FIRST LITHIUM LIMITED — Governance Information 2016

Sep 13, 2016

LIMITED

2016 CORPORATE GOVERNANCE STATEMENT

The Company’s Board of Directors is responsible for establishing the corporate governance framework of the Company and its related bodies corporate. In establishing this framework, the Board has considered and reports against the Principles of Corporate Governance and Best Practice Recommendations (3[rd] Edition) as published by the ASX Corporate Governance Council (“ASX Corporate Governance Principles”).

The Company appointed Voluntary Administrators on 29 August 2014 and resolved to enter into a Deed of Company Arrangement on 24 October 2014. Mr Mark Summers and Mr Jack James were appointed as Administrators of the Company on 29 August 2014. On 24 October 2014 Mr Summers and Mr James were appointed as Joint and Several Deed Administrators of the Company. Mr Summers subsequently resigned as Administrator of the Deed leaving Mr James as sole Administrator.

On 20 March 2015 the Deed of Company Arrangement was signed. On 5 June 2015 the Shareholders approved the necessary resolutions to effectuate the Deed. The Deed of Company Arrangement was effectuated on 23 September 2015, at which time the Administrators resigned and control and management of the Company reverted to the Directors appointed by the Shareholders on 5 June 2015.

As the current Board was appointed on 5 June 2015, it is unable to comment on the extent to which the Company followed the applicable ASX Corporate Governance Principles prior to this date, whether any recommendation was not followed or the reason for the departure, if any. On 12 October 2015, the Board adopted a documented Corporate Governance Plan which is based on the ASX Corporate Governance Principles.

This Corporate Governance Statement has been approved by the Board and summarises the corporate governance practices and procedures incorporated in the Corporate Governance Plan from 12 October 2015 and to the date of this statement. In addition to the information contained in this statement, the Company’s website contains additional details of its corporate governance practices and procedures.

The ASX Listing Rules require listed companies to include in their Annual Report or website a statement disclosing the extent to which they have complied with the ASX Corporate Governance Principles in the reporting period. The recommendations are not prescriptive and if a company considers that a recommendation is inappropriate having regard to its particular circumstances, the company has the flexibility not to adopt it. Where the Company considered it was not appropriate to presently comply with a particular recommendation, the reasons are set out in the relevant section of this Corporate Governance Statement.

With the exception of the departures detailed in this Corporate Governance Statement, the corporate governance practices of the Company from 12 October 2015 were compliant with the ASX Corporate Governance Principles.

The table below provides a summary of the Company’s compliance with each of the eight ASX Corporate Governance Principles:

Corporate Governance Principles:	Corporate Governance Principles:
Recommendation		Comply Yes/No/ Partly
Principle 1– Lay solid foundations for management and oversight
1.1	A listed entity should disclose: (a) the respective roles and responsibilities of its board and management; and (b) those matters expressly reserved to the board and those delegated to management.	Yes Yes
1.2	A listed entity should: (a) undertake appropriate checks before appointing a person, or putting forward to security holders a candidate for election, as a director; and (b) provide security holders with all material information in its possession relevant to a decision on whether or not to re-elect a director.	Yes Yes
1.3	A listed entity should have a written agreement with each director and senior executive setting out the terms of their appointment	Yes
1.4	The company secretary of a listed entity should be accountable directly to the board, through the chair, on all matters to do with the proper functioning of the board.	Yes
1.5	A listed entity should: (a) have a diversity policy which includes requirements for the board or a relevant committee of the board to set measurable objectives for achieving gender diversity and to assess annually both the objectives and the entity’s progress in achieving them; (b) disclose that policy or a summary of it; and (c) disclose as at the end of each reporting period the measurable objectives for achieving gender diversity set by the board or a relevant committee of the board in accordance with the entity’s diversity policy and its progress towards achieving them and either: (1) the respective proportions of men and women on the board, in senior executive positions and across the whole organisation (including how the entity has defined “senior executive” for these purposes); and (2) if the entity is a “relevant employer” under the Workplace Gender Equality Act, the entity’s most recent “Gender Equality Indicators”, as defined and published under that Act.	Yes Yes No Yes Not applicable
1.6	A listed entity should: (a) have and disclose a process for periodically evaluating the performance of the board, its committees and individual directors; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.	Yes No
1.7	A listed entity should: (a) have and disclose a process for periodically evaluating the performance of its senior executives; and (b) disclose, in relation to each reporting period, whether a performance evaluation was undertaken in the reporting period in accordance with that process.	Yes Yes
Principle 2– Structure the board to add value
2.1	The board of a listed entity should: (a) have a nomination committee which:	Not applicable

