Corporate Governance Guidelines
National Energy Services Reunited Corp. (“NESR” or the “Company”) was incorporated in the British Virgin Islands (“BVI”) in 2017 as a BVI company limited by shares. NESR’s affairs are governed by its Amended and Restated Memorandum and Articles of Association dated May 11, 2017 (“Charter”), the BVI Business Companies Act, 2004, as amended, and the common law of the British Virgin Islands. Additionally, because the Company’s ordinary shares are listed on the Nasdaq exchange, NESR is subject to Nasdaq’s corporate governance listing rules (“Nasdaq Listing Rules”).
As a Nasdaq-listed company, NESR is not required to adopt corporate governance guidelines, but NESR was built on a strong foundation of integrity, ethics, and corporate responsibility, so it voluntarily complies. This document represents a common set of expectations to assist the Board of Directors (“Board”) and its committees in performing their duties. It was developed to express our commitment to high standards of corporate governance, open communication, trust in both management and the Board, protection of shareholders and dedication to maintaining long-term relationships with investors.
Nasdaq Listing Rule 5615(a)(3) permits a foreign private issuer like NESR to follow the corporate governance practices of its home country in lieu of certain Nasdaq Listing Rules. These Corporate Governance Guidelines (“Guidelines”) do not represent NESR’s home country’s practice, and by adopting them, NESR has not avoided any Nasdaq Listing Rules. NESR is committed to high standards of corporate governance and endeavors to comply with the Nasdaq Listing Rules.
These Guidelines provide a framework for the governance of the Company and assist the Board and its committees in the exercise of their responsibilities. These Guidelines will be reviewed annually by the Nominating and Governance Committee and revised whenever necessary.
The Guidelines should be interpreted in the context of all applicable laws and the Company’s Charter, as well as other corporate governance documents such as NESR’s Code of Conduct (“Code”). In the event of any conflict between these Guidelines and the Charter, the provisions of the Charter shall prevail. These Guidelines were voluntarily produced to enhance the Company’s corporate governance structure but are not legally binding obligations.
Board Purpose and Responsibilities
The Board is elected by NESR’s shareholders to oversee the business and affairs of the Company, enhance its long-term value and financial health, and serve the interests of shareholders. The Company’s day-to-day business is conducted by employees under the direction of the Chief Executive Officer (“CEO”), with oversight of the Board.
The Board is committed to promoting the core values of the Company including integrity, social responsibility, environmental stewardship, and fostering diversity and inclusion. Both the Board and management of NESR recognize that the long-term interests of shareholders are advanced by maximizing return to shareholders in a responsible and ethical manner. The Board oversees corporate Environmental, Social and Governance (“ESG”) and Health, Safety and Environment (“HSE”) performance on a regular basis. The Board’s close oversight of ESG and HSE is designed to safeguard the interests of all internal and external stakeholders and ensure protection of communities, environments and ecosystems impacted by the Company’s business.
The Board’s primary responsibility is to provide effective oversight of the Company’s business for the benefit of its stockholders. The Board performs a number of specific functions:
- selecting, evaluating and compensating the CEO and overseeing CEO succession planning, in conjunction with the Compensation Committee;
- providing counsel and oversight on the selection, evaluation, development and compensation of senior management;
- reviewing, monitoring and, where appropriate, approving fundamental financial and business strategies and major corporate actions;
- monitoring and assessing major risks facing the Company—and reviewing options for their mitigation; and
- ensuring processes are in place for maintaining the integrity of the Company—the integrity of the financial statements, the integrity of compliance with law and ethics, the integrity of relationships with customers and suppliers, and the integrity of relationships with other stakeholders.
NESR Board Structure
The Company’s Charter provides that the minimum number of directors shall be one, and there shall be no maximum number of directors. Optimally, the Board should consist of 8-12 directors, with the majority of directors being independent, as defined under the Nasdaq Listing Rules, applicable rules of the Securities and Exchange Commission (“SEC”), and the Company’s independence standards, set forth in Appendix A (“Independence Standards”).
