CORPORATE GOVERNANCE

Corporate governance is the system by which companies are directed and controlled by the management in the best interest of all the stakeholders, thereby ensuring greater transparency and better and timely financial reporting.

The Board of Directors is responsible for proper governance which includes setting out Company’s strategic aims, providing the necessary leadership to implement such aims, supervising the management of the business and reporting to the shareholders on their stewardships.

Eastern Housing is committed to continually reviewing all corporate governance policies and practices to ensure the ongoing transparency of the company’s practices and the delivery of high standards and quality information to stakeholders.

The maintenance of effective corporate governance remains a key priority of the Board of Eastern Housing Limited. To exercise clarity about directors’ responsibilities towards the shareholders, corporate governance must be dynamic and remain focused on the business objectives of the Company and create a culture of openness and accountability. Keeping this in mind, clear structure and accountabilities supported by well understood policies and procedures to guide the activities of the Company’s management have been instituted

STATEMENTS OF COMPLIANCE

Securities and Exchange Commission’s notification on Corporate Governance

As Eastern Housing Ltd. is listed on the Stock Exchanges in Bangladesh, we comply with the BSEC’s notification on Corporate Governance SEC/CMRRCD/2006- 158/134/Admin/44 dated 7 August 2012. For the year ended 31st July 2013, we have complied with the relevant provisions set out in Annexure 1 in this report.

Corporate Governance Framework

Good corporate governance practices are not just a matter for the Board but are at the heart of everything that we do within the Company. The Company operates within a comprehensive governance framework.

Role of the Board

The Directors of the Board are appointed by the Shareholders at the Annual General Meeting (AGM) and accountable to the Shareholders. The Board is responsible for ensuring that the business activities are soundly administered and effectively controlled.

The Directors of the Board keep themselves informed about the Company’s financial position and ensure that its activities, accounts and asset management are subject to adequate control. The Board also ensures that EHL Policies & Procedures and Codes of Conduct are implemented and maintained, and the Company adheres to generally accepted principles for good governance and effective control of Company activities.

In addition to the other legal guidelines, the Board has also adopted “Code of Conduct” for ensuring better governance.

The Code on Corporate Governance of the company sets out the principles and best practices to be applied by the company in its operations towards achieving the optimal governance framework.

The Board of Directors is responsible for protecting the rights and interests of all shareholders and also accountable for the overall management of the entity. Besides its usual legal and statutory responsibilities, the Board is responsible for the following:

» Reviewing and adopting a strategic plan for the company;

» Overseeing the conduct of the company’s business to evaluate whether the business is being properly managed;

» Identifying principal risks and ensuring the implementation of appropriate systems to manage these risks;

» Succession planning, including appointing, training, fixing the compensation and where appropriate, replacing senior management;

» Developing and implementing and investor relations program or shareholder communications policy for the company;

» Reviewing the adequacy and the integrity of the company’s internal control systems and management information systems, including systems for compliance with applicable laws, and regulations, rules, directives and guidelines;

» Approving the financial statements and accounting policies of the company;

» Approving changes in the policy;

» Recommending dividend for declaration in AGM;

» Establishing committees including the Audit Committee& Executive Committee

» Receiving and reviewing reports from committees of the Board;

» Establishing and monitoring compliance with the company’s standards of business conduct and other policies of the company;

» Establishing appropriate systems of corporate governance in the company;

» Considering and approving other matters specially reserved for the attention of the Board;

» Constantly guide and assist the company in external stakeholder management.

Board Composition

The Board in EHL is comprised of Seven Directors, including the Chairman who is elected from amongst the members. In addition to Board of Directors, a separate Managing Director who is an Ex Office is present in the Board.

The name of the Board of Directors:

1. Manzurul Islam, Chairman

2. Suraiya Begum, Nominated Director

3. Zia U. Ahmed Independent Director

4. Md. Abdul Wadud, Nominated Director

5. Md. Mostafizur Rahman, Nominated Director

6. Sarwar Boudius Salam, Nominated Director

7. Zahiduzzaman Faruque, Independent Director

Board Meetings

The meetings of the Board of Directors of Eastern Housing Limited are generally held at the Registered Corporate Head Office of the Company. The meetings are held frequently, at least once in a quarter, to discharge its responsibilities and functions as mentioned above. Meeting is scheduled well in advance and the notice of each Board meeting is given, in writing to each director by the Company Secretary. The Board meets for both scheduled meetings and on other occasions to deal with urgent and important matters that require attention.

Retirement and Reelection on of Directors

As per the Article of Association of the company, one-third of the directors to retire in every year shall be those who have been longest in office since their last election, but as between persons who became directors on the same day, those to retire shall (unless they otherwise agree themselves) be determined by lot, but remains eligible for re-election.

