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REVISED
MANUAL ON CORPORATE GOVERNANCE
MARCH 28, 2014
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TABLE OF CONTENTS
OBJECTIVE ---------------------------------------------------------------------------- 3
PLAN OF COMPLIANCE ----------------------------------------------------------- 3
BOARD GOVERNANCE ------------------------------------------------------------ 3
General Responsibility Of the Board ---------------------------------3
Duties and Functions of the Board ----------------------------------- 4
Specific Duties and Responsibilities of a Director--------------- 5
Qualifications of a Director ---------------------------------------------- 6
Disqualifications of a Director ------------------------------------------6
ACCOUNTABILITY AND AUDIT ----------------------------------------------- 8
THE BOARD COMMITTEES ----------------------------------------------------- 8
THE CORPORATE SECRETARY ----------------------------------------------- 12
THE COMPLIANCE OFFICER -------------------------------------------------- 13
DISCLOSURE AND TRANSPARENCY ---------------------------------------- 14
COMMUNICATION PROCESS -------------------------------------------------- 14
STOCKHOLDERS RIGHTS AND PROTECTION OF
MINORITY STOCKHOLDERS INTERESTS -------------------------------- 14
REVIEW OF THE MANUAL ------------------------------------------------------ 15
GOVERNANCE SELF-RATING SYSTEM ------------------------------------- 15
PENALTIES FORNON-COMPLIANCE WITHTHE MANUAL ------- 15
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VICTORIAS MILLING COMPANY, INC.
REVISED MANUAL ON CORPORATE GOVERNANCEOF
VICTORIAS MILLING COMPANY, INC.
The Board of Directors, Management and staff of Victorias Milling
Company, Inc. (VMC) hereby commit themselves to the principles of best
practices contained in this Manual, and acknowledge that the same shall be
their guide inthe attainment of corporate goals and objectives.
1. OBJECTIVE
This Manual shall institutionalize the principles of good corporate
governance in the entire VMC organization.
The VMC Board of Directors, Management, staff and shareholders believe
that good corporate governance is a necessary component of what constitutes
sound strategic management and will undertake every effort necessary to
create awareness and compliance with the same within the organization.
2. PLAN OF COMPLIANCE
Compliance with the principles of good corporate governance shall start with
and is primarily the responsibility of the Board of Directors.
It shall be the Boards responsibility to foster the long-term success of the
Corporation and secure its sustained competitiveness in a manner consistent with
its fiduciary responsibility, which it shall exercise in the best interest of the
Corporation, its shareholders and other stakeholders. The Board shall conduct
itself with utmost honesty and integrity in the discharge of its duties, functions and
responsibilities.
3. BOARD GOVERNANCE
3.1 THE BOARD OF DIRECTORS
3.1.1 General Responsibility
A directors office is one of trust and confidence. He shall act in a manner
characterized by transparency, accountability and fairness.
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The Board should formulate the corporations vision, mission,
strategic objectives, policies and procedures that shall guide its activities
and decisions, including the means to effectively monitor Managements
performance.
3.1.2 Duties and Functions
To ensure a high standard of best practice for the Corporation and its
stockholders, the Board shall: should conduct itself with honesty and integrity
in the performance of, among others, the following duties and functions:
a) Implement a process for the selection of directors, who can add value
and contribute independent judgment to the formulation of sound
corporate strategies and policies.
b) Appoint competent, professional, honest and highly-motivated
management officers and adopt an effective succession planning
program for Management.
c) Provide sound strategic policies and guidelines and establish
programs that can sustain its long-term viability and strength;
periodically evaluate and monitor the implementation of such policies
and strategies, including the business plans, operating budgets and
Managements overall performance.
d) Ensure the Corporations faithful compliance with all applicable laws,
regulations and best business practices.
e) Establish and maintain an investor relations program that will keep the
stockholders informed of important developments in the corporation.
f) Identify the sectors in the community in which the Corporation
operates or are directly affected by its operations, and formulate a
clear policy of accurate, timely and effective communication with
them.
g) Adopt a system of check and balance within the Board. It shall
conduct a regular review of the effectiveness of such system to ensure
the integrity of the decision-making and reporting processes at all
times. It shall also conduct a continuing review of the Corporations
internal control system in order to maintain its adequacy and
effectiveness.
