Board Charter

The purpose of the Board Charter is to set out the role and responsibilities of the Board of Directors of Central Finance Company PLC (“Company”);

The role of the Board is to demonstrate leadership, establish strategic objectives and oversight of the management of the Company. The Board derives its authority to act from the Articles of Association of the Company. The overall responsibility of the Board is to ensure the Company’s long-term prosperity by collectively directing the Company’s affairs, while meeting the appropriate interests of its shareholders.
2.1 Specific responsibilities of the Board

a) Driving the strategic direction of the Company, ensuring appropriate resources are available to meet objectives and overseeing management’s implementation of the strategic objectives.
b) Ensuring a high standard of corporate governance practices and regulatory compliance and promoting ethical conduct and responsible decision making; setting out the values to which the Company will adhere to and charging management with the responsibility for creating a culture in the Company of ethical and responsible behavior, including high standards of personal integrity;
c) Reviewing and ratifying systems of audit, risk management, internal compliance and control;
d) Monitoring the adequacy and integrity of financial and corporate reporting systems (including external audit) so that the operations and financial performance of the Company can be effectively monitored on an ongoing basis; reviewing and approving annual and quarterly financial reports;
e) identifying and evaluating material risks for the Company; satisfying itself that the Company has in place an appropriate risk management framework for financial and non-financial risks;
f) monitoring the Company’s governance and compliance framework and systems for the Company to meet regulatory, contractual, internal and other requirements
g) Approving significant changes to the organizational structure.
h) Approving decisions affecting the Company’s capital, including determining the Company’s dividend policy and recommending dividend payments to shareholders.
i) The Board meetings shall be convened and conducted in accordance with Section 7 of the Finance Business Act Direction (Corporate Governance) No. 05 of 2021. A director may participate at meetings of the Board or Board Committees by audio visual means and such participation would be taken into account for quorum.

The Board reserves those matters it is expressly required by law to approve along with powers conferred to it by the Articles of Association of the Company and delegates to the Managing Director /CEO the authority to manage the day to day affairs of the Company. The management of the Company’s activities is undertaken jointly by the Executive Directors and the Managing Director /CEO subject to specific delegations of authority approved by the Board. The Managing Director /CEO has the authority to delegate all activities and aspects connected with the day to day management of the respective divisions overlooked by the Executive Directors.

The Board will establish limits for the exercise of credit approval authority and financial expenditure.

The Board will be constituted giving consideration to the size and nature of the Company’s business and its subsidiaries so that it comprises a diverse mix of skills and expertise for effective oversight on the management of the Company. The Board will consist of Independent Non-Executive Directors, Non Executive Directors and Executive Directors as shall be determined by the Board from time to time to conform to regulatory requirements and the Articles of Association of the Company.

5.1. Appointment and Remuneration of Board members
The appointment of directors shall be subject to the prior approval of the Central Bank of Sri Lanka, and the approval of the shareholders of the Company at Annual General Meetings as detailed hereunder:

i. The Board shall recommend to the Central Bank of Sri Lanka, the re-appointment of existing directors prior to each Annual General Meeting of the Company in terms of the Finance Business Act Direction No. 6 of 2021,
ii. The Board shall recommend to the shareholders the re-election of directors, who retire by rotation, as provided for in the Articles of Association, at Annual General Meetings,
iii. The Board shall recommend to the shareholders the re-appointment of a director appointed to the Board to fill any casual vacancy, as provided for in the Articles of Association at Annual General Meetings.

a) The Chairman of the Board shall be appointed by the Board and must be an Independent Non-Executive Director and if the Chairman ceases to be an Independent Non-Executive Director, the Board shall appoint a Senior Independent Director as provided in Section 6.1.
b) The number of Board members shall be as determined by the Company’s Articles of Association and its composition will be determined in accordance with the regulatory requirements.
c) All directors must disclose outside directorships and inform the Company Secretary of any changes to such directorships as soon as the changes take place. However, a director shall not hold office as a director in more than 20 companies.
d) The Board shall approve appointments to fill casual vacancies on the Board.
e) The Board shall appoint the Chairman and Managing Director.
f) The Board shall approve the appointment of Executive Directors.
g) Executive Directors intending to accept a board position outside of the Group for personal interests must receive prior approval of the Board. There shall be no conflict of interest in such external directorships.
h) The Board shall establish and approve formal remuneration policies and procedures for Board members. Executive Directors will not be paid directors’ fees in addition to their regular remuneration.
i) The total tenure of a Non-Executive Director of the Company on the Board shall not exceed 9 years as specified by the Central Bank of Sri Lanka. The age limit for all directors shall be 70 years and after attaining the age of 70 years no person can continue in the said position without seeking special approval of the CBSL.
j) Directors’ remuneration shall be disclosed in the Annual Report.

The Board shall determine the “independence” of directors of the Company in accordance with the independence definitions established by applicable Corporate Governance principles and standards.
6.1 Senior Independent Director
If a Chairman of the Board ceases to be an Independent Non -Executive Director then the Board will appoint a Senior independent Director.

a) The Senior Independent Director should meet at least twice each year with the Non-Executive Directors and at least once a year with the Executive Directors to enable discussion and communication of governance related matters. The outcome of these discussions should be informed to the Chair.
b) The Senior Independent Director should make himself available for confidential discussions with other directors who may have concerns which they believe have not been properly considered by the Board as a whole and which pertain to significant issues that are detrimental to the Company.
c) The Senior Independent Director should participate in all meetings with majority, significant and minority shareholders and be made aware of their concerns by the Board Secretary.

