Governance

Corporate Governance

This report provides an overview of how the Company has implemented sound corporate governance throughout its organisation. The Company’s corporate governance policies are based on the Norwegian Code of Practice for Corporate Governance (the “Code”) dated 17 October 2018 issued by the Norwegian Corporate Governance Board. The Code is available at www.nues.no.

Implementation and reporting on corporate governance

Hafnia Limited (“Hafnia” or the “Company”) is a Bermuda limited liability company listed in Oslo.

It is the view of the Board of Directors (the “Board”) that the best interests of the Company and its stakeholders are best served by the implementation of business policies and practices which are in compliance with applicable Legislation, regulations and ethical and corporate governance guidelines. Further, the Company aims to keep all dealings with customers, potential customers and other third parties transparent and compliant. To this end, Hafnia has implemented policies that are designed to be fair and in accordance with leading market practices on stakeholder relationships and accommodating to the reasonable expectations of its stakeholders.

Hafnia is primarily governed by the Bermuda Companies Act, its Memorandum of Association and its Bye-laws. Certain aspects of Hafnia’s activities are governed by Norwegian law pursuant. In particular, the Norwegian Securities Trading Act, related regulations and the Continued Obligations for listed companies will generally apply. Hafnia’s business activities are also subject to the laws of the countries in which it at any time operates, as well as international law and conventions.

Each individual section of the Code is discussed in the following, and any deviations from the Code are set out and explained.

The Company does not deviate from section 1 of the Code.

Business

The Company’s business and objectives are described in the Company’s Memorandum of Association. In accordance with common practice for Bermuda incorporated companies (including those listed on the Oslo Stock Exchange), the Company’s objects as set out therein are wider and more extensive than recommended in the Code.

The Board sets clear objectives and strategies for the Company and defines its risk profile, while the Company’s executive management implements and ensures compliance with the Board’s determinations. Hafnia’s objectives, strategies and risk profile are evaluated at least on an annual basis. The strategy and objectives of the Company, as well as its corporate governance regime, are cornerstones in the Company’s policy to integrate considerations related to its various stakeholders into its business execution and value creation.

Stakeholders may read more about Hafnia’s strategy, objectives and risk profile in the Annual Report.

Equity and dividends

The Board monitors the Company’s capital structure to ensure that it is appropriate to the company’s objective, strategy and risk profile.

The Board has established a clear and predictable dividend policy based on a targeted quarterly dividend with a pay-out ratio of 50% of annual net profit, adjusted for extraordinary items. In addition to cash dividends, the Company may also from time to time consider buying back shares as part of its total distribution to shareholders.

Pursuant to Bermuda law and in accordance with common practice for Bermuda incorporated companies, the Board has the authority to issue any authorised unissued shares in the Company on such terms and conditions as it may decide and may exercise all powers of the Company to purchase the Company’s own shares. The powers of the Board to issue and purchase shares are neither limited to specific purposes nor to a specified period as recommended in the Code. This represents a deviation from Section 3 of the Code.

Equal treatment of shareholders and transactions with close associates

The Company has one class of shares. All shares in the Company carry equal rights, including the right to vote and participate in general meetings. As such, all shareholders will be treated equally unless there is just cause for treating them differently.

As the Company is a Bermuda limited company, shareholders do not have the same preferential rights in a future offering of shares in Hafnia as shareholders in Norwegian limited liability companies normally have. This is common practice for Bermuda limited companies, including those listed on the Oslo Stock Exchange.

Any transactions that the Company carries out in its own shares will be carried out either through the stock exchange or at prevailing market prices if carried out in any other way.

In cases of transactions between the Company and a shareholder, a shareholder’s parent company, director, officer or executive personnel of the Company or persons closely related to any such parties, which are not immaterial for either the Company or the close associate involved, the Board will obtain a valuation from an independent third party.

The Company does not deviate from Section 4 of the Code.

