Good Corporate Governance Implementation

abt_corpgorv

PT Surya Esa Perkasa Tbk. (The Company) implements good corporate governance as a principle of all its business, strategic policy, and operational conducts. By implementing the highest standard of GCG, the Company will not fail to comply with regulations and quality standards normally applied to Indonesia’s limited liabilities companies, the oil and gas industry and the Indonesia’s stock market. Moreover, the Company always adheres to international standards and quality which include occupational health and safety, the environment, and corporate social responsibility.

In implementing GCG, the Company refers to the five main principles of GCG, namely transparency, accountability, responsibility, independency, and fairness.

Transparency
The Company provides financial statements, annual reports and other relevant information, in an accurate, clear, and prompt way to both the shareholders and stakeholders.

Accountability
In order to put forward conduct of living accountability, the Company ensures that all decisions on strategic actions will be accounted for and documented in the performance assessment, accounting and internal control reports.

Responsibility
The Company fulfills its responsibility by referring to principles of adherence to the prevailing regulations, in order to deliver more attention to the local community and environment.

Independence
The Company carries out all of its activities independently without any force or pressure from any other parties

Fairness
The Company exercises equal conducts in meeting each of stakeholders’ interest.

The Company believes that its efforts of fulfilling these principles constitute sturdy foundation to creation of longterm value for corporate sustainability. The Company also refers to the Law No. 40 Year of 2007 concerning Limited Liability Companies and the Company’s Articles of Association. This Law specifies provisions on GCG implementation within companies, especially to the extent of GCG structure, and serves as a guideline for implementation of Internal Control and Risk Management systems.

General Meeting of Shareholders

By virtue of the Company’s Articles of Association, General Meeting of Shareholders consists of Annual General Meeting of Shareholders and Extraordinary General Meeting of Shareholders. Annual General Meeting of Shareholders shall be held in 6 (six) months following the latest book year while Extraordinary General Meeting of Shareholders may be held any time as necessary.

Board of Commissioners

The structure of the Board of Commissioners adheres to the requirements of the capital market regulations and the Company’s Articles of Association. It is stated that the Board of Commissioners’ shall consist of at least 2 (two) persons, including an Independent Commissioner. The Board of Commissioners is appointed by the General Meeting of Shareholders for a period of five years, starting from the appointment and until the closing of General Meeting of Shareholders the next five years without prejudice the rights of the General Meeting of Shareholders to dismissal of any members of Board of Commissioners at any time. Details on duties and authority, meeting arrangement, remuneration information, competence enhancement program, and assessment applied to the Board of Commissioners performance are as follows:

Duties and Authorities

The Board of Commissioners is accountable for supervising the Company’s management and delivering of advice to the Board of Directors. The Board of Commissioners duties and authorities, based on the Company’s Articles of Association are as follows :

  • The Board of Commissioners conducts supervisory work on the Company’s policy and management either in terms of corporate management or Company business and gives advice to the Board of Directors;
  • The Board of Commissioners at any time during the Company’s office hours, may enter any buildings or premises used and under control of the Company and reserves the rights to examine all book keeping, letters and other instruments of proofs, makes necessary checks on cash or other related matters, and is authorized to gain access to any actions undertaken by the Board of Directors;
  • While performing duties, the Board of Commissioners is entitled to obtain from the Board of Directors or each member of The Board of Directors all information required by the Board of Commissioners;
  • The Board of Commissioners Meeting may at any time temporarily discharge one or more members of Board of Directors in the event that any member of Board of Directors has been found to be in breach the Company’s Articles of Association and/orto any other prevailing laws, or in a way, considered to be unproductive to the Company’s goals, or ignorant of his/her obligations;
  • Such temporary dismissal shall be informed to the affected Director along with the causes thereof;
  • Within the period of 45 (forty-five) days following such temporary dismissal, the Board of Commissioners shall summons Extraordinary General Meeting of Shareholders which will decide if the affected Director shall receive final discharge or otherwise resume his/ her original position while the affected Director shall be given the chance to be present for explanation;
  • The meeting as mentioned in point 4 of this article shall be chaired by the President Commissioner and when In the event that he/ she cannot be present, reason which is not necessarily proven to the other parties, then the General Meeting of Shareholders shall be chaired by another member of Board of Commissioners appointed by the General Meeting of Shareholders. Summons to such General Meeting of Shareholders shall made in accordance to the provision of Article 10;
  • In the event that no such General Meeting of Shareholders is summonsed within the period of 45 (forty-five) days following the temporary dismissal, then the dismissal shall be void and the affected Director reserves the right to resume his/her original position;
  • In the event that all the members of Board of Directors are temporarily dismissed and consequently the Directors positions are left vacant, then the Board of Commissioner shall temporarily control the Company’s management, and under such circumstance, the Board of Commissioners Meeting is authorized to delegate temporary power to one or more members of Board of Commissioners’ under collective responsibility, one and another, in compliance to provision of Point 6 Article 18.

