Statement from the Chair

As Chair I lead the Board, which has a collective responsibility to promote the long-term interests and success of the Group. My role includes ensuring that the Board has the right balance of skills to set business strategy and provide oversight through effective decision-making.

The members of our Board believe strongly in the value and importance of corporate governance. We have adopted a corporate governance framework which reflects the Quoted Companies Alliance Corporate Governance Code for small and mid-size quoted companies (‘The QCA Code’).

The QCA Code is based upon ten broad principles and related disclosures. The QCA has stated what it considers to be appropriate arrangements for growing companies and companies provide an explanation about how they meet such principles.

Our corporate governance framework includes Board leadership and effectiveness, Board remuneration and the internal controls used in the normal course of business. This framework is based upon practices which the Board believes to be proportionate to the stage, size and complexity of the Group.

As a Board we are responsible for ensuring that the strategy, operations, financial reporting and management of risk are underpinned by processes which promote a culture of engagement, transparency and responsibility throughout the Group.

Our business processes and practices seek to ensure that our expected standards of governance, corporate values and behaviour are consistently applied.

These standards are part of how we conduct our business and engage with a wide-ranging stakeholder base, including employees, partners, suppliers and the communities in which we do business.

Andrew Richards

Chair

Last updated: 14 June 2024

Corporate Governance Statement

The Board is responsible for the long-term success of the Group and is committed to ensuring that it provides leadership to the business, having regard to the views of its shareholders and other stakeholders. It is also responsible for setting the Group’s business strategy, values and standards in its oversight of implementation plans and management of risk.

The Board believes that good corporate governance is an integral part of the mid and long-term success of the Group.

Our strategy and business model

Our strategy is to develop a portfolio of enhanced proprietary products to value inflexion points with the potential to derive significant future revenue from existing and optimal future partnerships. Our product development is focused on diabetes and specialty hospital care products.

Partnerships with pharmaceutical companies under licence agreements provide revenue from milestones as products progress through clinical development and recurring royalties following market launch.

In Technology Partnerships we apply our Arestat™ technology to develop novel enhanced formulations of partners’ biological products which can include biosimilars, biological products or vaccines. These technology partnerships are revenue generating and if the partner licenses the Arecor developed formulation, it could result in product milestones and royalties.

The Board holds at least one session each year dedicated to strategy, working with the Leadership Team and external advisers by invitation and as appropriate.

Meeting shareholder needs and expectations

The Board is committed to open and ongoing engagement with shareholders through:

• annual report and accounts;
• interim and full-year results announcements;
• trading updates;
• the Annual General Meeting; and
• the Company’s website, in particular, the Investor Centre pages.

Regular meetings are held between the Chief Executive Officer, Chief Financial Officer and institutional investors and analysts to ensure that the Company’s strategy, financial and business development activities are communicated effectively. The Chair is also available for discussions with shareholders as and when required.

Shareholder questions and comments are also addressed via the dedicated email: ir@arecor.com.

Board members attend the Annual General Meeting (‘AGM’) and are available to answer questions raised by shareholders.

Stakeholder engagement and responsibilities

The Board recognises that the long-term success of the Company is due to the efforts of all stakeholders.

The Group draws upon a range of different resources and relationships which includes working collaboratively in cross functional teams. Company-wide meetings ensure that all employees are aware of the direction of the business, upcoming milestones and progress against business objectives. Employees feedback is collated through questionnaires with trends and themes presented at Company-wide meetings.

External relationships reflect our business objective of building and maintaining a network of relationships with pharma industry partners, academia, key opinion leaders, clinicians, and regulators. These relationships are underpinned by processes and systems to ensure that there is appropriate oversight and engagement.

Corporate social responsibility

The Board recognises the importance of corporate social responsibility and seeks to take account of the interests of the Group’s broad stakeholder groups. The Board works to build and maintain an environment within which employees, suppliers and customers involved in the Group’s business activities behave in an ethical and socially responsible way.

Environmental and Social Governance (ESG)

ESG is at the heart of our vision to enhance existing therapeutic medicines to enable healthier lives. Our technologies and approach use known ingredients and simple manufacturing techniques. Where possible, we source our materials and services locally and manage our supply chain relationships in accordance with our health, safety and environmental objectives.

Our proprietary diabetes product strategy has a strong social focus as we aim to develop products to improve the quality of life of people living with diabetes. Ogluo®, sold by Tetris Pharma, is a ready-to-use glucagon auto-injector pen to treat severe hypoglycaemia, a serious emergency condition for people living with Type 1 or Type 2 diabetes.

We are committed to behaving responsibly by updating or introducing new processes to manage our environmental obligation as part of supporting a sustainable environment. We work with suppliers who share our commitment to recycling and zero landfill. Where possible, we prioritise the sourcing our raw materials from suppliers recycling services. Employees are part of this commitment and identify ways to improve our environmental footprint.

Employee welfare and engagement

The Group is a committed equal opportunities employer. Employees and job applicants are given equal treatment regardless of their gender, marital status, sexual orientation, age, race, colour, nationality, ethnic origin, disability, or religious or philosophical beliefs.