h) Identify key risk areas and performance indicators and monitor these
factors with due diligence to enable the Corporation to anticipate and
prepare for possible threats to its operational and financial viability;
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i) Formulate and implement policies and procedures that would ensure
the integrity and transparency of related party transactions;
j) Constitute an Audit Committee and such other committees it deems
necessary to assist the Board in the performance of its duties and
responsibilities;
k) Establish and maintain an alternative dispute resolution system in the
Corporation;
l) Meet at such times or frequency as may be needed. The minutes of
such meetings should be duly recorded. Independent views during
Board meetings should be encouraged and given due consideration;
m) Keep the activities and decisions of the Board within its authority
under the articles of incorporation and by-laws, and in accordance
with existing laws, rules and regulations;
n) Appoint a Compliance Officer. In the absence of such appointment,
the Corporate Secretary, preferably a lawyer, shall act as Compliance
Officer.
3.1.3 Specific Duties and Responsibilities of a Director
A directors office is one of trust and confidence. A director should
act in the best interest of the Corporation in a manner characterized by
transparency, accountability and fairness. He should also exercise
leadership, prudence and integrity in directing the Corporation towards
sustained progress.
A director should observe the following norms of conduct:
a. Conduct fair business transactions with the Corporation, and ensure
that his personal interest does not conflict with the interests of the
Corporation.
b. Devote the time and attention necessary to properly and effectively
perform his duties and responsibilities.
c. Act judiciously.
d. Exercise independent judgment.
e. Have a working knowledge of the statutory and regulatory
requirements that affect the Corporation, including its articles of
incorporation and by-laws, the rules and regulations of the
Commission and, where applicable, the requirements of relevant
regulatory agencies.
f. Observe confidentiality.
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3.1.4 Qualifications of a Director
In addition to the qualifications for membership in the Board provided
in the Corporation Code, Securities Regulation Code and other relevant laws,
the following shall also be the qualifications of the VMC Board of
Directors:
He must be a holder of at least one (1) share of stock of
the Corporation;
He shall be at least a college graduate or have at least ten
(10) years experience in managing a business to
substitute for such formal education;
He shall have proven to possess integrity and probity; and
He shall be assiduous.
3.1.5 Disqualifications of a Director
I. Permanent Disqualification
The following shall be grounds for the permanent disqualification of a
director:
(i) Any person convicted by final judgment or order by a competent
judicial or administrative body of any crime that (a) involves the
purchase or sale of securities, as defined in the Securities
Regulation Code; (b) arises out of the persons conduct as an
underwriter, broker, dealer, investment adviser, principal,
distributor, mutual fund dealer, futures commission merchant,
commodity trading advisor, or floor broker, or (c) arises out of his
fiduciary relationship with a bank, quasi-bank, trust company,
investment house or as an affiliated person of any of them;
(ii) Any person who, by reason of misconduct, after hearing, is
permanently enjoined by a final judgment or order of the
Commission or any court or administrative body of competent
jurisdiction from (a) acting as underwriter, broker, dealer,
investment adviser, principal distributor, mutual fund dealer,
futures commission merchant, commodity trading advisor, or floor
broker; (b) acting as director or officer of a bank, quasi-bank, trust
company, investment house, or investment company; (c) engaging
in or continuing any conduct or practice in any of the capacities
mentioned in sub-paragraphs (a) and (b) above, or wilfully violating
the laws that govern securities and banking activities.
The disqualification shall also apply if such person is currently the
subject of an order of the Commission or any court or
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administrative body denying, revoking or suspending any
registration, license or permit issued to him under the Corporation
Code, Securities Regulation Code or any other law administered by
the Commission or Bangko Sentral ng Pilipinas (BSP), or under any
rule or regulation issued by the Commission or BSP, or has
otherwise been restrained to engage in any activity involving
securities and banking; or such person is currently the subject of
an effective order of a self-regulatory organization suspending or
expelling him from membership, participation or association with a
member or participant of the organization;
(iii) Any person convicted by final judgment or order by a court or
competent administrative body of an offense involving moral
turpitude, fraud, embezzlement, theft, estafa, counterfeiting,
misappropriation, forgery, bribery, false affirmation, perjury or
other fraudulent acts;
(iv) Any person who has been adjudged by final judgment or order of
the Commission, court, or competent administrative body have
wilfully violated, or wilfully aided, abetted, counselled, induced or
procured the violation of any provision of the Corporation
Code, Securities Regulation Code or any other law administered by
the Commission or BSP, or any of its rule, regulation or order;
(v) Any person judicially declared as insolvent;
(vi) Any person found guilty by final judgment or order of a foreign
court or equivalent financial regulatory authority of acts, violations
or misconduct similar to any of the acts, violations or misconduct
enumerated in sub-paragraphs (1) to (v) above;
(vii) Conviction by final judgment of an offense punishable by
imprisonment for more than six (6) years,, or a violation of the
Corporation Code committed within five (5) years prior to the date
of his election or appointment.
II. Temporary Disqualification
The Board may provide for the temporary disqualification of a director
for any of the following reasons:
(i) Refusal to comply with the disclosure requirements of the
Securities Regulation Code and its Implementing Rules and
Regulations. The disqualification shall be in effect as long as the
refusal persists;
(ii) Absence in more than fifty (50) percent of all regular and special
meetings of the Board during his incumbency, or any twelve (12)
month period during the said incumbency, unless the absence is
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due to illness, death in the immediate family or serious accident.
The disqualification shall apply for purposes of the succeeding
election;
(iii) Dismissal or termination for cause as director of any corporation
covered by this Code. The disqualification shall be in effect until
he has cleared himself from any involvement in the cause that gave
rise to his dismissal or termination;
(iv) Under preventive suspension by the corporation;
(v) In direct competition with the corporation, including any person
who is a member, stockholder holding more than 5% of the
outstanding shares, director, officer or of related interest with any
person, association, corporation, partnership, or entity which is in
direct competition with the Corporation, or who is engaged in any
business, activity or transaction that is inimical to the interests of
the Corporation, as may be determined by the Board of Directors.
(vi) If the beneficial equity ownership of an independent director in the
corporation or its subsidiaries and affiliated exceeds two percent of
its subscribed capital stock. The disqualification shall be lifted if
the limit is later complied with;
A temporarily disqualified director shall, within sixty (60) business
days from such disqualification, take the appropriate action to remedy or
correct the disqualification. If he fails or refuses to do so for unjustified
reasons, the disqualification shall become permanent.
Any independent director who becomes an officer, employee or
consultant of the Corporation shall automatically be disqualified from being
an independent director.
4. ACCOUNTABILITY AND AUDIT
The Board is primarily accountable to the stockholders. It shall
provide them with a balanced and comprehensible assessment of the
corporations performance, position and prospects on a quarterly basis,
including interim and other reports that could adversely affect the business,
as well as reports to regulators that are required by law.
5. BOARD COMMITTEES
The following committees have been created by the Board in order
to assi st i t i n t he perf ormance of i ts duti es and i n compliance
with the principles of good corporate governance.
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The Board may create other committees or sub-committees as it
may deem necessary. Each committee shall have its Charter. They shall
meet, pass upon and approve matters del egated to i t by the
Board as prescribed by the By-laws and as defined by their Charters.
The Committees and the Sub-committees shall maintain the
minutes of their meetings and provide copies thereof to the Corporate
Secretaries.
The different committees shall be composed of the members of the
Board and may request the attendance of resource person/s who may or
may not be members of the Board.
5.1 Executive Committee
The Board shall create an Executive Committee composed of at least
seven (7) members. The committee shall function on behalf of the Board
during intervals between its meetings, as deemed necessary.
It shall approve capital expenditures amounting to Five Million Pesos
(Php5,000,000) and above, but not exceeding Twenty Five Million Pesos
(Php25,000,000).
It shall also approve any and all asset disposals, sale or similar
dispositions and shall perform oversight functions on the strategic
initiatives identified by the Board.
5.2 Audit Committee
The Audit Committee shall be composed of at least three (3) five (5)
members who shall preferably have accounting and finance
backgrounds, one shall be an independent director and another with
audit experience. The chairperson of the Audit Committee should be an
independent director. The committee shall have the following
functions:
a) Assist the Board in the performance of its oversight responsibility for
the financial reporting process, system of internal control, audit
process, and monitoring of compliance with applicable laws, rules and
regulations;
b) Provide oversight over Managements activities in managing credit,
market, liquidity, operational, legal and other risks of the corporation.