Board of Directors

The Board of Directors is the Company’s internal organ which is fully accountable for collegial management of the Company. Each of the Board of Directors is in charged of their respective duty and role under the coordination of President Director. Each of the Directors decisions shall be under the collective responsibility of the Board of Directors while final decision shall be in the hand of the President Director as primus interpares. The Board of Directors is appointed by the General Meeting of Shareholders for a period following such appointment up to the closing of Annual General Meeting of Shareholders in the next five year without prejudice to the rights of General Meeting of Shareholders to discharge any of the Board of Directors at any time. Information and Amount of Remuneration Disclosure of the Board of Directors remuneration refers to the Company’s principle of transparency. Procedure for Directors remuneration confirmation by proposing calculation and amount thereof to the General Meeting of shareholders.

A. Board of Directors
The Board of Directors is the Company’s internal organ which is fully accountable for collegial management of the Company. Each of the Board of Directors is in charged of their respective duty and role under the coordination of President Director. Each of the Directors’ decisions shall be under the collective responsibility of the Board of Directors while final decision shall be in the hand of the President Director as primus interpares. The Board of Directors is appointed by the General Meeting of Shareholders for a period following such appointment up to the closing of Annual General Meeting of Shareholders in the next five year without prejudice to the rights of General Meeting of Shareholders to discharge any of the Board of Directors at any time.

B. Duties and Authorities
The Board of Directors undertakes any activities related to management of the Company. By virtue of the Company’s Articles of Association, the Board of Directors’ duties and authorities are as follows:

  1. The Board of Directors reserve the rights to represent the Company in or outside the court for matters and any issues; bind the Company with other parties and vice versa; and conduct all activities with regards to either management or ownership of the Company, under the following limitations for which prior approval of the Board of Commissioners are required:
    1. Borrowing or lending cash on behalf of the Company (excluding withdrawal of the Company’s cash fom any banks) amount which exceeds the total US$ 50,000,000 (fifty million United States Dolar).
    2. Establishment of a business entity or involvement in any other domestic or overseas companies.
    3. Signing of any agreement or contract in an amount of exceeding the total of US$ 50,000,000 (fifty thousand United States Dollar).
  2. Exercising any legal action of transferring, releasing of rights or placing warranty in an amount exceeding 50% (fifty-percent) of the Company’s total assets in a book year, either in a single or multiple independent or interrelated transactions upon which prior approval shall be required General Meeting of Shareholdersattended or represented by shareholders who control 3/4 (three fourth) of total shareholding under full votes of the meeting attendees pursuant to the prevailing capital market act.
  3. The President Director reserves the rights and is authorized to act for and on behalf of the Board of Directors. In the event that the President Director cannot be present for any reasons, for which no proof to any third parties is necessary, then Vice President Director reserves the rights and is authorized to act for and on behalf of the Board of Directors to represent the Company. In the event that the President Director and/or Vice President Director cannot be present for any reasons, for which no proof to any third parties is necessary, then one of other Directors reserves the rights and is authorized to act for and on behalf of the Board of Directors to represent the Company.
  4. Distribution of each of the Board of Directors’ duties and authorities shall be confirmed within the General Meeting of Shareholders. In the event that no such distribution has been confirmed within the General Meeting of Shareholders, than such distribution shall be confirmed under the Board of Directors’ decision.
  5. Without prejudice to the Board of Directors’ accountability, the Board of Directors may issue a written proxy to one or more persons to act for and on behalf of the Company to exercise certain legal representation on issues specified within such proxy.
  6. In any circumstances in which the Company is engaged in any interest which is in conflict with the interest of any of the Board of Directors member, then the Company shall be represented by another member of Directors, while in the event that the Company is engaged in any interest which is in conflict with the interest of all of the members of the Board of Directors, then the Company shall be represented by the Board of Commissioners, one and another, without prejudice to the provision of Point 6 of this Article.