Shares and negotiabilty

The Shares are generally freely negotiable. However, the Board may decline to register the transfer of any share, where such transfer would, in the opinion of the Board, likely result in 50% or more of the aggregate issued and outstanding share capital of the Company being held or owned directly or indirectly by individuals or legal persons resident for tax purposes in Norway, or alternatively, such shares being effectively connected to a Norwegian business activity, or the Company otherwise being deemed a “Controlled Foreign Company” as such term is defined pursuant to Norwegian tax legislation. The purpose of this provision is to avoid the Company being deemed a Controlled Foreign Company pursuant to Norwegian tax rules.

The Company’s bye-laws also provide the Board the authority to decline the registration of the transfer of “Default Securities” (as defined in the Company’s bye-laws), i.e. shares belonging to unidentified shareholders or any other person who, upon due notice from the company, have failed to disclose his, her or its interest in company securities.

Both of the above restrictions are common practice for Bermuda limited companies listed on the Oslo Stock Exchange, but represent deviations from Section 5 of the Code.

General meetings

The Company encourages all shareholders to participate in and to vote at general meetings. In order to facilitate shareholder participation, the Board will ensure that:

• the resolutions and supporting documentation, if any, will be sufficiently detailed, comprehensive and specific to allow shareholders to understand and form a view on matters that are to be considered at the general meeting;
• the registration deadline, if any, for shareholders to participate at the general meeting will be set as closely to the date of the general meeting as practically possible and permissible under the provision in the Company’s bye-laws;
• the shareholders will have the opportunity to vote on each individual matter, including on each candidate nominated for election to the Company’s Board and committees (if applicable); and
• the members of the Board, the chairman of the nomination committee and the auditor (where attendance is regarded as essential) will be present at the general meeting.

Shareholders who are not able to attend the general meeting will be given the opportunity to vote by proxy or to participate by using electronic means. The Company will in this respect:

• provide information on the procedure for attending by proxy in the notice;
• nominate a person who will be available to vote on behalf of shareholders as their proxy; and
• prepare a proxy form which will, insofar as this is possible, be formulated in such a manner that the shareholder may vote on each item that is to be addressed and vote for each of the candidates that are nominated for election.

Pursuant to common practice for Bermuda incorporated companies, the chairman of the Board, or the president of the Company if there is one appointed, will chair the Company’s general meetings unless otherwise resolved by majority vote. This represents a deviation from Section 6 of the Code. However, there will be routines to ensure that an independent person is available to chair the general meeting or a particular agenda with regards to any matters related to the chairman.

Nomination committee

As provided for in its bye-laws, the Company will appoint a nomination committee at the 2020 annual general meeting. The Company has already prepared and approved the guidelines for the nomination committee’s activities, duties, composition and remuneration.

The nomination committee’s duties include to propose candidates for election to the Board and the nomination committee itself. As part of its work in proposing candidates for election to the Board, the nomination committee will provide reasoned recommendations for any candidate and seeks to consult relevant shareholders concerning proposals for appointment of candidates.

Pursuant to the Nomination Committee guidelines, a member of the Board who is also a member of the Nomination Committee may offer him or herself for re-election to the Board. This deviation from Section 7 of the Code has been implemented to facilitate cooperation between the Nomination Committee and the Board, and to ensure continuity in the Board.

See the Remuneration and nomination committees section of Corporate Governance for further information regarding the nomination committee and its responsibilities.

The Company will provide shareholders with any deadlines for submitting proposals for candidates to the nomination committee.

Board of directors: composition and independence

An introduction to the members of the board of directors and their expertise is included here. The Company believes that the composition of the Board ensures that the Board has the required expertise, capacity, diversity and independence to attend to the Board’s duties towards the Company and its stakeholders.

The Board consists of five board members who work together to exercise proper supervision of the Company’s business, compliance and performance and the work done by the Company’s management. The chairperson of the Board is elected by the shareholders. Four out of five of the board members are independent of the Company, its main shareholders and material business contacts, and the Company’s executive management is not represented on the Board.

The members of the Board serve for periods of two years at the time, after which they are re-evaluated for potential re-election. The benefit of continuity in the Board’s composition will be balanced against the potential benefits of renewal and independence.

The members of the Board are encouraged to own shares in the Company. The Company does not deviate from Section 8 of the Code.