This function shall include regular receipt from Management of
information on risk exposures and risk management activities;
c) Perform oversight functions over the corporations internal and
external auditors. It should ensure that the internal and external
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auditors act independently from each other, and that both auditors are
given unrestricted access to all records, properties and personnel to
enable them to perform their respective audit functions;
d) Review the annual internal audit plan to ensure its conformity with the
objectives of the corporation. The plan shall include the audit scope,
resources and budget necessary to implement it;
e) Prior to the commencement of the audit, discuss with the external
auditor the nature, scope and expenses of the audit, and ensure
proper coordination if more than one audit firm is involved in the
activity to secure proper coverage and minimize duplication of efforts;
f) Organize an internal audit group, and consider the appointment of an
independent internal auditor and the terms and conditions of its
engagement and removal;
g) Monitor and evaluate the adequacy and effectiveness of the
corporations internal control system, including financial reporting
control and information technology security;
h) Review the reports submitted by the internal and external auditors;
i) Review the quarterly, half-year and annual financial statements before
their submission to the Board, with particular focus on the following
matters:
o Any change/s in accounting policies and practices
o Major judgmental areas
o Significant adjustments resulting from the audit
o Going concern assumptions
o Compliance with accounting standards
o Compliance with tax, legal and regulatory requirements.
j) Coordinate, monitor and facilitate compliance with laws, rules and
regulations;
k) Evaluate and determine the non-audit work, if any, of the external
auditor, and review periodically the non-audit fees paid to the external
auditor in relation to their significance to the total annual income of
the external auditor and to the corporations overall consultancy
expenses. The committee shall disallow any non-audit work that will
conflict with his duties as an external auditor or may pose a threat to
his independence. The non-audit work, if allowed, should be
disclosed in the corporations annual report;
l) Establish and identify the reporting line of the Internal Auditor to
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enable him to properly fulfil his duties and responsibilities. He shall
functionally report directly to the Audit Committee.
The Audit Committee shall ensure that, in the performance of the work
of the Internal Auditor, he shall be free from interference by outside
parties.
For Philippine branches or subsidiaries of foreign corporations
covered by this Code, their Internal Auditor should be independent of
the Philippine operations and should report to the regional or
corporate headquarters.
5.3 Nomination, Corporate Governance and Compliance Committee
The Nominations, Corporate Governance and Compliance
Committee shal l be composed of at least five (5) members.
The Committee shall have the following authority and responsibilities:
Nomination
To review and evaluate the qualifications of all persons nominated to the
Board and other appointments that require Board approval; and
To assess the effectiveness of the Boards processes and procedures in the
election and/or replacement of directors, pursuant to applicable laws, By-
laws and the Approved Rehabilitation Plan.
Corporate Governance
To ensure that the Companys policies, rules and procedures are in
accordance with the principles of best practices and good corporate
governance.
Compliance
To monitor, oversee and review compliance with the provisions of the
Manual, laws, rules and regulations by the Cor porat i on, t he directors,
officers, consultants and other workers.
5.4 Legal Committee
The Board shall be composed of at least three (3) members. It shall
monitor and report to the Board, the status of the Companys cases. It
shall also monitor and conduct review on the compliance of the
Companys service providers or suppliers with laws and regulations.
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5.5 Budget and Finance Committee
The Budget and Finance Committee shall be composed of at least
five (5) members.
The Finance and Budget Committee shall provide assistance to the
Board of Directors in fulfilling its responsibility to the shareholders in
respect to the policies and practices that relate to the management of the
financial and budgetary affairs of the Company.
5.6 Risk Committee
The Risk Committee shall be composed of at l east f i ve (5)
members.
The purpose of the Committee is to assist the Board in
fulfilling its risk management and oversight responsibilities in law
and more importantly, to its shareholders, creditors and other
stakeholders. The Committees role is primarily oversight,
recognizing that management is responsible for executing the
Companys risk management framework and policies.
5.7 HR, Compensation and Remuneration Committee
The Human Resource, Compensation and Remuneration
Committee shall be composed of at least five (5) members.
The purpose of the HRCR Committee is to assist the Board in
fulfilling its human resources management and oversight responsibilities
in law and more importantly, to its shareholders, creditors and other
stakeholders.
