Corporate governance
05
5.1
Corporate governance structure
An effective corporate governance system
is a crucial element for the sustainable development of UTLC ERA
the Company maintains
an advanced corporate governance system founded on the legal requirements of the Russian Federation.
UTLC ERA's Corporate Governance Structure
Selects, approves, appoints
Reports, drafts recomendation
Corporate year - end results
5
general meetings of shareholders
four joint attendance meetings with prior ballot submission, and one absentee vote.
17
meetings of the Board of Directors
nine held in the form of joint attendance and eight absentee votes
31
of Management Board meetings
twenty - nine held in the form of joint attendance
and two absentee votes
Committees of the Board
of Directors
6
meetings of the Strategy Committee
four meetings with joint attendance and two meetings
with absentee voting
6
meetings of the Human Resources, Remuneration and Corporate Governance Committee
four meetings with joint attendance and two meetings
with absentee voting
10
meetings of the Audit Committee
seven meetings with joint attendance and three meetings
with absentee voting
5.3
Dividend policy
During the reporting year, shareholders
at the annual general meeting ratified
the dividend policy of UTLC ERA
(as recorded in protocol No. 25 from June 28, 2024).
Dividend Policy principles
Legality principle
We uphold the rights
of shareholders in compliance with the laws of the Russian Federation
and contemporary international standards of corporate governance
Balanced objectives principle
We pay dividends to shareholders while also acting
in their best interests by strategically growing
the business.
Transparency principle
We enhance transparency
in the process
of determining dividend amounts and payments, improve access to information,
and provide guidance to shareholders.
the general shareholders' meeting makes all decisions regarding dividend payments, guided by the board
of directors' recommendations at UTLC ERA. Dividend payments follow a set schedule—after
the half - year
and annual results—and meet certain conditions.
Dividend payment terms
-
the net profit is determined from UTLC ERA’s accounting statements prepared
in accordance with RAS requirements -
At least 50% of UTLC ERA’s net profit (fixed amount) for the reporting period
is subject
to distribution -
the decision is not in conflict with
the Company's obligations
or Russian law -
Factors considered in determining the total dividend amount include the Company's financial and business plans, financial liabilities repayment schedule, potential impact
of dividend payment on credit covenants, projected working capital needs
for the upcoming year,
as well as the Company’s free cash flow
Dividends accrued and paid in 2024
Key decisions made in 2024
Annual General Meeting of Shareholders
dated June 28, 2024
-
Approved the annual accounting (financial) statements of UTLC ERA for 2023, prepared in accordance with the Russian Accounting Standards and
the International Financial Reporting Standards. -
the Annual Report of the Company for the year 2023 has been approved.
-
A decision has been made regarding the distribution of the Company’s profits
and losses for the fiscal year 2023. -
A decision has been made concerning the payment (declaration) of dividends for the fiscal year 2023.
-
A decision has been made to pay rewards and compensations to UTLC ERA’s Board of Directors,
as well as to the members
of the Internal Audit Commission, in accordance with the internal documents governing this matter. -
A new Internal Audit Commission
of UTLC ERA has been elected. -
the regulations on the dividend policy of UTLC ERA have been approved in a new version.
100%
the quorum of the Annual General Meeting of Shareholders.
Extraordinary General Meeting
of Shareholders
dated March 29, 2024
-
UTLC ERA’s CEO re - elected
for a new term. -
the board members were re - elected for another term.
dated August 9, 2024
-
New members of UTLC ERA Board
of Directors have been elected. -
Chairman of the Board of Directors
of UTLC ERA has been elected.
dated September 16, 2024
-
the terms of office of UTLC ERA Board of Directors have been prematurely ended.
-
New members of UTLC ERA Board
of Directors have been elected. -
Chairman of the Board of Directors
of UTLC ERA has been elected.
September 27, 2024
-
A decision has been made to pay (declare) dividends based
on the results
of the first half of 2024.
100%
the quorum of the Extraordinary General Meeting of Shareholders
5.5
Board
of Directors
the Board of Directors of UTLC ERA (hereinafter referred
to as the “Board
of Directors”) constitutes a management body tasked with providing strategic leadership
of the Company to enhance its shareholder value and resolving all matters of general management except for those within
the authority of the General Meeting of Shareholders, the Management Board,
and the Chief Executive Officer.
the Board holds a key position in forming
and developing
the corporate governance system, protecting and exercising shareholders’ rights, and overseeing
the functions of the executive bodies.
the modality of the Board’s operation
is regulated
by the Charter on the Board
of Directors of UTLC ERA, approved pursuant to the resolution of the Extraordinary General Meeting
of Shareholders (Protocol No. 15 dated July 22, 2021).
the Board is elected by the General Meeting
of Shareholders for a term extending to the next Annual General Meeting and comprises six members, of whom:
-
Two members are elected from candidates nominated by JSCo "RZD"
-
two members from candidates nominated
by JSC "NC "KTZ" -
● and two members from candidates nominated by Belarusian Railway
the Board of Directors does not include independent directors.
In its operations, the Board of Directors shall be governed by the legislation of the Russian Federation, the shareholders’ agreement, the Articles of Association of the Company, the Regulations on the Board of Directors, and other internal documents of JSC UTLC ERA.
the Board is competent to take decisions within its authority if no less than half
of its elected members take part in the meeting. Furthermore,
it is mandatory that at least one Board member nominated by each shareholder either attends
the meeting or submits a written opinion (in the case of in - person voting) or a completed and signed survey form (in case of absentee voting)
Chairman of the Board
of Directors
the Chairman of the Board of Directors plays
a pivotal role
in guaranteeing the efficient performance of the Board. He coordinates
the Board’s work, convenes its meetings, presides over them, and ensures the protocol
is duly maintained. the Chairman
also executes other functions prescribed
by the effective legislation, UTLC ERA’s Articles of Association, the Regulations on the Board of Directors, and other internal documents.
the Chairman is elected by the General Meeting of Shareholders of UTLC ERA concurrently with the election of the Board
of Directors, in compliance
with the provisions of the shareholders’ agreement.
In the event that the Chairman is not elected by the General Meeting of Shareholders of the Company, the Board of Directors shall elect the Chairman at its first meeting convened after its own election, by a simple majority
of the total number of elected Board members.
the Board of Directors may re - elect
its Chairman at any time by majority vote
of the members present at the meeting, taking into account
the shareholders’ agreement.
Committees of the Board
of Directors
By resolution dated July 24, 2019, the Board
of Directors established the Strategy Committee,
the Audit Committee, and the Committee on Human Resources, Remuneration, and Corporate Governance under the Board of Directors of JSC UTLC ERA (Minutes No. 15
of July 24, 2019).
the objective of establishing the committees
is to assist
in the effective operation of UTLC ERA’s Board of Directors.
In carrying out their activities,
the committees are accountable
to the Board
of Directors and act as consultative and advisory bodies. Their decisions are advisory only. the key purpose of the committees is to conduct preliminary evaluations and formulate recommendations
for the Board of Directors of the Company.
According to Clause 18.2.16 of the Articles
of Association of JSC UTLC ERA, the authority
of the Company’s Board of Directors includes
the following:
-
Formulation and adoption of internal documents establishing the scope of authority
and operational procedures
of the committees -
Setting the number of members of the Board
of Directors’ committees -
the election of chairpersons and members
of the respective committees, as well as the termination of their mandates
In accordance with clause 8.8 of the Regulation
on the Board
of Directors of UTLC ERA, approved
by the resolution
of the Extraordinary General Meeting of Shareholders, the first session of the newly constituted Board of Directors shall obligatorily consider issues related to the formation of the Board’s committees and the election of their chairpersons
the quantitative and individual composition
of the committees,
as well as their chairpersons, shall be elected by resolution
of the Board by majority vote of the members participating
in the session.
There are three committees
under the Board of Directors
Strategy Committee
the Strategy Committee includes two representatives each from JSCo "RZD", JSC "NC "KTZ", Belarusian Railway, and JSC UTLC ERA.
Audit Committee
the Audit Committee includes two representatives each from JSCo "RZD", JSC "NC "KTZ", Belarusian Railway, and JSC UTLC ERA.