Our responsibilities to employees and the expectations of employees as business representatives are set out in the Company Handbook. The handbook is provided to all employees as part of their onboarding and induction training. Employment policies are regularly reviewed and updated to ensure that they remain up to date and relevant. All employees are given appropriate training to enable them to perform their roles and to develop within the organisation.

The terms of reference of our Social Committee, includes identifying opportunities to support local communities and charities. Many of our employees work as volunteers in our local communities.

Health and safety

Our health and safety policies and procedures follow a review calendar to ensure that they are up to date and fit for purpose. Our overarching health and safety objectives are to ensure compliance with current legislation to protect employees, contractors and visitors attending our business premises. Health and safety policies and procedures are part of staff on-boarding and training programmes.

The terms of reference of our Health and Safety committee, includes maintaining a safe and healthy working environment so that the Group can meet its legal responsibilities. The Health and Safety committee holds quarterly meetings to update and inform all colleagues about the Committee’s activities.

Effective risk management

The Board is responsible for establishing the system of internal control used by the Group and reviewing its effectiveness. This system is intended to understand and manage risk which could potentially impact the business. The Board also monitors expenditure and information used in decision making. Established controls include:

• Monthly finance report issued to the Board
• Detailed board reports of progress against company goals
• Annual budget and rolling forecasts reviewed and approved by the Directors
• Authority limits approved by the Board, including matters reserved for the Board
• Ongoing review of the IP strategy including status of IP applications and grants

In addition to its other roles and responsibilities, the Audit & Risk Committee is responsible to the Board for monitoring the effectiveness of internal controls and authorities across the Group.

Board structure, skills and compliance

The Board has a collective responsibility and legal obligation to promote the interests of the Group and to define the corporate governance framework. At 31 December 2023, the Board comprised five Non-Executive Directors and two Executive Directors; the Chair, Chief Executive Officer, Chief Financial Officer and four Non-Executive Directors.

All Directors are subject to election by the shareholders at the general meeting immediately following their appointment to the Board and at re-election intervals of not more than three years.

Skills and experience

The Board composition is to bring to bear a balance of skills, experience, independence and knowledge of the business. The board structure provides a breadth and depth of skills and experience to deliver the business strategy of the Group for the benefit of shareholders.

The Directors believe that the Board has an appropriate balance of sector, financial, and public markets skills and experience. Board members are kept up to date on a regular basis on key issues and developments pertaining to the Company as well as their responsibilities as members of the Board.

The Board are supported by an experienced Leadership Team.

Independence

No Non-Executive Director has been an employee of the Group, has had a material relationship with the Group, receives remuneration other than Directors fees, has close family ties with any of the Group’s advisers, Directors or senior employees, or holds cross-directorships.

In accordance with the principles of the QCA Code, Christine Soden, Jeremy Morgan and Sam Fazeli are regarded as independent. Andrew Richards and Alan Smith have served on the board of directors for more than nine years and are not regarded as independent in accordance with the QCA Code, however the Board believes that the Non-Executive Directors and the Non-Executive Chair provide a blend of different experiences and backgrounds to bring an independent judgement to bear.

The Board is aware of the other commitments of its Directors and changes to these commitments are reported to the Board. The Group has procedures in place to deal with conflicts of interest, the Directors do not participate in any vote in which they have a conflict of interest and do not contribute to discussions involving such interests. The Board requires each Director to declare to the Board the nature and extent of any direct or indirect interest in a proposed transaction or arrangement with the Group. A register is maintained of Directors’ other interests, including other Board positions.

Non-Executive Directors are appointed to provide independent oversight and constructive challenge together with strategic advice and guidance. There is a rigorous and transparent procedure for the appointment of new Directors to the Board. The search for Board candidates will be conducted, and appointments made, on merit, against objective criteria and with due regard for the benefits of diversity on the Board.

The designation of the respective responsibilities of the Chair and Chief Executive Officer are clearly defined and independent. The Chair’s role is to ensure the effectiveness of the Board. The Chief Executive Officer has responsibility for the day-to-day business and performance of the Group.

Professional development

On appointment each Director takes part in an induction programme in which they receive information about the Group and the role of the Board including matters reserved for its decision, the terms and reference of the Board and committees. They receive guidance about the responsibilities of AIM company directors as set out in the AIM Rules for Companies and relevant aspects of the Market Abuse Regulation legislation.

The Directors can access independent professional advice, at the Group’s expense, in order for them to carry out their responsibilities.

Evaluation of Board Performance

Internal evaluation of the Board and individual Directors is carried out to determine effectiveness and performance of the Board and the Directors’ continued independence and capacity. The criteria against which effectiveness is considered is aligned to the strategy and business plans of the Company.

The annual evaluation of Board performance is co-ordinated and led by the Chair. The process includes peer appraisal, completion of questionnaires and discussions. Succession planning for the Board is monitored and considered during the annual evaluation of Board performance.

Culture and values

The Board recognises that decisions about business strategy and risk impact the culture of the Group which in turn will impact the performance of the Company. The tone and culture set by the Board is disseminated through the Company and influences behaviour.