The Board currently consists of eight directors who are biannually elected.
It is the policy of the Company that the Board consist of at least a majority of independent directors who meet the independence requirements of the Nasdaq Listing Rules. The Board will consider all relevant facts and circumstances in making a determination of independence for each director and may consider, as appropriate, imposing upon the Board independence requirements more stringent than those required by Nasdaq.
All of the members of the standing Board committees will meet the then-effective criteria for independence established by Nasdaq and, in the case of the Audit and Finance Committee, the independence requirements for audit committee members set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended. The members of these committees also will meet the other membership criteria specified in the respective charters for these committees. The Independence Standards are set forth in Appendix A.
Election and Removal of Directors
Members of the Board of Directors are elected by a majority of the votes validly cast at any general meeting of shareholders. Under the Charter, all directors can be elected for a period of up to six years with such possible extension as provided therein. Any director may be removed with or without cause by a majority vote at any general meeting of shareholders. If the office of a director becomes vacant, the Charter provides that the other directors, acting by a majority, may fill the vacancy on a provisional basis until a new director is elected at the next general meeting of shareholders.
Board of Directors Candidate Nomination and Selection
The Nominating and Governance Committee shall identify individuals qualified to become Board members and recommend nominees for election at the annual meeting of shareholders or for election by the Board to fill open seats between annual meetings. The committee shall consider NESR’s commitment to promoting gender, racial, cultural and geographical diversity in the nomination and selection process for the Board’s candidacy.
The Nominating and Governance Committee of the Board shall identify, evaluate and recommend candidates to become members of the Board with the goal of creating a balance of knowledge and experience. Nominations to the Board may also be submitted to the committee by the Company’s shareholders in accordance with the Company’s policy. Candidates will be reviewed in the context of current composition of the Board (including the diversity in background, experience and viewpoints of the Board), the operating requirements of the Company and the interests of the Company’s shareholders.
In conducting this assessment, the committee will consider and evaluate each director-candidate based upon its assessment of the following criteria:
- a candidate’s independence as defined under the Nasdaq Listing Rules, applicable SEC rules, and the Independence Standards;
- a candidate’s reputation, both personal and professional, and its consistency with the image and reputation of the Company;
- a candidate’s ability to read and understand basic financial statements. The committee also will determine if a candidate satisfies the criteria for being an “audit committee financial expert,” as defined by the SEC;
- a candidate’s relevant experience and expertise and the ability to provide insight and practical wisdom based upon that experience and expertise;
- a candidate’s commitment to enhancing shareholder value;
- a candidate’s capacity to fully understand the legal responsibilities of a director and the governance processes of a public company;
- a candidate’s moral and ethical character and willingness to apply sound, objective and independent business judgment, and to assume broad fiduciary responsibility;
- a candidate’s ability and willingness to commit the required hours necessary to discharge the duties of Board membership;
- the presence of prohibitive interlocking relationships or conflicts of interest; and
- a candidate’s ability to develop good working relationships with other Board members and to contribute to the Board’s working relationship with the senior management of the Company.
Service on Other Boards
Directors shall consult with the Chairman of the Board and the Chair of the Nominating and Governance Committee before accepting an invitation or nomination to serve on the board of directors of another company, especially if it impairs a director’s ability to serve effectively on the Company’s Board.
Executive directors of the Board, such as the CEO who also serves as the Chairman of the Board, are not compensated for their service on the Board.
The Nominating and Governance Committee recommends competitive compensation packages designed to attract and retain highly qualified directors on the Board and assure that the interests of the Company directors and shareholders are aligned. The committee may also review and recommend to the Board changes to the compensation of the Company’s independent directors.
Changes to independent director compensation, if any, need to be approved by the Board.
Retirement and Resignation from the Board
Under the Charter, all directors can be elected for a period of up to six years with such possible extension as provided therein. As such, there are no term limits on a director’s service. Any director may be removed with or without cause by a majority vote at any general meeting of shareholders.
