The British Business Bank constitution consists of its Articles of Association and a Shareholder Relationship Framework Document between the British Business Bank and BEIS. The British Business Bank plc operates, so far as is practicable, a corporate governance framework that accords with best practice and complies with the provisions of the UK Corporate Governance Code (other than Section E Relations with Shareholders).

The UK Corporate Governance Code is freely available from the Financial Reporting Council. The UK Corporate Governance Code acts as a guide to a range of key issues to ensure effective Board practice.

Apart from those set out in this Annual Report, the Board is not aware of any deviations from the relevant aspects of the Code in the period since 1 April 2017 insofar as it applies to the British Business Bank.

Role and responsibility of the Board of Directors of the company

British Business Bank plc is led by its Board of Directors which is collectively responsible for the long-term success, and in consultation with BEIS, the strategy of the British Business Bank plc.

As set out in the Shareholder Relationship Framework Document, the Board requires no fewer than eight Directors including six Non-executive Directors. Independent Non-executive Directors are to constitute the majority of the Board. Our Board and Committees have the appropriate balance of skills, experience and independence to enable them to discharge their duties and responsibilities effectively. The Board considers that the Chair was independent on appointment and that all Non-executive Directors other than Ceri Smith are independent for the purposes of the Code. Ceri Smith is the Shareholder Representative Director.

The Board reviewed the schedule of matters reserved for the Board in June 2017. The matters reserved for the Board include strategy and management, Company structure and capital, financial reporting and controls, risk management and internal controls, Board membership and other appointments, remuneration, delegation of authority, corporate governance, appointment of professional advisors, litigation and insurance.

Our Non-executive Directors scrutinise the performance of management in meeting agreed goals and objectives. The Remuneration Committee is responsible for setting appropriate levels of remuneration for Executive Directors and staff in consultation with our Shareholder. This is further explained in the Directors’ Remuneration Report at page 66.

The Chair is responsible for leading the Board and its discussions and for encouraging open debate and challenge. The Chief Executive leads the Executive in the day to day running of the business and the implementation of strategy and is supported in this by the Senior Leadership Team.

As an organisation funded by taxpayers’ money the Bank is required to comply with the principles set out in managing public money (www.gov.uk/government/publications/managing-public-money).

The Chief Executive is the Accounting Officer. The responsibilities of an Accounting Officer include responsibility for the propriety and regularity of the public finances.

The Senior Independent Director is Christina McComb. The Senior Independent Director’s responsibilities are to: work closely with the Chair, act as an intermediary for other Directors as and when necessary and meet with other Non-executive Directors to review the Chair’s performance.

Christina McComb acted as Interim Chair from 1 October 2016 until 4 July 2017 on appointment of the new Chair.

The exercise to appraise Lord Smith’s performance as Chair was conducted by questionnaire. The results were discussed among the Non-executive Directors, led by the Senior Independent Director.

Appointment and removal of directors

The Shareholder Relationship Framework Document provides that no appointment or removal of a director of the Company or appointment or removal of any such director to or from an executive position, can be made without the prior written consent of the Shareholder. In accordance with the Shareholder Relationship Framework Document, the Chair and the Senior Independent Director were appointed in a process chaired by a commissioner from the Office of the Commissioner for Public Appointments.

The composition of the Board during the year is set out on page 45 of the Directors’ report.

The Shareholder selected Korn Ferry as an independent recruitment consultant for the appointment of a new Chair. In accordance with the Shareholder Relationship Framework Document, our Shareholder announced the appointment of Lord Smith of Kelvin as the new Chair of the British Business Bank in April 2017 for a term of three years, commencing in July 2017.

In June 2017 the three-year terms of Colin Glass, Teresa Graham and Caroline Green ended and they stepped down from the Board. In July 2017 the Board confirmed the re-appointment of Caroline Green for a term of 18 months, commencing in July 2017.

Following a tender process, Audeliss was appointed as an independent search consultant for the appointment of two new Board Members for the British Business Bank. In November 2017, Piers Linney and Amanda Rendle were appointed as Non-executive Directors for terms of three years commencing in December 2017.

The full biographies of all Board members can be found here.