Human Resources, Remuneration
and Corporate Governance Committee
the Human Resources, Remuneration and Corporate Governance Committee includes two representatives each from JSCo "RZD", JSC "NC "KTZ" and Belarusian Railway, as well as one representative from JSC UTLC ERA.
5.6
Corporate Secretary and Committee Secretary
the Corporate Secretary of UTLC ERA (hereinafter referred to as the Corporate Secretary) is elected
by the Board of Directors and acts in accordance with the Company’s Articles of Association
and the Regulations on the Corporate Secretary approved by the Board of Directors. Additionally,
the Corporate Secretary also fulfills the duties
of the Secretary of the General Meeting
of Shareholders of UTLC ERA.
the Corporate Secretary is responsible for ensuring proper communication
with the shareholders
and the Board of Directors, coordinating activities aimed
at protecting their rights and interests, ensuring the adoption of corporate decisions, and performing other related functions
Over 2024, the Corporate Secretary functions were carried out by Dmitry Alexandrovich Bulgakov, elected pursuant to the Board of Directors’ resolutions (minutes No. 66 dated August 2, 2023; No. 83 dated August 27, 2024; No. 85 dated September 30, 2024).
the Secretary of the Board of Directors’ Committee (hereinafter - the Committee Secretary) is elected by the respective committee and performs functions per the regulations on the committee. In their activities, the Committee Secretary
is accountable to the Chairperson of the Committee.
the key functions of the Committee Secretary are:
-
to provide informational and document support to the committees’ activities
-
exercise control over the execution of decisions passed by the committee
-
ensure proper storage of committee meeting minutes and other documents and materials pertaining to the committee’s operations
in accordance with the document retention procedures adopted
by UTLC ERA -
and perform other functions prescribed
by the legislation of the Russian Federation,
the Company’s Charter, the committee regulations, and other internal documents.
In 2024, the functions
of the committee secretary were performed by Dmitry Alexandrovich Bulgakov.
Minutes of the Strategy Committee No. 28 dated August 11, 2023,
No. 35 dated September 16, 2024,
No. 36 dated October 7, 2024; minutes of the Audit Committee No. 26 dated August 11, 2023,
No. 37 dated October 4, 2024; minutes of the Human Resources, Compensation, and Corporate Governance Committee No. 23 dated September 19, 2023, No. 30 dated October 22, 2024.
5.7
Management Board and CEO
the CEO and the Management Board serve
as the executive bodies of UTLC ERA, ensuring the timely and efficient resolution of current and strategic tasks.
They report to the General Meeting
of Shareholders and the Board
of Directors. the CEO submits quarterly reports
to the Board
of Directors for the evaluation
of UTLC ERA's efficiency
and performance.
Chief Executive Officer
the CEO, as the sole executive authority
of UTLC ERA, is elected
by the General Meeting of Shareholders for a term specified by the meeting.
the Chairman of the Board of Directors or a designated representative signs the employment contract with the CEO on behalf
of the Company.
the CEO oversees the operational management of the Company's activities within the scope of his authority
(as outlined in UTLC ERA’s Articles of Association).
Alexey Grom has been elected as CEO with a term ending on April 1, 2027, inclusive.
the authorities of the CEO
-
representing the interests of UTLC ERA
-
making transactions on behalf
of the Company that do not require the approval
of the Management Board, the Board of Directors
or the General Meeting
of Shareholders -
signing financial documents
-
approval of staff payrolls, entering into labor contracts with employees,
and applying rewards or penalties -
approval of internal documents regulating the Company's current activities, except those requiring approval by the Management Board, Board of Directors, and General Meeting
of Shareholders as specified in the Articles of Association -
issuing binding orders
and instructions -
organizing the work
of the Management Board -
fulfilling other functions outlined
in the Company's Articles of Association
Alexey Grom
0%
Share in the charter capital of JSC «UTLC ERA»
0%
Share of ordinary shares in JSC «UTLC ERA»
the Management Board
the collegial executive body of UTLC ERA, responsible for overseeing
the company's day - to - day operations, actively participating in strategy development
and implementation, and ensuring compliance with decisions made
by the General Meeting of Shareholders and the Board of Directors.
the composition of the Management Board, consisting of six members
from among the employees, and its term
of office are determined
by the General Meeting of Shareholders, which considers candidates proposed by the CEO.
