Leadership & governance
We are committed to ensuring the highest standards of corporate governance, business practice and ethics.
The primary goal of the Boards of Directors of Letterone Holdings S.A. (‘L1 Holdings’) and Letterone Investment Holdings S.A. (‘L1 Investment Holdings’) is to ensure the long-term success of L1 for the interest of its shareholders. L1 Holdings is the parent of the Group comprising L1 Energy, which invests in the energy sector. L1 Investment Holdings is the parent of the Group comprising L1 Technology, L1 Health, L1 Retail and L1 Treasury. Governance across L1 is now set up and functioning effectively. L1 is committed to the highest standards of governance based on the requirements set for public companies, including transparent financial reporting. In addition to maximising shareholder value, we strive to foster relationships of trust with employees, governments, suppliers, business partners and minority investors. L1 currently invests through strategic equity holdings in public and private companies.
At a corporate level, L1 operates through two Boards of Directors, each with executive, shareholder and independent Directors. The Boards are supported by their Audit & Compliance, and Nomination & Remuneration Committees. The Board of Directors of L1 Holdings is responsible for setting investment strategy and approving investment decisions for L1 Energy. The Board of Directors of L1 Investment Holdings is responsible for setting investment strategy and approving investment decisions for L1 Technology, L1 Treasury, L1 Health, and L1 Retail.
Board of Directors
The Board of Directors for both L1 Holdings and L1 Investment Holdings consists of ten people: Non-Executive Chairman Lord Davies; CEO Jonathan Muir; COO David Gould; Non-Executives Wulf von Schimmelmann and Richard Burt, former US Ambassador to Germany and five shareholders, including the principal shareholder Mikhail Fridman. The Board of Directors of L1 Holdings and L1 Investment Holdings meet, at a minimum, on a quarterly basis in Luxembourg to review investment performance and to make decisions on capital allocation (including investments and divestments), strategy and budgets. The Boards also receive regular updates from the Chairmen of each Board Committee. Additional Board meetings are scheduled when time-sensitive investment and strategic decisions are required.
LetterOne has a strong compliance culture backed by a robust compliance function, which is responsible for ensuring that we comply with all relevant laws and regulations across all countries in which we operate and uphold the highest standards of business ethics. The Group Compliance Director, Simon Roache has more than 15 years of experience in UK regulation and compliance. An effective compliance programme is in place, incorporating robust compliance policies and Know Your Client (KYC) procedures, requiring risk-based due diligence measures to be applied to all third parties with whom we do business or seek to do business and ongoing monitoring of all third-party relationships and transactions. All higher-risk counterparties and partners require escalation to, and approval by, the Group Compliance Director (GCD) prior to the establishment of any business relationship.
LetterOne has strict anti-bribery and corruption procedures in place, including training for all staff. We require all business parties to comply with anti-bribery laws. LetterOne has robust sanctions compliance procedures to ensure that all staff are aware of sanctions risks. All transactions and counterparties are screened against all relevant sanctions lists. A robust KYC process is in place requiring all counterparties and potential investee companies to undergo due diligence, enabling us to meet our anti-money laundering obligations. All high-risk counterparties must be referred to the GCD for approval. Financial reporting is IFRS compliant and subject to annual audit by PwC.
L1 HOLDINGS AND L1 INVESTMENT HOLDINGS
L1 Holdings is the ultimate parent of the group comprising L1 Energy, which invests in the energy sector. L1 Investment Holdings is the ultimate parent of the group comprising L1 Technology, L1 Health, L1 Retail and L1 Treasury. L1 Investment Holdings makes investments in the telecoms and technology sectors through L1 Technology, in the healthcare sector through L1 Health and in the retail sector through L1 Retail. L1 Treasury manages L1's liquidity and financial investments.
ROLE OF ADVISORY BOARDS
The investment teams in – L1 Energy, L1 Technology, L1 Health and L1 Retail - put forward investment recommendations. The corporate structure of L1 has been carefully designed so that investment decisions are scrutinised thoroughly, before they are presented to the L1 Holdings and L1 Investment Holdings Boards for an investment decision. To challenge our investment teams’ recommendations and to challenge our assumptions, we have recruited sector investment advisory boards consisting of internationally respected chief executives and entrepreneurs. Each advisory board provides advice on whether or not to proceed with a particular opportunity in its sector. The advisory boards play an essential role in our investment governance process. The oversight of our wholly owned companies, and strategic equity holdings, is undertaken by separate teams in L1 Energy, L1 Technology, L1 Health and L1 Retail. They work actively with the management of the companies we invest in, providing strategic input and monitoring the operational performance of each portfolio. They are responsible for setting strategy, finance, capital allocation, performance management and top team talent management within their companies.
L1 Treasury’s investment parameters are set by the Investment and Risk Committee, delegated by the L1 Treasury Board within a framework approved by the Board of L1 Investment Holdings. The Committee is chaired by Ed Eisler, founder and Chief Investment Officer of Eisler Capital, a global macro hedge fund, who had a distinguished 20-year career at Goldman Sachs. Individual investment decisions are then taken by a separate L1 Treasury team headed by the CIO of L1 Treasury.