Division of work for the Board and Managing Director

The roles of the Board and Managing Director are separate and delegation of responsibilities is clearly established, set out in writing and agreed by the Board to ensure transparency and better corporate governance. The Managing Director is the authoritative head for day-to-day business. He acts to reasonably ensure that EHL operates business as per the Articles of Association (AoA), decisions made by the Board and Shareholders, as well as according to EHL Policies and Procedures and applicable regulatory legislations.

Role of the Chairman

The Chairman leads the Board in determination of its strategy and achievement of its objectives. The Chairman is responsible for organizing the business of the Board, ensuring its effectiveness and setting its agenda. The Chairman is also responsible for ensuring that the Directors receive accurate, timely and clear information. The Chairman facilitates the effective contribution of Independent Directors and ensures that constructive relations exist amongst the Directors. Minutes of Board meeting are signed by the Chairman.

Role of the Managing Director

The Managing Director is responsible for running the business and for formulating and implementing Board strategy and policy. He also has direct charge and overall control of the Company on a day-to-day basis and is accountable to the Board for the financial and operational performance of the Company.

He is to certify to the board regarding financial statement and financial transactions of the company according to the corporate governance guidelines as issued by Bangladesh Securities and Exchange Commission (BSEC).

Role of Company Secretary

To ensure effective integration and timely flow of information required by the Board and to maintain necessary liaison with internal resources as well as external agencies, the Board has appointed a Company Secretary.

The Corporate Governance Guidelines issued by the Bangladesh Securities and Exchange Commission (BSEC) also require a listed company to appoint a fully fledged Company Secretary, as distinct from other managers of the Company. In pursuance of the same, the Board of Directors has appointed Company Secretary and defined his roles & responsibilities. In EHL, among other functions, the Company Secretary:

» Advises and assist the members of the Board with respect to their duties and responsibilities as Directors and compliance with their obligations under the Companies Act, Stock Exchange requirements and issues on corporate governance
» Acts as a channel of communication and information
» Ensures that the Board’s decisions are properly implemented and communicated by assisting in the implementation of corporate strategies and policies.
» Ensures proper compliance with all relevant statutory and regulatory requirements.
» Communicates with the stakeholders of the company

Role of Chief Financial Officer

The Chief Financial Officer is a versatile individual with the talent to meet a continually changing set of circumstances. He is responsible for accounts and treasury functions of the company. In addition he attends all board meeting and presents quarterly and periodical results.

He is to certify to the board regarding financial statement and financial transactions of the company according to the corporate governance guidelines as issued by Bangladesh Securities and Exchange Commission (BSEC).

Role of the Head of Internal Audit& Compliance

The Head of Internal Control & Compliance is responsible for reporting to the Board/ Audit Committee regarding any deviation from accounting and internal control systems of the Company. He is also responsible for ensuring regulatory compliance of the Company.

Price Sensitive Information

The Board of Eastern Housing Limited through the company secretary always ensures to inform all price sensitive information within 30 minutes of the decision or immediately upon getting such information to the BSEC and the Stock Exchanges.

The communication is done through Fax and by special messenger, and through courier service in special cases and at the same time cause publishing the same in two widely circulated daily newspapers, one in Bangla and the other in English.

Disclosure on the performance and prospect of the Company

Eastern Housing Ltd. attaches high priority on timely publication of quarterly, half-yearly and annual report with comprehensive details in excess of regulatory requirements. Mediums of publication include printed materials, newspapers and the website of the Company. Price Sensitive information is released to the regulators within half an hour of the decision. The Financial Statements are prepared in accordance with IAS and IFRS as adopted by Bangladesh Accounting Standards.

Dividend Policy

The Board of Directors has a Dividend Policy which is based on company’s performance and company’s long term objectives.

Board Committees

There are two committees in Eastern Housing Limited.

a) Audit Committee

The EHL Audit Committee was established in late 2008 as a sub-committee of the Board and has jurisdiction over EHL. The Audit Committee is comprised of four members of the Board including the Independent Director. The Audit Committee assists the Board in discharging its supervisory responsibilities with respect to internal control, financial reporting, risk management, auditing matters and EHL’s processes of monitoring compliance with applicable legal & regulatory requirements and the Code of Conduct. The Audit Committee Charter, as approved by the Board, defines the purpose, authority, composition, meetings, duties and responsibilities of the Audit Committee.

b) Executive Committee

The Executive Committee of Eastern Housing Ltd manages and run the affairs of the Company on behalf of the board. The Managing Director is the leader of the team. Executive Committee endeavors to achieve the strategic goals & mission of the Company set by the Board of Directors. The Executive Committee meets on a weekly basis to monitor the business performance of the Company.