Executive directors of the Board shall resign from the Board upon retiring from the Company unless the majority of the Board deems that their continued membership on the Board for a transitional period or longer is in the interest of the Company and its shareholders.
Non-executive directors can retire from the Board by submitting a resignation to the Board.
The Nominating and Governance Committee shall regularly conduct performance reviews of each director and consider the director’s participation and time commitment to the Board, review the independence status of directors, continued relevance of a director’s expertise and experience, changes in principal occupation and other criteria as the committee deems appropriate.
Board Leadership Structure
The leadership structure of the Board of Directors is put in place to ensure effective oversight of management and advance the best interests of shareholders.
The Board of Directors believes that the most effective leadership structure is for the CEO to also serve as the Chairman of the Board of Directors (or “Chairman”). The Board of Directors believes that having the CEO as Chairman of the Board ensures that the Board of Directors’ agenda responds to strategic challenges and that the Board of Directors is presented with information required for it to fulfill its responsibilities, and that Board of Directors meetings are as productive and effective as possible. The Board may, in their discretion, decide to reassign the roles of CEO and Chairman to different individuals in the future if they deem such action to be appropriate.
Lead Independent Director
The Lead Independent Director of the Board chairs the Nominating and Governance Committee. The responsibilities of the Lead Independent Director include:
- Assisting the Board in implementing and complying with NESR’s Corporate Governance Guidelines;
- Setting agendas and schedules for all Board meetings, in coordination with the Chairman;
- Presiding at all the Board executive sessions of the independent directors;
- Monitoring and improving Board effectiveness;
- Advising the Chairman of the Board;
- Leading the independent directors’ discussions on succession planning and evaluation of the performance of the CEO;
- Facilitating discussions among the independent directors on key issues concerning senior management;
- Facilitating Board leadership on matters of governance where independence is required; and
- Monitoring and improving Board effectiveness.
The Board meets at least four times a year to review the performance of the Company. Directors are expected to attend all scheduled Board and committee meetings and review all materials to prepare for meetings. Directors must also be available for special meetings of the Board or any of its committees when necessary. The Chairman of the Board will prepare a draft agenda and meeting schedule and share with directors ahead of scheduled Board meetings.
Executive Sessions: The independent directors of the Board shall conduct executive sessions during Board meetings presided over by the Lead Independent Director. At least one executive session a year will be dedicated to the review and evaluation of the CEO’s performance.
Board Risk Oversight
The Company’s risk management reports and procedures are presented to the Board to evaluate and address directly or through the Audit Committee. The Audit Committee addresses identified risks and regularly meets with the Company’s independent auditor.
Independent Advisors to the Board
The Board may retain or dismiss independent advisors, including independent legal counsel, and approve related fees and expenses as it deems appropriate.
Board Access to Company Management
The Board has full access to the Company’s management who may attend Board and committee meetings when invited to brief the Board and its committees on relevant topics. The Board also meets with executive management and other company management during scheduled events to gain insight into the Company operations and other matters of interest to the Board.
Code of Conduct
NESR adopted a Code of Conduct that applies to all directors, officers, and employees. The Code is available on the corporate website.
The Board of Directors must approve any waiver, deviation or exception from the Code. Amendments or waivers from one or more of the provisions of the Code are intended to be publicly disclosed especially as they apply to the CEO and Chief Financial Officer. Compliance with the Code is overseen by the Board and enforced through the Nominating and Governance Committee and regular management communication sessions, online and in-person training.
The communications, proceedings, and deliberations of the Board and its committees are strictly confidential. Directors may not disclose any confidential information, including non-public information about the Company, obtained from whatever source during their tenure on the Board or thereafter, which was made available to them in their capacity as directors of the Board. Any proprietary, privileged or protected information obtained by a director while serving on the Board must be kept confidential except where the disclosure is authorized by the Board or required by law. Directors may not use confidential information for their own benefit or that of other entities other than the Company and its shareholders.