The work of the board of directors

The Board is ultimately responsible for the management of the Company and for supervising its day-to-day management.

The Board’s duties and responsibilities are set out in detail in the Company’s bye-laws. The Company has adopted various guidelines for the Board’s work, and the Board emphasises clear allocation of responsibilities and duties amongst the board members and between the Board and executive management. The Board has also adopted guidelines for executive personnel.

Directors and officers of the Company and executive personnel are required to notify the Board if they directly or indirectly have a material interest in any transaction carried out by the Company. Members of the Board of Directors and Executive Personnel cannot consider items in which they have a special and prominent interest so that such items can be considered in an unbiased and satisfactory way. When assessing significant matters in which the chairman of the Board has been actively involved outside of the role as chairman of the Board, another board member will normally chair the discussions regarding such matters.

The Board has established an audit committee consisting of members of the Board, and has adopted guidelines for the audit committee’s work. See the Audit committee section of Corporate Governance for further information regarding members of the audit committee and their responsibilities.

The Board has also established a remuneration committee to ensure due and independent preparation of matters relating to compensation paid to executive personnel. See the Remuneration and nomination committees section of Corporate Governance for further information regarding the members of the remuneration committee and their responsibilities.

The Board aims to annually evaluate its own performance, expertise and cooperation in order to ensure that it fulfils its duties and responsibilities satisfactorily.

Risk management and internal control

The Board is responsible for ensuring that the Company has sound and appropriate control procedures and systems to manage its exposure to the risks that are inherent to the Company’s business. Such procedures also support the quality of the Company’s financial reporting and compliance with applicable laws and regulations, and shall as such contribute to accommodate the interest of the Company’s stakeholders and assets.

In the section Risk Management, the Company provides an overview of central risks related to Hafnia and its business.

Management and internal control will be based on Company-wide policies and internal guidelines in areas such as Finance and Accounting, Health, Safety, Security, Environment & Quality (HSSEQ), Ship Operations and Project Management, in addition to implementation and the follow-up of a risk assessment process. The Company’s management system is central to the Company’s internal control and shall ensure that the Company’s vision, policies, goals and procedures are known and adhered to.

The Company has frequent and relevant management reporting of both operational and financial matters in place both to ensure adequate information for decision-making and to respond quickly to changing conditions. The Company has established clear and safe communication channels between the employees and management to ensure effective reporting of any illegal or unethical activities in the Company, as such activities may be detrimental to the Company’s reputation and financial well-being, as well as to the Company’s various stakeholders.

The Board carries out annual reviews of the Company’s most important areas of exposure to risk and its internal control arrangements. These measures (and others) ensure that considerations related to the Company’s various stakeholders are integrated in the Company’s decision-making processes and value-creation.

The Company does not deviate from Section 10 of the Code.

Remuneration of the board of directors

The remuneration of the Board is decided by the annual general meeting. In determining the remuneration of the Board, the Board’s responsibility, expertise, time commitment and the complexity of the Company’s activities will be considered.

To maintain the Board’s independence, the Board’s remuneration will not be linked to the performance of the Company, nor does the Company intend to grant share options, similar instruments or retirement benefits to board members as consideration for their work.

As a rule, board members do not undertake special tasks for the Company in addition to their directorship. Fees for any such services rendered should be approved by the Board.

The Company does not deviate from Section 11 of the Code.

Remuneration of executive personnel

The Board has adopted guidelines and principles for determining the remuneration of executive personnel, which have been presented to the shareholders and will be communicated to the annual general meeting. Such guidelines are not a requirement under Bermuda law, and will therefore not be subject to the approval of the annual general meeting. The deviation is in accordance with common practice for Bermuda incorporated companies and customary for Bermuda incorporated companies listed on the Oslo Stock Exchange. This represents a deviation from Section 12 of the Code.

The remuneration committee annually prepares recommendations to the Board regarding the remuneration to executive management. When preparing its recommendations, the remuneration committee will take into account inter alia responsibility, expertise, time commitment and the complexity of the Company’s activities. The remuneration paid to executive management will aim to ensure a convergence of the financial interests of the shareholders and executive management. The Company has inter alia adopted a long-term share incentive program for executive management.