Standards of Business Conduct

Eastern Housing Limited is committed to achieving high standards of integrity in public life and in all of its business practices. This commitment is set out in the standards of business conduct adopted by the company in order to conduct the company’s business with honesty, integrity and transparently.

Standards of Business Conduct are a fundamental policy of the company that everyone working in Eastern Housing Limited must follow, whilst also providing support and guidance to assist the people to ensure that their conduct meets the high standards expected to them and comply with the laws and regulations applicable to the company’s business and that they act with high standards of business integrity. The standards are an integral part of the principles of corporate governance in Eastern Housing Limited and are designed to:

» Ensure that decision and judgments made by the employees are lawful and comply with the ethical standards expected of a leading public limited company;

» Set a tone and culture for the organization which will enable it to be regarded as a good corporate citizen;

» Help employees who are faced with making relevant judgments in the course of doing their work;

» Assist managers in considering disciplinary matters where appropriate, give reassurance to Eastern Housing Limited’s shareholders, customers and suppliers, to government and to other third parties with whom Eastern Housing Limited comes into business contact;

» Seek to protect Eastern Housing Limited from being subject to loss as a consequence of extortion, fraud, theft, bribery and corruption, insider dealing and anti-terrorism or other dishonesty.

The Standards of Business Conduct are reviewed from time to time and updated to reflect what we see as developments and issues affecting corporate conduct and values, and the standards expected.

Statement of Internal Control

The internal control system of Eastern Housing Limited is designed to manage risks that may impede the achievement of the company’s business objectives rather than eliminates these risks. The ultimate facilitator of the internal control system is the Board of Directors in order to ensure that the importance of internal controls is understood across the company and that adequate resource allocations are available. Internal control is the process by which the company’s directors, management and staff obtain reasonable assurance as to the achievement of specified objectives including:-

» Efficiency and effectiveness of operations,

» maintenance of assets,

» reliability of financial and other management information,

» the prevention of fraud,

» Compliance with relevant national laws and Companies Act. BSEC Rules, Stock Exchanges Rules and Regulations.

Eastern Housing Limited continues to ensure the presence of the following components that would create an effective internal control system.

Control Environment

The Board of Directors sets the tone for an effective control environment through regular exchange views and reviews of the processes for identifying, evaluating and managing the significant risks. An effective control environment is set by top management that cascades across all business functions. Before selecting a site for land or apartment projects utmost attention and arrangement is ensured for environment.

Risk Assessment

The company has an ongoing risk management process to identify key business risks. Process risks are also assessed at the planning stages whereby objectives are reviewed along with the associated risks that may potentially affect the achievement of objectives. Appropriate risk responses are articulated to enable the company to achieve its objectives effectively.

In Eastern Housing risks can come from uncertainty in form of project failures (at any phase in design, development, material cost), legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. Further to address & manage risk, the Company also works on ensuring:

» Implementation & good practice of required policies & procedures

» Controls on different functions of Revenue Assurance & Fraud Management
Control Activities

Control activities are the policies and the procedure to help ensure that management directives are carried out, and the necessary actions are taken to minimize the risks of failing to meet objectives. Policies and procedures are effectively established within the company and continuously reviewed for compliance, adequacy and improvement.

Information and Communication

The company ensures the effective flow of information on internal activities and external factors across the management levels. All individuals receive a clear message from senior management that control responsibilities must be taken seriously.

Monitoring

The system of internal control is monitored regularly through both ongoing activities and separate evaluations. Ongoing monitoring activities are conducted through regular management activities. An Internal Audit Team has been setup with five members during the year under review. The internal audit function is responsible for providing an objective and independent view of the effectiveness of operational and financial controls and procedures, as well as management action in dealing with issues of control. The internal audit function monitors the presence of the components of internal control system and reports to the audit committee.

Development of Awareness

The Board through the Audit Committee ensures that an awareness of internal control is enhanced throughout the company. This occurs through management self assessment of controls, discussion of internal control issues at management meetings, off the job education on internal control and through creating an environment and control attitude within the company that is challenging, proactive, and considers the worst case scenarios to gauge the appropriateness of controls.

The Board has delegated the process of reviewing the effectiveness of internal controls to the Audit Committee. The committee monitored and reviewed independent assessment of business process within the company.

Accountability and Audit

In implementing and ensuring the right Governance in EHL, the Board and Executive Committee ensure the following:

Financial Reporting

EHL has strong financial reporting procedures in line with the requirements of International Financial Reporting Standard (IFRS), Bangladesh Accounting Standard (BAS) and other related local legislations.