Management Board meetings
are convened as necessary, but at least once
a month, and are generally held
in the form of joint attendance. the Management Board's activities
are based on an approved plan.
In its activities, the Management Board is guided by
-
Applicable laws
-
the Shareholders’ Agreement
-
the Articles of Association of «UTLC ERA»
-
the Regulations on the Management Board
-
Other internal documents
5.8
Countering corruption
5.8
Anti - Corruption Efforts
5.8
Anti - Corruption Efforts
Since its establishment, the Company has upheld
the principles of counteracting
and rejecting corruption in all its manifestations.
On this basis, the document “Anti - Corruption Policy
of JSC UTLC ERA” was developed and approved by the Board of Directors on January 25, 2021.
This document sets forth the following:
-
the goals and objectives of the Company's
anti - corruption policy -
Key principles for preventing corruption
-
the roles and duties of management and staff
in addressing prevention and counteraction of corruption -
the responsibility of managers and employees for failure to comply with the Company’s anti - corruption policy
Objectives of the Anti - Corruption Policy
Preventing corruption offenses
Ensuring compliance of UTLC ERA's activities with the legislation
of the Russian Federation
and similar
anti - corruption documents adopted by the Company's shareholders
Cultivating a unified understanding
of the Company's zero - tolerance
for corruption
in all its manifestations among
the Company's managers and employees, counterparties, railway administrations, railway carriers, transportation
and logistics market participants and other persons
Monitoring and evaluating corruption risk factors
and the effectiveness of anti - corruption policy measures
UTLC ERA implements a comprehensive set
of measures designed to prevent
and combat corruption. In doing so, the Company adheres
to the laws of the Russian Federation and accepted norms.
All employees of the Company have been informed
of the anti - corruption policy
and fully endorse its provisions. In line with company guidelines, employees
are obligated to immediately report any suspected corruption or fraudulent behavior
to their direct manager, notify the Security Department, or submit details through anticorr@utlc.com —a mailbox monitored daily by security staff.
In the past year, there have been no recorded violations of anti - corruption laws,
nor has any reports been received.
5.9
Control System
Система контроля
UTLC ERA attaches great importance
to the robustness and efficiency of control systems, applying enhanced requirements
to them.
the Company’s control system is formalized and grounded in widely accepted international standards. It encompasses business processes and all levels of management.
the system's functioning is monitored by:
the Company’s Internal Audit Commission
Board of Directors’ Audit Committee
Internal auditor
External audit organization
Internal Audit Commission
UTLC ERA’s Internal Audit Commission is a permanent elected body. Its mandate
is founded
on the Company’s Articles and the Regulation
on the Internal Audit Commission, endorsed
by resolution of the Extraordinary General Meeting of Shareholders on July 22, 2021.
the Internal Audit Commission monitors
-
Preparation of reliable financial and accounting statements
-
Generation of information on the financial
and economic activities and property status
of UTLC ERA -
Improvement of asset management efficiency
-
Reduction of financial and operational risks
-
Enhancement of the internal control system
the Internal Audit Commission is elected
at the annual general meeting of shareholders for one year,
until the following annual general meeting,
in a composition of three members:
One representative of JSC Russian Railways
One representative of JSC NC KTZ
One representative of Belarusian Railway
the Internal Audit Commission's authority
-
Validating the accuracy of data in the Annual Report and annual financial statements
-
Analyzing the financial status of UTLC ERA
-
Organizing and conducting inspections (audits) of the financial and economic activities of UTLC ERA
-
Overseeing the safety and utilization of fixed assets and expenditure of UTLC ERA funds
in alignment with the budget -
Monitoring the creation and utilization of reserve and special funds of UTLC ERA
-
Ensuring compliance with previous directives
to address violations and deficiencies identified in prior inspections -
Other activities related to the inspection
of financial and business operations
External audit
UTLC ERA engages an external independent audit organization to perform an annual audit of financial statements in compliance with RAS and IFRS standards.
the nomination of the auditing organization is subject to preliminary consideration
by the Audit Committee and final approval by the Board
of Directors.