The Board’s assessment of the culture within the Company is that there is respect for individuals, open dialogue and a commitment to building and maintaining stakeholder relationships.

The Group takes a zero-tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all business dealings and relationships wherever they occur. The Anti-Corruption and bribery policy provides clear guidance about recognising and handling potential bribery and corruption issues. This policy and approach applies to all persons working for the Group or on its behalf in any capacity, including employees at all levels, Directors, officers, consultants and agents.

Employees are at the heart of the Group’s corporate culture. Our employees know that they can make a positive contribution to people’s lives in the development of new treatments in areas of high unmet need. This is a strong motivator and drive for change, which is reflected in our core Company values of Ambition, Innovation, Creativity, Collaboration, Transparency and Integrity.

Board responsibilities

The Directors, together, act in the best interests of the Group via the Board and its Committees. They devote sufficient time and consideration as necessary to fulfil their duties. Each Director brings different skills, experience and knowledge to the Group with the Non-Executive Directors bringing independent thought and judgement.

Matters specifically reserved for the Board include strategy and capital; financial reporting and controls; internal controls; significant contracts; communication; board membership and other appointments; remuneration; delegation of authority and corporate governance matters including policies. These matters are set out in a formal schedule of matters reserved for the Board which is reviewed to ensure it remains relevant and reflects the business structure.

To discharge its responsibilities effectively, the Board has a system of delegated authorities, which enables the day-to-day operation of the business and so that significant matters are brought to the attention of the Leadership Team and the Board, as appropriate. Through this system the Board is able to provide oversight and direction to the Executive Directors, the Leadership Team and the wider business.

Division of responsibilities

The ultimate authority for all aspects of the Company’s activities rests with the Board with the respective responsibilities of the Non-Executive Chair and Chief Executive Officer as delegated by the Board.

Non-Executive Chair – key responsibilities
• Responsible for the effectiveness and leadership of the Board
• Builds and maintains an effective and complementary Board of Directors
• Sets the agenda, style and tone of Board discussions
• Promotes a culture of openness and debate by facilitating the effective contribution of Non-Executive Directors
• Ensures active engagement in meetings, through effective relationships between the Executive and the Non-Executive Directors

Chief Executive Officer – key responsibilities
• Is responsible for day-to-day leadership and management of the Group
• Develops the Group’s objectives and strategy for Board review and approval
• Creates and recommends to the Board an annual business plan, including an annual budget
• Delivers the annual business plan
• Executes the agreed Group strategy and other agreed objectives

Non- Executive Directors – key responsibilities
• Evaluate and appraise the performance of the Executive Directors and Leadership Team against agreed objectives
• Participate in defining and developing the Group’s strategy and monitor against it
• Monitor the financial information, risk management and controls processes of the Group
• Approve annual budget
• Formulate Executive Director remuneration and succession planning

Board Committees

The Board’s principal committees are the Audit and Risk Committee, Remuneration Committee and Nomination Committee. Each committee has written terms of reference that set out specific authorities and duties.

As required, separate committees are set up by the Board to consider specific issues.

Audit and Risk Committee

The Audit and Risk Committee assists the Board in discharging its responsibilities of corporate governance, financial reporting, external and internal audits and controls. This includes, reviewing the Company’s annual and interim financial statements, reviewing and monitoring the extent of the non-audit services undertaken by external auditors, and reviewing the effectiveness of the Company’s internal controls and risk management systems. The ultimate responsibility for reviewing and approving the annual report and accounts and the half yearly reports rests with the Board.

The Audit and Risk Committee meet not less than three times a year and otherwise as required.

Membership: Christine Soden, Jeremy Morgan and Sam Fazeli.

Committee Chair: Christine Soden.

Remuneration Committee

The Remuneration Committee is responsible for executive remuneration and the remuneration packages of individual Directors. This includes agreeing with the Board the framework for remuneration of the Executive Directors and members of the Leadership Team. The Committee is responsible for determining the total individual remuneration packages of each Director including, where appropriate, bonuses, incentive payments and share options. No Director is involved in any decision as to their own remuneration.

The Remuneration Committee meet not less than three times a year and otherwise as required.

Membership: Jeremy Morgan, Christine Soden and Sam Fazeli.

Committee Chair: Jeremy Morgan.

Nomination Committee

The Nomination Committee is responsible for the structure and composition of the Board and its committees, taking into account the balance of skills and diversity. This includes consideration of the appointment and succession planning of Executive and Non-Executive Directors.

The Nomination Committee meet each year and as required.

Membership: Andrew Richards, Christine Soden, Jeremy Morgan, Alan Smith and Sam Fazeli.

Committee Chair: Andrew Richards.

Board meetings

The Board meets at least eight times each year or any other time deemed necessary for the good management of the business. They meet at a location agreed between the Board members.

Face-to-face meetings at the Company’s premises at Chesterford Research Park occur where practicable.

Title View

Arecor Therapeutics plc Environmental and Social Governance Policy

Arecor Therapeutics plc Audit and Risk Committee Terms of Reference

Arecor Therapeutics plc Remuneration Committee Terms of Reference

Arecor Therapeutics plc Nomination Committee Terms of Reference