	(1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director, and disclose (3) the charter of that committee; and (4) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of members at those meetings; or (b) if it does not have a nomination committee, disclose that fact and the processes it employs to address board succession issues and to ensure that the board has the appropriate balance of skills, knowledge, experience, independence and diversity to enable it to discharge its duties and responsibilities effectively.	Yes
2.2	A listed entity should have and disclose a board skills matrix setting out the mix of skills and diversity that the board currently has or is looking to achieve in its membership.	Yes
2.3	A listed entity should disclose: (a) the names of the directors considered by the board to be independent directors; (b) if a director has an interest, position, association or relationship of the type described in Box 2.3 of the ASX Recommendations, but the board is of the opinion it does not compromise the independence of the director, the nature of the interest, position, association or relationship in question and an explanation of why the board is of that opinion; and (c) the length of service of each director.	Yes Yes Yes
2.4	A majority of the board of a listed entity should be independent directors.	Yes
2.5	The chair of the board of a listed entity should be an independent director and, in particular, should not be the same person as the CEO of the entity.	No
2.6	A listed entity should have a program for inducting new directors and provide appropriate professional development opportunities for directors to develop and maintain the skills and knowledge needed to perform their role as directors effectively.	Yes
Principle 3– Act ethically and responsibly
3.1	A listed entity should: (a) have a code of conduct for its directors, senior executives and employees; and (b) disclose that code or a summary of it.	Yes Yes
Principle 4– Safeguard integrity in corporate reporting
4.1	The Board of a listed entity should: (a) have an audit committee which: (1) has at least three members, all of whom are non-executive directors and a majority of whom are independent directors; and (2) is chaired by an independent director, who is not the chair of the board, and disclose: (3) the charter of the committee; (4) the relevant qualifications and experience of members of the committee; and (5) in relation to each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have an audit committee, disclose that fact and the processes it employs that independently verify and safeguard the integrity of its corporate reporting, including the processes for the appointment and removal of the external auditor and the rotation of the audit engagement partner.	Not applicable Yes
4.2	The board of a listed entity should, before it approves the entity’s financial statements for a financial period, receive from its CEO and CFO a	Yes

		declaration that, in their opinion, the financial records of the entity have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.
4.3		A listed entity that has an AGM should ensure that its external auditor attends its AGM and is available to answer questions from security holders relevant to the audit.	Yes
Principle 5– Make timely and balanced disclosure
5.1		A listed entity should: (a) have a written policy for complying with its continuous disclosure obligations under the Listing Rules; and (b) disclose that policy or a summary of it.	Yes Yes
Principle 6– Respect the rights of security holders
6.1	A listed entity should provide information about itself and its governance to investors via its website.		Yes
6.2	A listed entity should design and implement an investor relations program to facilitate effective two-way communication with investors.		Yes
6.3	A listed entity should disclose the policies and processes it has in place to facilitate and encourage participation at meetings of security holders.		Yes
6.4	A listed entity should give security holders the option to receive communications from, and send communication to, the entity and its security registry electronically.		Yes
Principle 7– Recognise and manage risk
7.1	The board of a listed entity should: (a) have a committee or committees to oversee risk, each of which: (1) has at least three members, a majority of whom are independent directors; and (2) is chaired by an independent director; and disclose (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a risk committee or committees that satisfy (a) above, disclose that fact and the processes it employs for overseeing the entity’s risk management framework.		Not applicable Yes
7.2	The board or a committee of the board should: (a) review the entity’s risk management framework at least annually to satisfy itself that it continues to be sound; and (b) disclose, in relation to each reporting period, whether such a review has taken place.		Yes No review undertaken
7.3	A listed entity should disclose: (a) if it has an internal audit function, how the function is structured and what role it performs; or (b) if it does not have an internal audit function, that fact and the processes it employs for evaluation and continually improving the effectiveness of its risk management and internal control processes.		Not applicable Yes
7.4	A listed entity should disclose whether it has any material exposure to economic, environmental and social sustainability risk and, if it does, how it manages or intends to manage those risks.		Yes
Principle 8– Remunerate fairly and responsibly
8.1		The Board of a listed entity should: (a) have a remuneration committee which: (1) has at least three members, a majority of whom are independent directors; and	Not applicable