Scope of Work and Responsibilities of Board of Directors

President Director
The President Director’s scope of work and responsibility includes management of the Company in the course of its strategic vision implementation and fulfillment the said vision. In addition to that, the President Director is responsible for establishment of a structure and system which insures that the Company is capable of operating in a smooth way as well as growing in a sustainable manner.

Vice President Director
The Vice President Director’s scope of work and responsibility includes the Company’s day-to-day operational management as dictated by the Company’s goals and objectives; and implementation of the Company’s policies, plans, principles, values, strategies, goals and performance targets confirmed by the Meeting of Board of Directors, approved and evaluated by the Board of Commissioners.

Business Development Director
The Business Development Director’s scope of work and responsibility include building good relations with customers, maintaining sustainable relations with business partners and exploring business development adjusted to the Company’s business objectives.

Finance Director
The Finance Director scope of work and responsibility include implementation of corporate functions with regards to the Company’s finance directorate. The Director of Finance is accountable for good operation of finance function in accordance to the prevailing requirements and assurance of good control on subsidiary’s investment activities.

Technical Director
The Technical Director’s scope of work and responsibility include operational management of the Company’s LPG plants; implementation of good operation management; assurance of good, sustainable and environment friendly operational performance; and assurance that all of the Company’s operation activities comply with aspects of occupational health and safety.

Corporate Secretary

The Corporate Secretary serves as a liaison officer who maintains good relations with the stock market institution, shareholders, investors and other stakeholders. The Corporate Secretary is also accountable for assurance of the Company’s compliance to the stock market regulations and arrangement of Board of Commissioners’ and Directors’ meetings

Duties and Authorities
The Corporate Secretary’s Duties and Authorities include:

  1. Assisting the President Director, the Board of Directors and Board of Commissioners in complying with capital market requirements, Indonesia’s Stock Exchange regulations, corporate laws and the Company’s Articles of Association.
  2. Taking an active role in enforcing the highest standard or GCG principles.
  3. Organizing and coordinating the General Meeting of Shareholders, the Board of Directors’ Meetings and other Company’s meetings.
  4. Representing the Company in dissemination of official information on the Company’s activity updates to the public and related parties.

Audit Committee

The Audit Committee is responsible for monitoring of the Company’s financial statement process. In the implementation of the Audit Committee has the following duties and authorities as follows :

Duties

  • Conducting review onfinancial information to be issued by the Underwriter or Public Listing Companies to the public and/or the authority including financial statement, financial Projection and other reports related to the Company’s financial information.
  • Conducting review on the Company’s compliance to the prevailing regulations with regards to the Company’s business activities.
  • Delivering independent opinion in the emergence of conflicting opinion between the Company and the appointed on the accountant service.
  • Delivering recommendation to the Board of Commissioners on appointment of accountant on the grounds of independence, scope, assignment and fee.
  • Conducting review on audit result of the internal audit and monitoring of the the Board of Directors follow up on the findings of the internal audit.
  • Conducting review on implementation of risk management undertaken by the Board of Directors in the even that no risk monitoring body is available under the Board of Commissioners.
  • Conducting review on objections on the Company’s accounting and financial report process.
  • Reviewing and delivering advice to the Board of Commissioners on potential emergence of conflict of interest within the Company.
  • Keeping the Company’s documents ,data and information confidential.

Authorities
The Audit Committee is responsible for :

  • Gaining necessary access to the Company’s documents, data and information on employees, fund, assets and resources.
  • Communicating directly with the employees, the Board of Directors and any parties running the internal audit, risk management and accounting functions in lieu of Audit Committee’s durties and authorities.
  • Involving any independent party other than member of Audit Committee required to assist in their job (if necessary).
  • Exercising any other authoritie delegated by the Board of Commissioners.