6. THE CORPORATE SECRETARY
The Corporate Secretary, who should be a Filipino citizen and a
resident of the Philippines, is an officer of the corporation. He should
(i) Be responsible for the recording and safekeeping of the minutes of
the meetings of the Board and its committees, as well as the
preservation of the integrity thereof, including other official records
of the corporation;
(ii) He shall keep record books showing the details required by law
with respect to the stock certificates of the corporation;
(iii) He shall keep the corporate seal and affix it to all papers and
documents requiring a seal, and attest by his signature all
corporate documents requiring the same;
(iv) He shall serve notices of the corporation required by law or its By-
laws;
(v) He shall act as inspector at the election of directors and as such,
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determine the number of shares of stock outstanding and entitled
to vote, the shares of stock represented at the meeting, the
existence of a quorum, the validity and effects of proxies, and
receive votes, ballots or consents, hear and determine questions in
connection with the right to vote, count and tabulate all votes,
determine the result, and do such acts as are proper to conduct the
election;
(vi) Be loyal to the mission, vision and objectives of the corporation;
(vii) Work fairly and objectively with the Board, Management and
stockholders;
(viii) Have appropriate administrative and interpersonal skills;
(ix) If he is not at the same time the corporations legal counsel, be
aware of the laws, rules and regulations necessary in the
performance of his duties and responsibilities;
(x) Have a working knowledge of the operations of the corporation;
(xi) Inform the members of the Board, in accordance with the by-laws,
of the agenda of their meetings and ensure that the members have
before them accurate information that will enable them to arrive at
intelligent decisions on matters that require their approval;
(xii) Attend all Board meetings, except when justifiable causes, such as,
illness, death in the immediate family and serious accidents,
prevent him from doing so;
(xiii) Ensure that all Board procedures, rules and regulations are strictly
followed by the members; and
(xiv) If he is also the Compliance Officer, perform all the duties and
responsibilities of the said officer as provided for in this Code.
7. THE COMPLIANCE OFFICER
The Board shall appoint a Compliance Officer, who shall report to the
Chairman of the Nomination, Corporate Governance and Compliance
Committee.
He shall perform the following duties:
a. Monitor compliance by the corporation with the provisions and
requirements of this Manual, the Revised Code of Corporate
Governance and the rules and regulations of regulatory agencies. In
case any violations are found, he should report the same to the Board
and recommend the imposition of appropriate disciplinary action on
the responsible parties and the adoption of measures to prevent a
repetition of the violation;
b. Appear before the Securities and Exchange Commission upon
summons, in relation to compliance with this Manual and the Revised
Code of Corporate Governance;
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c. Determine violation/s of the Manual, the Revised Code of Corporate
Governance and the regulations of regulatory agencies and
recommend penalty for violation thereof for further review and
approval of the Board.
8. DISCLOSURE AND TRANSPARENCY
The Board shall commit at all times to fully disclose material
information or anything that could potentially affect share price. Such
information shall include among others, the earnings results, off balance
sheet transactions, board changes, related party transactions,
shareholdings of directors and changes in ownership. It shall cause the
filing with the appropriate Government agencies of all required information
and reports.
9. COMMUNICATION PROCESS
This Manual shall be available for inspection by any stockholder of the
Corporation at reasonable hours on business days.
The Board of Directors and Management are tasked to ensure the
thorough dissemination of this Manual to all workers and to likewise
enjoin compliance therewith.
10. STOCKHOLDERS RIGHTS AND PROTECTION OF
MINORITY STOCKHOLDERS INTERESTS
The Board shall respect the rights of the stockholders as provided for
in the Corporation Code and as allowed by its Approved Rehabilitation Plan.
The Board shall be transparent and fair in the conduct of the annual
and special stockholders meetings of the corporation. The stockholders
shall be encouraged to personally attend such meetings. If they cannot
attend, they should be apprised ahead of time of their right to appoint a
proxy. Subject to the requirements of the By-laws, the exercise of that right
shall not be unduly restricted and any doubt about the validity of a proxy
should be resolved in the stockholders favor.
It is the duty of the Board to promote the rights of the stockholders,
remove impediments to the exercise of those rights and provide an adequate
avenue for them to seek timely redress for breach of their rights.
The Board shall take the appropriate steps to remove excessive or
unnecessary costs and other administrative impediments to the
stockholders meaningful participation in meetings, whether in person or by
proxy. Accurate and timely information shall be made available to the