Annual Director election

At the 2017 Annual General Meeting (AGM) Lord Smith of Kelvin was elected and Jonathan Britton, Christina McComb and Keith Morgan were each re-elected for a period of three years. Caroline Green was re-elected for a period of 18 months.

Board information

All Directors are provided with updates on corporate governance developments, legislative and regulatory changes, and relevant industry and technical information. The Board is supplied in a timely manner with the appropriate information to enable it to discharge its duties and any further information is readily available to all Directors. Since 2015 the Board has received board papers and information electronically, to increase efficiency, confidentiality and sustainability.

Board committees

The Board has established four board committees to ensure robust and effective decision making within the group structure, notably Audit, Remuneration, Risk and Nomination committees. The British Business Bank Board has approved terms of reference for each committee.

Audit Committee

Under the chairmanship of Jonathan Britton, the other members of the committee during the year were Teresa Graham, Caroline Green and Neeta Atkar, who are all independent Non-executive Directors. The Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, General Counsel, Managing Director Finance and Head of Internal Audit attend Committee meetings along with the external auditors who are invited to attend and report at all meetings.

The committee also meets privately with both internal and external audit.

Role

The Committee’s role is to review, monitor and make recommendations to the Board relating to the going- concern nature of the Bank, the integrity of financial reporting, the financial statements and any issues and judgements they contain, the adequacy and effectiveness of the internal and external controls and overseeing the relationship with the Bank’s external auditor. The committee also has oversight of the internal audit and audit planning process of the Bank.

During the financial year 2017/18, the Audit Committee considered and approved the following matters:

In relation to financial statements:

• The oversight of the Bank’s financial reporting process and the process for preparation of the consolidated accounts
• The accounting policies adopted to ensure the Bank as a whole complies with the applicable accounting standards and presents consolidated accounts that are true and fair
• Accounting treatment for investments and impairments and critical accounting judgements
• IFRS 9 accounting implications
• Group and subsidiary audit exemptions.

In relation to internal and external audit:

• Appointment of external auditors
• Review of external audit planning and progress
• External audit management letter
• Approval of the internal audit plan and review of progress against this plan
• Review the Head of Internal Audit’s annual report and opinion.

In relation to governance and other matters:

• Migrating the payroll, finance and expenses system from UKSBS to inhouse using an alternative system
• Approval of amendments to its Terms of Reference
• Funding structure and accounting for SULCo as a subsidiary of the group
• Changes to the Bank’s financial framework with government.

During the year the Audit Committee undertook a self-assessment using the NAO Audit and Risk Assurance Committee Effectiveness Checklist. The committee concluded that it was operating effectively but undertook to make a small number of changes in line with some of the suggestions made by the participants of the self-assessment.

As required by the Shareholder Relationship Framework Document, the Bank is audited by the Comptroller and Auditor General. The National Audit Office carries out the external audit for and on behalf of the Comptroller and Auditor General. The external auditors have not conducted any non-audit services during the financial year and the committee considers that the external auditor is both objective and independent.

The significant issues considered by the committee, with input from the External Auditor, during the year included methodologies and procedures for determining asset valuations and provisions, significant accounting policies, decisions and judgments, the contents of the Annual Report and Accounts of the Company and the financial and accounting aspects of the combination with SULCo.

External audit brought four matters to the Audit Committees attention in their 2016/17 management letter.

These were:

• Timing of the Adjusted Return calculation to allow for appropriate review
• The process for reporting the valuation of the VC Catalyst Fund
• Timing for the calculation of the ECF provision to allow for appropriate review
• Minor corrections required to the final proof of the Annual Report.

All of these issues were addressed and their resolution discussed and agreed by the committee.

Signed for and on behalf of the Audit Committee

Remuneration Committee

The Remuneration Committee is chaired by Christina McComb. The Committee was chaired for an interim period by Teresa Graham during Christina McComb’s appointment as interim Chair of the Board between October 2016 and July 2017. The other members of the Committee were Caroline Green (who was appointed to the Committee with effect from its September 2017 meeting and stepped down following its December 2017 meeting), Amanda Rendle (who was appointed to the Committee with effect from its February 2018 meeting) and Ceri Smith.