Member’s Independence
Based on regulation of Indonesia Financial Service Authority on Audit Committee, the Audit Committee shall consist of three members. Audit Committee shal consist of an Independent Commissioner serving as Chairman, and two other independen members with competence in accounting and finance.

Head of Internal Audit

According to the provisions contained in the Internal Audit Charter, the structure and the position of Internal Audit Units in the Company are as follows:

  1. The Internal Audit Unit is led by a head of the Internal Audit Unit. In terms of the Internal Audit Unit was composed of one internal auditor internal auditor, it is acting as the head of Internal Audit Unit;
  2. The head of the Internal Audit Unit are appointed and dismissed by the President Director upon the approval of the Board of Commissioners;
  3. President Director can dismiss the head of the Internal Audit Unit, after obtaining the approval of the Commissioners, if the head of the Internal Audit Units do not meet the requirements of the Internal Audit Unit as an auditor as provided for in this regulation and/or fails or is not qualified to perform the task;
  4. The head of the Internal Audit Unit is responsible to the President Director.
  5. In the implementation of the Internal Audit Unit’s daily activities, the President Director appoints the Executive Director and/or VP of Finance to coordinate & monitoring execution of daily tasks of Internal Audit Unit;
  6. The Internal Audit Unit staff responsible directly to the head of Internal Audit Unit.

Duties, Responsibility and Authorities
According to the Internal Audit Charter, the scope of the duties and responsibilities of the Internal Audit of the Company are set out as follows:

  1. Compile and execute the annual Internal Audit plan.
  2. Test and evaluate the implementation of interen control and risk management systems in accordance with Company policy.
  3. Controling and assessment of efficiency and effectiveness in the areas of finance, accounting, operations, human resources, information technology, marketing and other activities.
  4. Give advice on improvements and objective information about the activities that are checked at all levels of management.
  5. Create reports on audit results and submit these reports to the President Director and Board of Commissioners.
  6. Monitor, analyze and report on the implementation of the follow- up to the improvements that have been suggested.
  7. Working closely with the Audit Committee.
  8. Compile the program to evaluate the quality of the internal audit activity does.
  9. Perform special inspections where necessary.

Internal audit is authorized to:

  1. Access all the relevant information about the Company related duties and functions.
  2. Communicate directly with the Board of Directors, Board of Commissioners, and/or the Audit Committee and a member of the Board of Directors, Board of Commissioners, and/or the Audit Committee.
  3. Hold meetings at regular intervals and incidental to the Board of Directors, Board of Commissioners, and/or the Audit Committee.
  4. Coordination activities with the activities of the external auditor.

Independence
According to the Charter of the Internal Audit, the auditor who sits in the Internal Audit Unit are prohibited from remaining assignments and positions as auditors and implementers from all forms of implementation of the operational activities of the Company and the Subsidiary Company.

Internal Control System

With regards to implementation of GCG, the Company applies Internal Control System based on transparency, accountability, responsibility, independency and fairness principles. The Company’s Internal Control System was developed by actively involving close supervision function within the Company’s top management level.

In addition, the Internal Audit Unit in the Company, compliance with the duties and responsibilities, conduct an examination and assessment of the efficiency and effectiveness in the field of finance and accounting, as well as implementing the rotation of the audit in order to review the design and implementation of internal controls that have been carried out by each Department in the Company. In addition, the Internal Audit Unit also gives advice on the repair and objective information about the activities that are checked at all levels of management.

Evaluation on Effectiveness of Internal Control System

Result of evaluation on implementation of internal control system constitutes one of bases for the Management evaluation on effectiveness of said internal control system. Such result of evaluation can be benefitted to improve the Company’s management system and policy allowing the Company to run its operation in a more effective way. The Internal Audit Unit has the main responsibility to provide assurance of the good coordination between the functions of the control in the Company so that it can run effectively.