Conflicts of Interest
Directors are expected to be familiar with the Company’s Code and conflict of interest and donations policy and to avoid any actual or apparent conflict between their own personal interests and the interests of the Company. Directors are expected to avoid actions that may interfere with their ability to conduct their role on the Board and the delivery of their responsibilities in the best interest of the Company and its shareholders.
Situations involving a possible or apparent conflict of interest should be disclosed to the Chair of the Nominating and Governance Committee to ensure compliance with the Conflict of Interest and donations policy. In addition to disclosing actual or apparent conflicts of interest, directors should refrain from engaging in deliberations or voting on matters before the Board or one of its committees where they have a personal, business or professional interest.
Non-Executive Director Orientation and Continuing Education
Newly elected non-executive directors are provided information about the Company, the Board and its committees, director responsibilities, HSE, ESG, and corporate governance guidelines. In addition, relevant background summaries, financial statements, earnings reports, developments in law, listing standards, and governance best practices, press releases, analyst reports and other information designed to keep the Board informed of the Company’s business and priorities shall be distributed to all directors on a regular basis.
Procedure for Communicating with Board Members
If any shareholder or other interested party desires to communicate with the Board, or any specific member or members thereof, including the nonmanagement directors as a group, such shareholder or party should send their communication to the Corporate Secretary of the Company at National Energy Services Reunited Corp., 777 Post Oak Blvd., Suite 730, Houston, Texas 77056. The Corporate Secretary shall then forward the correspondence or materials, as appropriate, to the intended member(s) of the Board.
Committees of the Board of Directors
The Board has three standing committees: the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee. The Board may create other committees from time to time, as it deems necessary. Every committee has a charter that outlines the committee’s purpose and responsibilities. The charters are reviewed annually and updated as necessary. Each committee performs its duties as authorized by the Board in compliance with its specific charter and the Company’s Charter.
The Audit Committee will consist solely of directors who meet the independence requirements established by the Board and other laws and regulations, as applicable. The Board will ensure that the composition of the committees meets the criteria set forth in applicable SEC rules and regulations and may replace members who cease to qualify as independent as the Board deems appropriate.
Reports to the Board
Each of the Audit, Compensation, and Nominating and Governance Committees report to the Board on a regular basis. All Board members receive meeting minutes documenting each committee meeting. The agendas of committee meetings are determined by the committee members and chairs. Directors may, at any time, suggest items to be included in the meeting agendas of individual committees.
Directors are expected to actively participate in meetings of committees to which they are appointed. Scheduled meetings of each committee will be maintained in a calendar that is shared with all committee members. Committees may meet as frequently and for as long as required to conduct their duties and may also schedule special meetings as deemed necessary. The agendas of committee meetings shall be distributed to committee members prior to the meetings.
The qualifications sought in committee members are set forth in the charters of the committees. Members are selected for, among other things, their knowledge and expertise pertaining to a committee’s function and relevant past employment experience, as well as the ability to exercise sound business judgment.
The Audit Committee of the Board is appointed for the primary purpose of performing the Board’s oversight responsibilities as they relate to the Company’s accounting policies and internal controls, financial reporting practices and legal and regulatory compliance, including, among other things:
- the quality and integrity of the Company’s financial statements;
- the Company’s financial compliance with legal and regulatory requirements;
- review of the independent auditors’ qualifications and independence; and
- the performance of the Company’s internal audit function and the Company’s independent auditors.
Audit Committee Composition: The Audit Committee is appointed by the Board and is comprised of three or more directors (as determined from time to time by the Board), each of whom shall meet the independence requirements (subject to a phase-in period as permitted by the provisions of Rule 5615(b) of the Nasdaq Listing Rules for the Audit Committee Composition requirement) of the Sarbanes-Oxley Act of 2002, the Nasdaq Listing Rules, and all other applicable laws.
The Audit Committee charter details the principal functions of the Audit Committee.
The Compensation Committee of the Board is appointed for the primary purpose of representing and assisting the Board in discharging its responsibilities for approving and evaluating officer compensation plans, policies and programs of the Company.