	(2) is chaired by an independent director, and disclose (3) the charter of the committee; (4) the members of the committee; and (5) as at the end of each reporting period, the number of times the committee met throughout the period and the individual attendances of the members at those meetings; or (b) if it does not have a remuneration committee, disclose that fact and the processes it employees for setting the level and composition of remuneration for directors and senior executives and ensuring that such remuneration is appropriate and not excessive.	Yes
8.2	A listed entity should separately disclose its policies and practices regarding the remuneration of non-executive directors and the remuneration of executive directors and other senior executives.	Yes
8.3	A listed entity which has an equity-based remuneration scheme should: (a) have a policy on whether participants are permitted to enter into transactions (whether through the use of derivatives or otherwise) which limit the economic risk of participating in the scheme; and (b) disclose that policy or a summary of it.	Yes Yes

Board Responsibilities

The Company has established the functions that are reserved to the Board. The Board acts on behalf of the shareholders and is therefore accountable to the shareholders. It also has other obligations of a regulatory or ethical nature. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to appropriately manage those risks.

The Board’s role is to govern the Consolidated Entity. Without limiting the generality of that stated role, the key matters reserved specifically for the Board include:

• Driving the strategic direction of the Company, ensuring appropriate resources are available to meet objectives and monitoring management’s performance.

• Appointment, and where necessary, the replacement, of the Chief Executive Officer/Managing Director and other senior executives and the determination of their terms and conditions including remuneration and termination.

• Approving the Company’s remuneration framework.

• Monitoring the timeliness and effectiveness of reporting to Shareholders.

• Reviewing and ratifying systems of audit, risk management and internal compliance and control, codes of conduct and legal compliance to minimise the possibility of the Company operating beyond acceptable risk parameters.

• Approving and monitoring the progress of major capital expenditure, capital management and significant acquisitions and divestitures.

• Approving and monitoring the budget and the adequacy and integrity of financial and other reporting such that the financial performance of the company has sufficient clarity to be actively monitored.

• Approving the annual, half yearly and quarterly accounts.

• Approving significant changes to the organisational structure.

• Approving decisions affecting the Company’s capital, including determining the Company’s dividend policy and declaring dividends.

• Recommending to shareholders the appointment of the external auditor as and when their appointment or re-appointment is required to be approved by them (in accordance with the ASX Listing Rules if applicable).

• Ensuring a high standard of corporate governance practice and regulatory compliance and promoting ethical and responsible decision making

• Procuring appropriate professional development opportunities for Directors to develop and maintain the skills and knowledge needed to perform their role as Directors effectively.

For a complete list of the functions reserved to the Board and a copy of the Board’s charter, please refer to the Corporate Governance section of the Company’s website.

Due to the size of the Board and the stage of the Company’s operations, the Board has opted not to establish an Audit and Risk Committee or a Remuneration or Nomination Committee. These duties and responsibilities are discharged by the full Board, in accordance with the Audit and Risk Committee and Remuneration and Nomination Committee Charters that have been adopted by the Board.

Refer to the Corporate Governance section of the Company’s website for a copy of the Committee charters.

Responsibilities of Senior Executives

The responsibility for the day to day operation and administration of the Consolidated Entity, in accordance with the direction of the Board, is delegated by the Board to the Managing Director and the executive team. The Board ensures that this team is appropriately qualified and experienced to carry out their responsibilities and has in place procedures to assess the performance of the Managing Director and the executive team.