LetterOne (L1) is committed to the highest standards of governance, including transparent financial and tax reporting. L1 strongly believes that pursuing a transparent tax policy is a part of doing business. This is in line with L1’s Code of Conduct. In addition, the interests of all relevant stakeholders – shareholders, employees, governments, suppliers, business partners, and minority investors – are balanced with our policy.
The L1 Tax Director is responsible for our tax policy, which is approved by the main Board and Audit Committees. The L1 Tax Director is also responsible for maintaining and updating this policy and for ensuring that procedures supporting the policy are in place, maintained, and used consistently throughout L1.
To safeguard adherence to its tax policy, L1 maintains a well-educated staff of tax and finance professionals who are in constant contact with L1’s business units and senior management. The L1 Tax Team will provide guidance to the business unit on the tax implications of particular transactions. In addition, L1 makes use of the services of accredited tax advisers at all relevant levels in L1 and has included tax compliance in its internal audit program.
L1 reports and pays taxes in the jurisdictions in which it operates in accordance with all relevant tax laws and regulations. L1 complies with such laws and regulations as well as what we believe to be the spirit of those laws and regulations.
Transactions must be driven by a legitimate commercial purpose and will consider appropriate tax planning when entering into such commercial arrangements. In addition, consideration is also given to the reputation of L1 and to its corporate and social responsibilities.
L1 staff are required to file all the required tax-relevant filings with the appropriate tax authorities in a timely and complete manner. To assure timeliness and completeness, tax filings are monitored through L1’s comprehensive tax control framework, which is regularly reviewed and updated. L1 has a very low tolerance for errors in tax processes, including tax compliance processes.
Transactions conducted between L1 companies located in different countries are conducted on an arm’s length basis and in line with current OECD principles and other local transfer-pricing regulations. L1 has implemented a Transfer Pricing Policy to ensure consistent application of international recharging throughout L1.
Tax risk management
L1 adopts a neutral tax risk position and adheres to very high standards of governance in its approach to managing tax risk. This includes the signoff of complex matters by external advisors. To ensure that tax matters are appropriately addressed in transactional activity undertaken by L1 (both in its corporate capacity and in respect of joint ventures), the L1 Tax Team is notified whenever a transaction is proposed.
The tax positions adopted by L1 must be those, which we are confident are robust and in accordance with relevant legislation, based on the tax laws at the particular time. L1 will obtain external opinions in relation to the level of risk for more significant transactions, and consultation may be sought from a tax authority, if appropriate.
All notifications of tax audits or enquiries must immediately be referred to the L1 Tax Director, who will determine, in consultation with the business unit, the approach to be taken and which advisors to use.
Relationships with governments
L1 aims for open and constructive dialogue with tax authorities, including HMRC, on the basis of disclosure of all relevant facts and circumstances. L1 intends to be clear about all aspects pertaining to its tax position and share these in a transparent manner with tax authorities to achieve upfront certainty on tax matters.
This tax strategy applies to the accounting period ended 31 December 2017. L1 adopts the same tax strategy for its global group and does not alter this policy for the UK. Accordingly, L1 regards this publication as complying with its duties under Schedule 19 of the Finance Act 2016.
Audit & Compliance Committee (ACC)
Members: Lord Davies (Chairman),
Alexey Kuzmichev, Petr Aven, David Gould
The Audit & Compliance Committee meets on a quarterly basis in Luxembourg to review financial reporting, audit, tax and risk management matters, and to approve the compliance work plan. Compliance is a standing item on the agenda, and the Group Compliance Director presents a report covering the previous quarter on compliance achievements, statistics, errors and breaches; he brings any new policies or policy updates for ratification by the Committee; and discusses the compliance programme and priorities for the next quarter. Our external auditor, PwC, is invited to attend each meeting.
A key role of the ACC is to ensure the integrity of L1’s financial statements, the effectiveness of the internal and external audit function and of the internal controls and risk management framework of L1 and its portfolio companies. Its role is also to ensure the overall adequacy of compliance programmes and policies including their communication throughout the Group and portfolio companies as well as the Group’s compliance with all legal and regulatory requirements.
In 2016, ACC was focused on the roll-out of a risk management framework, review of the financial statements and Annual Review, providing guidance on improvement of financial reporting process, valuation policy and internal control functions. The ACC also provided guidance to top management of the portfolio companies to ensure the effectiveness of the internal controls and risk management framework.
The Compliance Committee (which merged with the Audit Committee in December 2016 to form the ACC) focused on the implementation of the initial compliance programme and adoption of the compliance policies, overseeing the implementation of the policies and the staff training programmes, and the roll-out of the compliance programme to the new business units L1 Retail and L1 Health. The quality and effectiveness of the compliance function was confirmed by an independent review conducted by Slaughter & May in November 2016.
Nomination & Remuneration Committee (NRC)
Members: Mikhail Fridman (Chairman), Lord Davies, Jonathan Muir
The Nomination & Remuneration Committee approves the employment of senior executives, sets the principles of the performance management process, approves KPIs, reviews performance, and makes decisions on remuneration and incentive schemes.
A key role of the NRC is to ensure that L1 recruits, retains and develops the best people. In 2016, the NRC was involved in guiding the formation of two new industry teams (L1 Health and L1 Retail), performed a Group-wide compensation benchmarking process and developed the Group’s short-term incentive arrangements to further align the objectives of the Group with those of key staff.
PricewaterhouseCoopers (Luxembourg and London)