the Board of Directors adopted the procedure
for determining the candidate audit organization
in 2024 and fixed the initial (maximum) contract amount for the audit of the Company’s financial (accounting) statements for 2024 at 9,433,333 rubles and 33 kopecks, exclusive of 20% VAT (Protocol
No. 79, dated April 26, 2024).
the Company conducted a competitive procurement procedure through a closed tender to select an external audit organization with sufficient qualifications to provide audit services under RAS
and IFRS for the needs of UTLC ERA for 2023. Based on the results of procurement procedures, the Board
of Directors proposed the candidacy of TSATR - Audit Services LLC for election, which was approved on June 23, 2023.
Internal audit
Internal audit issues within UTLC ERA
are governed by several internal regulations:
of Directors’ resolution, Protocol No. 71 dated December 22, 2023
of Risk Management and Internal Control System” adopted by decision of the Board of Directors, Protocol No. 73 from January 30, 2024
by decision of the Board of Directors, Protocol No. 73 from January 30, 2024
Key Principles and Approaches
the Director of Internal Audit employs a risk - oriented approach to planning
their activities and allocating resources. This entails preparing, based on the internal audit model, an audit plan focused on the most significant areas of the Company’s operations, its business processes, and other audit subjects identified as having a high risk level.
the Director of Internal Audit is administratively subordinate to the Company CEO
and functionally accountable to the Board of Directors.
the key objectives of the Director
of Internal Audit include
-
Submitting recommendations to the Board
of Directors (post preliminary review
by the Audit Committee) and the CEO based on internal audit findings
to improve risk management, internal controls, and corporate governance practices -
Overseeing the thorough and timely implementation of directives from the Board, Audit Committee, and CEO as a result
of the internal audit findings
the responsibilities of the Director of Internal Audit include
-
Organizing and performing internal audits within the Company as per the prescribed procedures
to enhance the efficiency and effectiveness
of UTLC ERA’s business processes, ensure reliable reporting, safeguard assets,
and comply with Russian Federation laws
and the Company’s internal regulations -
Performing an independent and objective evaluation of the reliability and efficiency
of the internal control system, risk management, and corporate governance practices
for the areas subject to audit -
Delivering recommendations to the Board
of Directors (following review by the Audit Committee) and the CEO based on audit findings to improve risk management, internal control, and corporate governance systems, while ensuring that the Director of Internal Audit does not assume responsibility for management decisions, compromise objectivity, or encounter conflicts of interest -
Monitoring, overseeing, and analyzing
the outcomes of the Company’s execution
of measures regarding -
Remediation of issues and weaknesses identified through internal audit findings
-
Advancing the systems of risk management and internal control, along with corporate governance practices
-
Maintaining the internal audit register of UTLC ERA to facilitate risk - focused audit planning
-
Consolidation and analysis of internal audit outcomes, including violations and risks detected within Company units, along
with weaknesses in risk management, internal control, and corporate governance practices -
Root cause analysis of issues and deficiencies uncovered in the course of the internal audit. Formulating proposals and recommendations within one’s area of expertise regarding
-
Improving the performance of audit subjects
-
Strengthening the reliability and efficiency of risk management, internal controls,
and corporate governance practices -
Initiating and ensuring the development
of the Company’s internal audit regulations -
Designing and enhancing methodologies, formats, and approaches for internal audits
at UTLC ERA, incorporating the Company’s automated systems -
Drafting and forwarding proposals to the HR Department regarding professional development, retraining, and qualification enhancement
-
Managing documentation and safeguarding records associated with internal audit activities
-
Undertaking other responsibilities connected
to internal auditing within the Company, in compliance with UTLC ERA’s regulatory documents
Information security
UTLC ERA has developed an Information Security Policy
to ensure and sustain information security (CEO's Order
No. 40
of June 1, 2022).
Its purpose is to establish a security architecture through the use
of specialized software. the policy introduces the basic concepts
of information security activities. Specialized software is used to achieve these objectives.
Throughout the year, the Company takes measures
to maintain
a high level of information security.
All employees of the Company who use computer equipment in their work are required to adhere to the provisions outlined in the Information Security Policy.