Going Concern

The company has at the date of the report, sufficient resources available for its estimated requirements for the next 12 months.

Related Party Transactions

Parties are considered to be related if one party has the ability to control the other party or exercises significant influence over the other party in making financial and operational decision and include associated companies with or without common Directors and key management positions. The Company has entered into transaction with other related entities in normal course of business that fall within the definition of related party as per Bangladesh Accounting Standard 24: “Related Party Disclosures.”

Business Review and Financial Review

Business Review and Financial Review are conducted quarterly. The purpose of Business Review is to ensure strategic control and follow-up of results based on the prevailing strategic objectives and value drivers and key changes to risk exposure. Financial Review provides the internal quarterly results follow-up for the Company. The purpose is to provide an analysis of the economic and financial situations, which will then form the basis for external reporting and presentations, and to provide quality assurance for the financial reporting. In addition, internal review on monthly financial results is conducted by Managing Director on a monthly basis.

Statutory Audit

Statutory Audit of the Company is governed by the Companies Act, 1994 and Securities and Exchange Rules 1987. As per these regulations, auditors are appointed at each Annual General Meeting (AGM) and their remuneration is also fixed by the Shareholders at the AGM. Appropriate structure is in place as per corporate governance best practices to ensure independence of statutory auditors.

Internal Audit

The Internal Audit department is independent of business operations. It undertakes a programme to address internal control and risk management processes with particular reference to the EHL Audit Charter.

It operates a risk-based methodology, ensuring that the Company’s key risks receive appropriate regular examination. Its responsibilities include reviewing and reporting on the effectiveness of risk management systems and internal control with the Executive Committee, the Audit Committee and ultimately to the Board. Internal Audit facilitates oversight of risk and control systems across the company. The Head of Internal Audit also attends all Audit Committee meetings.

Compliance with Rules & Regulations

In this context, the Company provides complete set of financial statements and relevant documents to the Bangladesh Securities and Exchange Commission (BSEC), Stock Exchanges, National Board of Revenue (NBR), Registrar of Joint Stock Companies & Firms (RJSC), Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE). The CFO and Company Secretary always accommodate any queries that are raised by regulators of the country

Employees
Employee’s remuneration:

The objective of the Company’s remuneration policy is to attract, motivate, reward and retain quality staff. The Board ensures that the remuneration policies are in line with the strategic objectives and corporate values of the Company, and do not give rise to conflicts between the objectives of the Company and the interests of individual Directors and key executives. The total compensation package for employees comprises salary, contributory provident fund, gratuity scheme, and other benefits plans such as maternity benefits etc.

In determining the composition of the package, the nature of the role performed and market practice are taken into consideration. To ensure that its remuneration package is competitive, the Company regularly reviews its base salary ranges and benefits package based on market data.

Codes of Conduct:

In accordance with approved and agreed Code of Conduct, Eastern Housing employees are expected to avoid personal activities and financial interests which could conflict with their responsibilities to the company. Eastern Housing employees must not seek gain for themselves or others through misuse of their positions.

Restrictions on dealings in EHL Shares by Insiders

The Company has established policy relating to trading of EHL shares by Directors, Employees and other Insiders. The securities laws also impose restrictions on similar transactions. All the Insiders are prohibited from trading in the EHL shares, while in possession of unpublished price sensitive information in relation to the Company during prescribed restricted trading period. Directors and Employees are also required to notify their intention to trade in the EHL shares prior to initiating the same.

Relationship with Shareholders:

Good corporate governance encourages dialogue with shareholders

Communications with Shareholders

EHL is continuously striving to improve relations with its shareholders.

The quarterly financial results and all other information are published in widely circulated dailies in both Bengali and English newspaper. The information is also made available in the company website.

Half yearly and Annual Reports are sent to shareholders are sent by post. The information is also made available in the company website.

Event based disclosure when required is disclosed through press releases and stock exchanges.

All information provided to the BSEC and Stock Exchanges are immediately made available to Shareholders on our company website: www.easternhousing.com

General Meeting 

The Company requires its Board and auditors to attend each Annual General Meeting (AGM) so as to be available to answer Shareholders queries on the results of the Company.

Website

All financial results are posted on the Investor Relations section of the Company’s website: www.easternhousing.com

Shareholders Queries

EHL has set up a separate share division in ground floor of the registered office of EHL. In addition we have special queries telephone lines and an email address. Shareholders can contact 9566303 or mail to EHL Share Office: share@easternhousing.com for any queries and/or grievances.