Performance evaluation of Board and Senior Executives

The Board has adopted a policy for evaluating the performance of the Board and Directors, a copy of which is available on its website. The Board did not conduct a formal evaluation of the Board and its Directors in the reporting period as the current Board has only been in place since 27 October 2015. The Board expects to undertake an evaluation in the 2016/17 financial year.

The Board is responsible for an annual evaluation of the Managing Director, to be coordinated by the Chairman. There is currently no Managing Director but the Board intends that if and when a Managing Director is appointed, the Managing Director’s performance objectives will be equivalent to the Company’s performance objectives and will be set by the Board based on qualitative and quantitative measures. The Managing Director’s performance against these objectives will then be reviewed annually by the Board and reflected in the Managing Director’s remuneration structure.

For further information regarding the Company’s Performance Evaluation Policy please refer to the Corporate Governance section of the Company’s website.

Structure of the Board and Skills Matrix

To ensure the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination, selection, induction and ongoing professional development of Directors. These guidelines include a requirement to undertake appropriate background checks prior to the appointment of a person as a Director, including but not limited to undertaking police and solvency checks, a formal induction program to enable new Directors to build their knowledge and make an effective contribution in a timely manner, and the provision of appropriate professional development opportunities for Directors to develop and maintain the skills and knowledge needed to perform their roles as Directors effectively.

The Directors in office and the term of their appointment at the date of this Corporate Governance Statement are:

Name	Position	Date of Appointment
F Ismail	Chairman, Non-executive Director	5 June 2015
B De Kauwe	Non-executive Director	5 June 2015
P Wall	Non-executive Director	27 October 2015

The skills, experience and expertise relevant to the position of Director held by each Director at the date of this Statement are included on pages 2 and 3 of the Company’s 2016 Annual Report.

The composition of the Board will be reviewed regularly by the Board to ensure that the Directors between them bring the range of skills, knowledge and experience necessary to direct the Company’s operations. The Board has developed a skills matrix considered suitable for the Board of the Company at its current stage and into the future, taking into account its current strategy, operations and expectations for changes in the nature and scope of its activities. The Board skills matrix identifies a mix of areas the Board should collectively hold across its membership, including experience in the financial services industry, software, finance and executive management. The Board is satisfied that the identified skills are well represented in the current Board.

The Company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of the Board. All Directors have unfettered access to the Company Secretary. In addition, Directors are entitled, in furtherance of their duties, to seek independent professional advice at the Company’s expense.

Independence

Recommendation 2.4 requires a majority of the Board to be independent Directors. The ASX guidance on factors relevant to an assessment of independence includes interests, positions, associations or relationships which might interfere with, or reasonably be seen to interfere with, a director’s capacity to bring independent judgement to bear on issues before the Board and to act in the best interests of the entity and its security holders generally. In accordance with this guidance, two of the three Directors are considered to be independent. Mr Ismail, Non-Executive Chairman is not considered independent as he is a substantial shareholder of the Company and associated with companies that provide various corporate, capital raising and accounting services and office accommodation to the Company at normal commercial rates. However the Board is of the view that this fact does not impact on his independent judgement and he can and does make independent decisions in the best interests of the Company and its security holders.

Nomination and Remuneration Committee

The Board has adopted a Nomination and Remuneration Committee Charter however at this stage has not established a Nomination or Remuneration Committee and the full Board currently undertakes the responsibilities for determining and reviewing compensation arrangements for the Directors and senior executives and ensuring that the Board continues to operate within the established guidelines, including when necessary, selecting candidates for the position of Director. For further details regarding the procedure for the nomination, selection and appointment of new Directors and re-election of incumbents, as well as a copy of the Nomination and Remuneration Committee Charter, please refer to the Corporate Governance section of the Company’s website.

For further details on the remuneration policy of the Company, including a description of the structure of Non-executive Directors’ remuneration and Executive Directors’ and senior executives’ remuneration, see the Directors’ Report of the Company’s 2016 Annual Report.