One of the main priorities of UTLC ERA is ensuring
the safety
of cargo transportation. Our information security system is built
on domestically developed software. the system utilizes multiple licensed applications to safeguard the Company’s external and internal perimeters.
the created information security system, along
with the suite
of support measures implemented
by UTLC ERA throughout
the year, fully comply
with FSTEC and FSB requirements.
5.10
Risk management
UTLC ERA's risk management system
is regulated by the following Company documents:
Risk Management Policy
approved by the Board of Directors, Minutes No. 52 from May 11, 2022
Risk Management Regulations
approved by Order No. 43 dated September 27, 2023
Methodical Recommendations for Risk Management
approved by Order No. 43 dated September 27, 2023
Key tasks of risk management
Risk management is the function and responsibility of the Company's management. the risk management function is the center of expertise.
Development of RM approaches
and methodological support
to risk owners
Employee training in RM
Planning and ensuring the development of RM
Overall coordination of RMS processes
Risk culture development
IT Support for the RM System
Risk analysis, statistics andreporting
Monitoring (operational control of risks)
Competencies
Risk management process
Press and drag
2024 results
In 2024, UTLC ERA identified 51 risks, out of which 10 were classified as key risks, indicating that they were both highly probable and material.
Key risk area
Significant risk area
Minor risk area
To mitigate risks and minimize potential consequences, the Company has devised and put into effect the UTLC ERA Risk Impact Action Plan for 2024.
In 2024, the Company began formalizing the risks of business processes. Order No. 78 of December 25, 2024, approved the risk matrices and control procedures for five business processes:
-
Service Pricing
-
Client Account Reconciliation
-
Supplier Account Reconciliation
-
Procurement activities
-
Rolling Stock maintenance and operation
10 key risks
-
Risk of a declining political stability in the countries
where the company/its partners operate
and in those along the route -
Risk of reduced / stagnant freight volumes
in the corridor via Kazakhstan -
Risk of alterations
to the conditions governing transit railway transport within UTLC ERA member countries -
Risk of border crossing point closures/partial restrictions at the European Union border
-
Risk of creating a negative public perception
of the Company -
Risk of reduced / stagnant import freight volumes
-
Risk of significant constraints on the railway infrastructure within
the 1,520 mm gauge -
Risk of increasing imbalance in containerized cargo flows
-
Exposure to currency fluctuations
-
Risk of non - application
of special tariff terms
Work continued on automating
the main processes of the risk management system using
the 1C:RiskPro system.
the risk register and key risk indicator monitoring subsystems
were successfully deployed
in production.
Of the 51 risks identified during the year,
9 materialized, among which 5 were classified as key risks.
Key risks
-
Exposure to currency fluctuations
-
Risk of reduced / stagnant freight volumes
in the corridor via Kazakhstan -
Risk of reduced / stagnant import freight volumes
-
Risk of significant constraints on the railway infrastructure within the 1,520 mm gauge
-
Risk of increasing imbalance in containerized cargo flows
Other risks
-
Risk of growing delays and restrictions imposed regulatory authorities at border checkpoints
-
Interest rate risk
-
Risk of inadequate rolling stock supply
-
Risk of train accident / derailment
Counterparty due diligence
To analyze and reduce risks associated
with counterparties, the Company implemented
a system of initial due diligence and regular checks. Using licensed software tools considerably reduces risks in dealings with external companies, while competitive tenders ensure the Company obtains
the best market terms.
Three structural units within UTLC ERA are involved
in the vetting and approval process of counterparties:
-
Legal Department
-
Accounting and Tax Department
-
Security Division
287
ounterparties
were subject to initial due diligence
or regular checks in 2024
among them
-
249 legal entities
-
29 individual entrepreneurs
-
9 individuals
As a result of a robust information security strategy, the Company did not suffer any property damage due to intentional unlawful actions by third parties in 2024.
the list of major transactions
major transactions
No major transactions as defined by Federal Law
No. 208 - FZ of December 26, 1995,
"On Joint - Stock Companies," took place in 2024.
the list of related - party transactions
No related - party transactions, as recognized
by Federal Law No. 208 - FZ of December 26, 1995,
"On Joint - Stock Companies," were carried out in 2024.