Details of the remuneration paid to executive management in 2019 is set out in Note 26 the Company’s financial statements for the year ended 31 December 2019.

Information and communications

The Board has adopted guidelines for the Company’s communication with shareholders and how the Company will make information available to shareholders outside of general meetings. Hafnia values openness and transparency towards its shareholders, and all communications and announcements of information will take into account the requirement for equal treatment of the Company’s shareholders.

The Company publishes an updated financial calendar with dates for important events such as the annual general meeting, publishing of interim reports, public presentations and payment of dividends (if applicable) on the Company’s website and on Newsweb.

The Company does not deviate from Section 13 of the Code.

Take-overs

The Company has established key principles for how to act in the event of a take-over offer. In the event of a take-over process, the Board has a duty to ensure that the Company’s shareholders are treated equally and that the Company’s activities are not unnecessarily interrupted. The Board will also ensure that the shareholders have sufficient information and time to assess the offer. In the event of a take-over process, the Board will abide by the principles of the Code and also ensure that the following take place:

• the Board will ensure that the offer is made to all shareholders, and on the same terms;
• the Board shall not undertake any actions intended to give shareholders or others an unreasonable advantage at the expense of other shareholders or the Company;
• the Board should not enter into an agreement with any offeror that limits the Company’s ability to entertain other offers for the Company’s shares, unless it is obvious that such an agreement is in the common interest of the Company and its shareholders;
• the Board shall strive to be completely open about the take-over situation. Agreements between the Company and the offeror which are of significance for the market’s assessment of the offer shall be made know to the market no later than the time when the market is notified of the offer;
• the Board shall not institute measures which have the intention of protecting the personal interests of its members at the expense of the interests of the shareholders; and
• the Board acknowledges the particular duty the Board carries for ensuring that the interests of the shareholders are safeguarded.

The Board shall not attempt to prevent or impede the take-over bid unless this has been decided by the shareholders in a general meeting in accordance with applicable laws. The main underlying principles shall be that the Company’s common shares shall be kept freely transferable and that the Company shall not establish any mechanisms which can prevent or deter take-over offers unless this has been decided by the shareholders in a general meeting in accordance with applicable law.

If an offer is made for a Company’s common shares, the Board shall issue a statement evaluating the offer and making a recommendation as to whether shareholders should or should not accept the offer. If the Board finds itself unable to give a recommendation to the shareholders on whether or not to accept the offer, it should explain the reasons for this. The Board’s statement on a bid shall make it clear whether the views expressed are unanimous, and if this is not the case, it shall explain the reasons why specific members of the Board have excluded themselves from the statement.

The Board will consider whether to arrange a valuation from an independent expert. If any member of the Board, or close associates of such member, or anyone who has recently held a position but has ceased to hold such a position as a member of the Board, is either the bidder or has a particular personal interest in the bid, the Board will arrange an independent valuation. This will also apply if the bidder is a major shareholder of the Company. Any such valuation should either be enclosed with the Board’s statement, or reproduced or referred to in the statement.

The Company does not deviate from section 14 of the Code

Auditor

The Company’s auditor is appointed by the annual general meeting of the Company and is responsible for the audit of the consolidated financial statements of the Company.

The auditor participates in the audit committee’s review and discussion of the annual accounts and quarterly interim accounts, and will annually submit the main features of the plan for the audit of the Company to the Board or the audit committee.

The auditor normally participates in Board meetings that deal with the annual accounts, accounting principles, assess any important accounting estimates and matters of importance on which there has been disagreement between the auditor and the executive management of the Company and/or the audit committee. The auditor shall at least once a year present to the Board or the audit committee a review of the Company’s internal control procedures, including identified weaknesses and proposals for improvement. Further, the Board will normally hold a meeting with the auditor at least once a year at which no representative of the executive management is present.

The Board is responsible for determining whether executive management may engage the auditor for other purposes than auditing. The auditor is required to annually confirm his or her independence in writing to the audit committee.

The Board will give an account to the shareholders at the annual general meeting of the remuneration paid to the auditor, including details of the fee paid for audit work and any fees paid for other specific assignments.