1. Risk Management
Risk Management serves as a crucial pillar with regards to GCG. Risk Management shall be applied not merely for compliance reason, but for preventing conditions that potentially deteriorate the Company performance and for preparation of mitigation thereof as well. While running the business, the Company is exposed to a variety or risks, namely Company’s internal risk which takes the form of business activities risk and external risks which include Indonesian social and political situation and risks related to investment on shares. The Company is also a equipped with corporate risk management which focuses on assurance of availability of sufficient financial resources for business operation and development, risk management for foreign exchange, rate of interest and liquidity. The followings are material business risks which may affect the Company’s business activities.

  • Supply of natural gas raw material
    The Company is highly dependent on supply of raw material from Pertamina EP. Interruption in supply of raw material will affect the Company’s performance, financial condition and business sustainability.
  • Government Policy
    The Government policy on convertion of kerosene LPG to another alternative source will be a risk. Changes of policy and denial of exploration permit may affect the Company’s business sustainability.
  • Competitian and New Competitors
    Despite the fact that competition in LPG industry is relatively low, the government’s policy on coversion of kerosene to LPG can potentially invite new competitor in LPG industry.
  • Product Substitution
    In spite of the fact that no substitute for LPG which is the Company’s main product presence of new energy source is possible.
  • Marketing
    Marketing risk is considered to be low due to Pertamina support as main buyer of the plant’s main produk namely LPG as indicated in the LPG trading contract.
  • Fire
    Production process at the LPG Plants is prone to fire. Therefore, within the LPG plant vicinity smoking and possession or ligher is not allowed. Despite the fact that the Company is covered with insurance scheme under coverage value adjusted to the nature of industry, in when the Company is expose to fire, it is unlikely to resume normal operation in short time which in turn will affect the Company’s income sustainability.
  • Human Resources
    LPG Plant operation which involves integrated machineries require qualified and experienced human resources.Absence of qualified human resources may affect the LPG plant operation and may in turn affect the Company’s overall performance.
  • Natural Disaster
    Natural disasters such as earthquake and mud flood resulting from gas well explosion that may happen in some areas in Indonesia, including the Company’s operation area, may affect the Company’s business activities which in turn affect production process, sales and net profit.

2. Indonesia’s Social and Political Risk:

  • Indonesia’s social and political instability may negatively impact the national economic which in turn will leave material negative effect to the Copany’s business, finance and prospect.
  • Development of regional autonomy may potentially create unpredictable business atmosphere which will become a burden to the Company.
  • Undergrading of Indonesia’s credit rank and corporate rank may materially and negatively affect the Company in general and share market price in particular.

3. Risk on Investment to The Company’s Shares:

  • The Company’s share price may fluctuate in the future
  • Future sales of the Company’s shares may negatively affect the Company’s share price. In anticipation to risks exposed to the Company, the Company has prepared a mitigation model of risk management system and undertaken the following steps:
  • Integrated anticipation on the Company’s strategy and plan, especially in terms of financial and equity risk management;
  • Management of foreign currency exposure by matching, whenever possible, receivables and payables on each individual currency;
  • Placement of bank balance and time deposit in trusted financial institutions.
  • Arrangement of receivables with trusted and related parties;
  • Maintenance of capital, bank facilities and actual cash flow adequacy;
  • Retention of sufficient fund for purposes sustainable working capital requirement.

4. Corporate Financial Risk Management

  • Foreign Exchange Risk Management of the Company is exposed to the effect of fluctuating foreign exchange rate especially due to the transactions denominated in foreign exchange such as sales, and purchases from inventories and loans. The Company anticipates the risk by managing exposure of foreign exchange by whenever possible matching receivables and payables on each individual currency.
  • Credit Risk Management Credit risk refers to a situation in which a business partner fails to meet his/her contractual obligations resulting in loss to the Company. The Company anticipates the risk by placing bank balance and time deposite in reliable and trusted financial institution. Arrangement of receivables is made with trusted and related parties. Value of financial assets within the financial statement after allowed for loss represents the Company’s exposure to credit risk.
  • Liquidity Risk Management Main responsibility on liquidity risk management lies in the hand of the Board of Directors who has originally established framework of liquidity risk management adjusted to requirement of the Company’s management of liquidity, short-term financing, middle-term financing and long term financing. The Company anticipates such risk by maintaining inventory adequacy and continually monitor bank facility’s outstanding.