The Company has established a Performance Rights Plan pursuant to which the Company may offer long term equity incentive rights to Directors and employees. The rights are usually issued for nil consideration and typically only vest under certain conditions. The performance rights cannot be transferred without the approval of the Company’s Board and are not quoted on the ASX. Holders may not enter into any transaction designed to remove the “at risk” aspect of an option before it is exercised.

The Company acknowledges that the guidelines to ASX Principle 8.2 recommend that Non-executive Directors do not receive equity incentives with performance hurdles attached. However, in the Company’s current circumstances, the Directors consider rights to be a cost effective and efficient means for the Company to provide a reward and incentive, as opposed to alternative forms of incentive, such as the payment of additional cash consideration that would be necessary for someone with the experience of the Directors, and may from time to time resolve to issue options to Nonexecutive Directors, including with performance hurdles, subject to regulatory and shareholder approval.

There is no scheme to provide retirement benefits (other than superannuation) for Non-executive Directors.

For additional details please refer to the Corporate Governance section of the Company’s website.

Audit Committee

The Board has adopted an Audit Committee Charter however given the current size of the Board, a separate Audit Committee has not been established and the full Board currently undertakes the responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes such as the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information, as well as non-financial considerations including the benchmarking of operational key performance indicators. The Board is also responsible for the nomination of the external auditor and reviewing the adequacy of the scope and quality of the annual statutory audit and half year audit review.

For further details regarding the procedures for selection, appointment and rotation of external audit partners, as well as a copy of the Audit Committee’s Charter, please refer to the Corporate Governance section of the Company’s website.

Communication with Shareholders

Pursuant to Principle 6, the Board aims to ensure that the shareholders are provided with full and timely information about the Company’s activities. To promote effective communication with shareholders, the Company has designed a Shareholder Communication Strategy. Information is communicated to the shareholders through:

• the Annual Report which is made available to all shareholders;

• announcements made through the ASX companies announcements platform;

• the Company’s website which has a dedicated Investor Relations section for the purpose of publishing all important Company information and relevant announcements made to the market; and

• the annual general meeting and any other meetings called to obtain approval for Board action as appropriate.

In addition, shareholders are encouraged to make their views known or to seek clarification on information available in the public arena by contacting the Company (including the Company’s share registry, which facilitates electronic correspondence) or attending the annual general meeting. The external auditors also attend, and are available to answer queries on the preparation and content of the independent Audit Report, the accounting policies adopted by the Company in relation to the preparation of accounts and the independence of the Auditor in relation to the conduct of the audit at the Company’s annual general meetings.

For further information regarding the Company’s Shareholder Communication Policy please refer to the Corporate Governance section of the Company’s website.

Diversity Policy

The Board is committed to promoting equality and diversity in the workplace and aims to be an organisation where diversity is valued, respected and celebrated. All decisions relating to employees will be based strictly on merit, without regard to gender, ethnicity, age, relationship status or any other irrelevant factor not applicable to the position.

Pursuant to Recommendation 1.5, the Company has established a Diversity Policy. However due to the small size of the organisation and its current stage of operations, the introduction of specific measurable objectives at this stage has not been implemented. The Company currently has no employees and therefore does not report on the proportion of women in the whole organisation, women in senior executive positions and women on the Board.

Whilst the Board of the Company strongly endorses the concept of gender diversity, until the Company’s human resource base has grown to a point where fully implementing specific measurable objectives will become more meaningful, the Company will, in accordance with its Diversity Policy, continue to recruit the best person for each role, regardless of gender, ethnicity, age, relationship status or any other irrelevant factor not applicable to the position.

Share Trading

The Constitution of the Company permits Directors and officers to acquire shares in the Company.

In accordance with the provisions of the Corporations Act and the listing Rules of the ASX, Directors must advise the Company and the ASX of any transactions they conduct in securities of the Company.

The Company has established a Securities Trading Policy concerning trading in the Company’s securities by Directors and employees. This policy provides a brief summary of the law on insider trading and other relevant laws, sets out the restrictions on dealing in securities by people who work for or who are associated with the Company, and is intended to assist in maintaining market confidence in the integrity of dealings in the Company’s securities.

The policy stipulates that the only appropriate time for a Director or employee to deal in the Company’s securities is when he or she is not in possession of ‘price sensitive information’ that is not generally available to the share market. A Director wishing to deal in the Company’s securities may only do so after first having received approval from the Chairman. All staff wishing to deal must obtain approval from the Managing Director.

Trading in the Company’s securities is also subject to specified blackout periods, which are set out in the Company’s Trading Policy or as otherwise determined by the Board from time to time.

The Company prohibits Directors and employees from entering into transactions in associated products which limit the economic risk of participating in unvested entitlements under any equity-based remuneration schemes.

A copy of the Company’s Trading Policy is available in the Corporate Governance section of the Company’s website.

Integrity of Financial Reporting and Risk Management Policies

The Board has primary responsibility to ensure that the Company presents and publishes accounts which present a true and fair view of its results and financial position and that the accounting methods adopted are appropriate to the Company and consistently applied in accordance with relevant accounting standards and the applicable laws.

Under section 295A of the Corporations Act, the Managing Director and the person who performs the Chief Financial Officer function are each required to provide a written statement to the Board that the Company’s annual financial report presents a true and fair view, in all material respects, of the Company’s financial condition and operational results and that it is in accordance with the relevant accounting standards. Recommendation 4.2 extends this requirement such that it applies to financial statements for any financial period and that the Managing Director and the person who performs the Chief Financial Officer function must also confirm that this statement is founded on a sound system of risk management and internal compliance which implements the policies adopted by the Board and that the Company’s risk management and internal compliance and control system is operating effectively in all material respects.

The financial report for the year ended 30 June 2016 has been prepared by Directors who were appointed on or after 5 June 2015. However, the Directors did not have control of the Company until control was transferred to them on the effectuation of the deed of company arrangement on 23 September 2015. Prior to 23 September 2015, the current Directors did not have oversight or control over the company’s financial reporting systems including but not limited to being able to obtain access to complete accounting records of the Company. To prepare the financial reports for the year ended 30 June 2016, the Directors have reconstructed the financial records of the Company for the period 1 July 2015 to 23 September 2015 using data extracted from the Company’s accounting system. However, there may have been information that the current Directors were not able to obtain, the impact of which may or may not have been material on the financial performance.

Consequently, although the Directors have prepared this financial report for the year ended 30 June 2016 to the best of their knowledge based on the information made available to them, they were of the opinion that it was not possible to state that these financial reports had been prepared in accordance with Australian Accounting Standards including Australian interpretations, other authoritative pronouncements of the Australian Accounting Standard Board and the Corporations Act 2001, nor was it possible to state these financial reports gave a true and fair view of the Group’s financial position as at 30 June 2016 and its performance for the year ended on that date.

Due to the size of the Company and its current level of activity and operations, the Company does not have a formal internal audit function. Periodically, internal reviews of the Company’s financial systems,

documents and processes will be undertaken and any recommendation for improvement reported to the Board as part of the Company’s risk management processes.

The Board is committed to the management of risks throughout its operations to protect all of its stakeholders. Risk management is carried out through the full Board and the processes and procedures mentioned above.

The Company’s Risk Management Policy deals with the management and oversight of material business risks and provides the guiding principle for management in the identification of risks across the organisation as a whole, and within individual business units. Going forward, the Company intends to review the risk management framework at least annually.

The Risk Management Policy provides a framework for systematically understanding and identifying the types of material business risks that may threaten the Group as a whole or specific business activities within the Company and includes risk mitigation strategies. The Board intends to develop specific frameworks for risk, applicable to the Company’s proposed new direction.

The Board has formed the view that the Company does not currently have any material exposure to economic, environmental or social sustainability risks.

For a summary of the Company’s Risk Management Policy, please refer to the Corporate Policies section of the Company’s website.

Code of Conduct and Continuous Disclosure Policy

The Company has a Code of Conduct and Continuous Disclosure Policy, which can be found in the Corporate Governance section of the Company’s website. The Company’s Continuous Disclosure Policy facilitates compliance with the ASX continuous disclosure requirements.