A Director may seek professional advice at the Company’s expense, in order to discharge the duties and responsibilities effectively. Request to seek such advice first be referred to the Board and the Board shall resolve to provide independent professional advice. Such advice shall be shared amongst other directors.

a) Each newly appointed Non-Executive Director will be afforded an induction program to orient the member to the Company’s business, strategy, objectives, policies, procedures, operations, senior management and the business environment. The induction will also include all the necessary information that is unique to the regulated nature of the business.
b) The Board shall ensure adequate Board development through continuous learning to keep the members informed on critical information pertinent to the business and its regulatory environment.

a) The performance of the Board will be reviewed annually in the Board evaluation form developed for this purpose.
b) The results of the evaluation will be discussed at a regular meeting of the Board and action taken to improve such areas members have identified would contribute to Board effectiveness as a whole.

The Chairman of the Board is appointed by the Directors. The Chairman of the Board is responsible for the leadership of the Board, and is responsible for;

a) Promoting the efficient organization and conduct of the Board’s functions, setting the agenda of the Board, conducting the Board meetings and ensuring Board meetings are held by the Company;
b)Facilitating Board discussions and effective contribution by all directors and briefing all directors in relation to issues arising at Board meetings;
c) Encouraging constructive and respectful relations between Board members and senior executives; and
d) Chairing the Annual General Meeting and other shareholder meetings of the Company.
e) Making arrangements to hold meetings, at least twice a year, with Non-Executive Directors without the Executive Directors being present.

The Managing Director /CEO is appointed by the Board. The role of the Managing Director/ CEO shall be to:

a) Manage the day to day affairs of the Company and control the affairs of the Company;
b) Ensure that the strategies set out by the Board in the Company’s overall corporate strategy are implemented;
c) Co-ordinate operations of the various departments within the Company;
d) Establish and maintain efficient and adequate internal control systems;
e) Implement the necessary management information systems in order to facilitate efficient and effective communication within the Company;
f) Ensure that the Board is adequately apprised about the operations of the Company; and
g) carry out any other duties as may be assigned by the Board from time to time

Directors are expected to attend and participate in Board meetings and meetings of committees on which they serve.
a) Directors are expected to spend the time needed, and meet as often as necessary, to properly discharge their responsibilities.
b) Directors are encouraged to ask questions of, request information from and raise any issue of concern with senior executives.
c) Directors must exercise independent judgment when making decisions.
d) Directors must keep Board information, discussions, deliberations, and decisions that are not publicly known, confidential.

The Board Secretary shall

a) Ensure that the Board complies with its obligations under the law and the Articles of Association of the Company;
b) Assist the Chairman of the Board in organizing the Boards’ activities;
c) Draw up the agenda for Board meetings in consultation with the Chairman;
d) Coordinate the Board evaluation exercise and maintain records of such evaluations;
e) Record the proceedings of Board meetings in sufficient detail;
f) Maintain and update the register of interests
g) Ensure that the Company complies with the requirements under the Companies Act No. 07 of 2007 and the Registrar General of Companies; and
h) liaise with Colombo Stock Exchange (CSE), the Securities and Exchange Commission of Sri Lanka (SEC), the Registrar General of Companies and other regulatory authorities as required; and
i) Carry out any other duties as may be assigned by the Board from time to time.
j) Keep Board information, discussions, deliberations, and decisions that are not publicly known confidential.

The Board may establish committees to discharge any of its responsibilities. All such committees will operate under a charter, approved by the Board, which set out the committee’s authority, responsibilities, and membership.
The Board has established the following standing committees:

• Board Audit Committee (BAC)
• Board Integrated Risk Committee (BIRMC)
• Related Party Transactions Review Committee (RPTRC)
• Board Nomination and Governance Committee,
• Human Resources and Remuneration Committee

The Committees shall report through the respective Chairperson to the Board on the proceedings, specific recommendations and any other issues deemed appropriate following each meeting of a committee.

The Board may establish other committees as deemed necessary.

All directors are required to:

a) Declare any interests that may give rise to potential or perceived conflict e.g. multiple directorships, business relationships or other circumstances that could interfere with exercise of objective judgment.
b) Declare as soon as they become aware that a subject to be discussed at a Board or committee meeting may give rise to a conflict of interest at the outset of the applicable meeting. The conflicted director shall not participate further in the discussion of that subject, nor vote on it. This is subject to the provisions of the Central Bank and Colombo Stock Exchange Regulations, Articles of Association of the Company and the Related Party Transactions Policy of the Company.
c) The Board shall evaluate all potential or perceived conflict of interest as declared and shall approve such transactions with the Company as may be appropriate and recommended by the RPTRC.
d) A register of declared interest by directors shall be maintained by the Board Secretary.
e) Trading in securities of the company and group entities shall be conducted within the guidelines prescribed in the “Guideline on Trading in Listed Shares of Group Entities”

a) The Board is responsible for providing shareholders with appropriate information and facilities to allow them to exercise their rights as shareholders.
b) The Board is responsible for monitoring the Company’s relationship with other stakeholders and policies relating to employment, health and safety, social responsibility, sustainable development and other regulatory and statutory requirements.

The Board may review the Board Charter contained herein from time to time as required.

Subject to the Articles of Association, the Company will provide Board members with, and will pay the premiums for, indemnity and insurance cover while acting in their capacities as board members, to the fullest extent permitted by the law and the Directors & Officers Insurance policy in force.