Corresponding to the 2019 financial year
The Audit and Control Committee of NH Hotel Group, S.A. (“NH”) issues this report on the operation of the Committee and compliance with its goals during the year 2019 (hereinafter the “Report”).
The object of the Report is to give an account of the activity carried out by this Committee to the Board of Directors in accordance with the provisions of Recommendation 6 of the Code of Good Governance for Listed Companies, approved by a Resolution of the Board of the CNMV dated February 18th, 2015.
The composition, competences and operation of the Audit and Control Committee are regulated in article 48 of the Company’s Bylaws and article 25 of the Board Regulations.
2. Composition of the Audit and Control Committee
As of December 31st, 2019, the Audit and Control Committee was made up of 3 members, together with the Secretary who is not a member.
The composition of the Audit and Control Committee as of December 31st, 2019 is as follows:
Mr Fernando Lacadena Azpeitia (Independent)
Mr. José Maria Cantero de Montes-Jovellar (Independent)
Mr. Stephen Andrew Chojnacki (Proprietary)
Mr. Carlos Ulecia Palacios
The provisions of the applicable regulations are met, which require that the Audit and Control Committee be made up of a minimum of three and a maximum of six Directors appointed by the Board of Directors and that all the members of this Committee should be External Directors, at least a majority of whom must be Independent Directors, and one of them will be appointed taking into account his/her knowledge and experience in the field of accounting, auditing or both.
The Chairman of the Audit and Control Committee is to be appointed out of the Independent Directors who form part of the Committee and should be replaced every four years, and may be re-elected after one year has elapsed since being replaced.
The principal function of the Audit and Control Committee is to provide support to the Board of Directors in its supervision and control functions, the most important manifestation of which is the duty to assure the effectiveness of the Company’s internal control and supervise the process of drawing up and presenting regulatory financial information.
The Audit and Control Committee is assigned at least the following competences:
- Report to the General Meeting on matters raised within its sphere of competence.
- Supervise the efficacy of the Company’s internal control, internal audit, as the case may be, and the risk management systems, including tax risks, and discuss with the accounts auditors or audit firms any significant weaknesses in the internal control system that may have been detected in the course of the audit.
- Supervise the process of drawing up and presenting regulatory financial information.
- Make proposals to the Board of Directors for the selection, appointment, re-election and replacement of the external auditor, as well as the contract conditions, and obtain information regularly from the external auditor concerning the audit plan and its execution, as well as preserving its independence in exercising its functions.
- Establish the pertinent relations with the accounts auditors or audit firms in order to receive information on any matters that may put their independence at risk, so that they can be examined by the Committee, and any other matters related to the audit process, and other communications established in auditing legislation and auditing standards. In any case, it must receive written confirmation each year from the accounts auditors or audit firms of their independence in relation to the Company or companies related to it directly or indirectly, as well as information on any additional services of any kind provided to and the corresponding fees received from such companies by the aforesaid auditors or companies, or by persons or entities related to them in accordance with the provisions of legislation on auditing.
- Issue each year, prior to the issue of the report of the auditors, a report in which an opinion will be expressed on the independence of the auditors or audit firms. This report must, in any case, contain a valuation of the additional services provided, other than statutory audit, as referred to in the preceding section, individually considered and regarded as a whole, in relation to the regime of independence or to auditing legislation.
- Report, in advance, to the Board of Directors on all matters established by law, the Company’s Bylaws and the Board Regulations, and in particular, on:
- the financial information the company is required to publish periodically,
- the creation or acquisition of shareholdings in entities with a special purpose or domiciled in countries or territories classified as tax havens and
- related-party operations.
- Ensure the independence and effectiveness of the internal audit function; propose the selection, appointment, re-election and removal of the person responsible for the internal audit service; propose the budget for this service, receive regular information on its activities; and verify that senior management takes into account the conclusions and recommendations of its reports.
- Establish and supervise a mechanism to allow employees to report confidentially and anonymously any breaches of the Code of Conduct.
- Supervise compliance with internal codes of conduct and rules of corporate governance.
The Audit and Control Committee will meet at least once a quarter, and as often as is appropriate, on being convened by its Chairman, on his/her own decision or in response to the request of two of its members or of the Board of Directors.
The Audit and Control Committee may require the attendance at its meetings of any employee or executive of the company, as well as the Company’s Auditor.
Through its Chairman, the Audit and Control Committee will report to the Board on its activity and the work carried out, at the meetings established for this purpose or at the immediately following meeting when the Chairman of the Audit and Control Committee considers it necessary. The minutes of its meetings will be available to any member of the Board who requests them.
The Audit and Control Committee met 8 times in 2019.
Furthermore, Board members who are not members of the Committee and executives of NH may attend the meetings of the Audit and Control Committee, at the Chairman’s invitation.
5. Relations with External Auditors
NH Hotel Group, S.A. has been audited since fiscal year 1986 by prestigiouse audit companies. During the period 1986-1992 the company was audited by Peat Marwick and between 1993-2001 by Arthur Andersen. Since 2002 and until fiscal year 2018 the Audit has been realized by Deloitte. The General Sharehodlers meeting helt on 13th Mai 2019 approved, among others, the appointment of PricewaterhouseCoopers Auditores, S.L. as new auditor of the Company and its grouo companies for fiscal year 2019. The appointment has been done in compliance with Regulation (UE) No 537/2014 European Parliament of 16th april 2014 regarding requirements for legal audits of companies. The Audit and Control Audit has submitted submitted ition to the Board following article 16.5 of the referred Regulation.
During fiscal years 2019 and 2018, the remunerations regarding audit services and other services rendered to NH Hotel Group, as well as related companies are the following: