes a specific SRA audit to ensure compliance with the SRA’s rules on client money, and the Group’s auditors meet with the Audit Committee of the Board on a bi-annual basis without the presence of the Finance Director.
COMPOSITION OF THE BOARD, ITS SUBCOMMITTEES AND ITS MEMBERS
The Board generally comprises five Directors, two Executives and three Non-executives, reflecting a blend of different experiences and backgrounds. Directors’ biographies, setting out their experience, skills and independence, are shown here www.keystonelaw-ir.co.uk/content/investors.board. The Board believes that the composition of the Board brings a desirable range of skills and experience in light of the Company’s challenges and opportunities whilst at the same time ensuring that no individual (or a small group of individuals) can dominate the Board’s decision making.
The Non-executive Directors are expected to devote such time as is necessary for the proper performance of their duties. It is anticipated that this will require them to spend a minimum of 24 days a year working for the Company. The Non-executive Directors meet during the year without the Executive Directors and provide effective balance and challenge. The Executive Directors are full time employees of the Company.
The Non-executive Directors keep their skill set up to date with a combination of attendance at CPD events and experience gained from other Board roles. The Executive Directors are employed full time in the Group and this is the best way of their keeping up to date. The Group’s Nominated Adviser and the Company Secretary ensure the Board is aware of any applicable regulatory changes. All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at the Group’s expense. In addition, the Directors have direct access to the advice and services of the Company Secretary and Finance Director.
The division of responsibilities between the Chairman and Chief Executive Officer has been agreed by the Board and is set out below.
ROLES OF THE CHAIRMAN AND CHIEF EXECUTIVE
The Chairman leads the Board ensuring its effectiveness and his role and responsibilities are clearly divided from those of the Chief Executive Officer. The Chairman:
The Chief Executive Officer has responsibility for all operational matters which include the implementation of strategy and policies approved by the Board. In addition, he has responsibility for managing the business of Keystone subject to the matters reserved for the Board. He has overall responsibility for the Group’s development and expenditure and delivering on the budget prepared by the Finance Director and approved by the Board.
MATTERS RESERVED FOR THE BOARD
The Board is responsible for reviewing, formulating and approving the Group’s strategy, budgets and corporate actions and overseeing the Group’s progress towards its goals. This is formally documented in a schedule of matters reserved for Board approval and includes:
BOARD DECISIONS AND ACTIVITY DURING THE YEAR
The Board has a schedule of regular business comprising all the major financial and operational matters of the Group. The Board has established a number of committees, the work of which is described below. The Board has ensured that all areas for which it is responsible are addressed and reviewed during the course of the year. The Chairman, aided by the Company Secretary, is responsible for ensuring the Directors receive accurate and timely information. The Company Secretary provides minutes of each meeting and every Director is aware of the right to have any concerns minuted.
In addition to the Board meetings, there is regular communication between Executive and Non-executive Directors, including where appropriate updates on matters requiring attention prior to the next scheduled Board meeting. It is the Board’s current practice that the Non-executive Directors meet periodically and at least annually, without the Executive Directors.
Board meetings are held monthly and arranged by the Company Secretary. Where the subjects to be discussed call for it, the Company Secretary arranges for or prepares suitable papers which are then circulated to the Directors in advance. Additional ad hoc meetings and committee meetings are called as necessary; for example, to approve the release of the Group’s Annual Report, once it has been approved in principle in substantially the final form.
At least annually, the Board will consider the Group’s strategy and annual budget.
There are currently no plans in place for evolution of the corporate governance framework in line with the Group’s plans for growth as the Board believes that the current structure of the Board is suitable for such growth plans in the short to medium term. However, the Board will keep this under regular review.
The table below shows the Directors’ attendance at scheduled meetings of the Board and its committees during the year:
(1) Peter Whiting resigned on 28 April 2021 but attended all meetings during the period whilst a Director.
The Disclosure Committee is available as needed to review how the Group should deal with price sensitive information and information that may be price sensitive information. The purpose of the Disclosure Committee is to provide a rapid response to the potentially urgent matter of required disclosures. All Board members are members of the Disclosure Committee as is the Company Secretary. The quorum of the Disclosure Committee is one of the Chief Executive Officer, the Finance Director, or the Company Secretary and any Non-executive Director.
The terms of reference are available on the Company’s website.
The Nomination Committee is available as needed to manage the process of appointing new Directors to the Board and to consider succession matters. The Committee is Chaired by Robin Williams and is comprised of James Knight and the Non-executive Directors.
Page last updated: 9 August 2021