The Compensation Committee ensures that the Company’s compensation programs are competitive, designed to attract and retain highly qualified directors, officers and employees, encourage high performance, promote accountability and assure that employee interests are aligned with the interests of the Company’s shareholders.
Compensation Committee Composition: The Compensation Committee is appointed by the Board and is comprised of at least two independent directors of the Board who shall also satisfy such other criteria imposed on members of the committee pursuant to the federal securities laws and the rules and regulations of the SEC, the listing standards of any exchange or national listing market system upon which the Company’s securities are listed or quoted for trading (including, without limitation, the Nasdaq Listing Rules and any other applicable laws or regulations, and any additional requirements that the Board deems appropriate). Each appointed member of the committee may be removed by the Board at any time, with or without cause.
The Compensation Committee charter details the principal functions of the Compensation Committee.
Nominating and Governance Committee
The Nominating and Governance Committee of the Board is appointed for the primary purpose of monitoring compliance with good corporate governance standards and overseeing the selection of persons to be nominated to serve on the Board. The responsibilities of the Nominating and Governance Committee includes:
- Recommending director nominees to the Board for election at the annual meeting of shareholders or for election by the Board to fill open seats between annual meetings; and
- Reviewing and making recommendations to the Board regarding non-executive director compensation.
Nominating and Governance Committee Composition: The Nominating and Governance Committee members are appointed by the Board from among its members and may be removed by the Board at any time. The committee shall be comprised of three or more directors who satisfy the criteria of independence as defined under the Nasdaq Listing Rules and applicable SEC rules and the Company’s independence standards set forth in appendix A.
The Nominating and Governance Committee charter details the principal functions of the committee.
It is the policy of the Board that at least a majority of its directors be independent.
The Board has adopted these Independence Standards to assist in affirmatively determining that a director has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The standards include, and either meet or are more restrictive than, the independence requirements of the Nasdaq Listing Rules and the SEC rules. The standards also identify categories of relationships that the Board has determined would not affect a director’s independence, and therefore are not considered by the Board in determining director independence. The Board considers relevant facts and circumstances of any relationship bearing on independence of a director or nominee that are outside the categories permitted under these Independence Standards.
Definition of Independent Director
“Independent director” means a director who meets each of the following standards listed in sections 1 through 8 below (and additionally 9, in case of audit committee members):
- The director has no relationship that, in the opinion of NESR’s Board, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Relationships not affecting independence . Relationships of the following types will not be considered material relationships that would impair a director’s independence:
- A director who is, or has a Family Member (as defined below) who is, an Executive Officer (as defined below) of a charitable organization to which the Company (as defined below) has made in the Company’s last complete fiscal year discretionary charitable contributions that do not exceed the greater of:
- $200,000, or
- 5% of that organization’s annual consolidated gross revenues.
- A director who is a current employee, or has a Family Member who is a current executive officer of, any organization to which the Company made, or from which the Company received, payments, if such payments are less than the threshold set forth in Section 5 below;
- A director who has a membership in, or association with, the same professional association, social, educational, fraternal or religious organization, club or institution, as an Executive Officer or another director of the Company; or
- A director who serves on the board of another company at which an Executive Officer or another director of the Company also serves as a Board member, except as set forth in Section 6 below.
- A director is not, and has not been at any time during the past three years, an employee or Executive Officer of the Company.
- A director has no Family Member who is, or at any time during the past three years was, employed by the Company as an Executive Officer.
- A director has not accepted and no Family Member has accepted any compensation from the Company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than the following:
- compensation for Board or Board committee service;
- compensation paid to a Family Member who is an employee (other than an executive officer) of the Company; or
- benefits under a tax-qualified retirement plan, or non-discretionary compensation.
- Neither the director nor any Family Member is a partner in, or a controlling shareholder or an Executive Officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed the greater of:
- 5% of the recipient's consolidated gross revenues for that year, or
- $200,000, in each case excluding:
- payments arising solely from investments in the Company's securities; or
- payments under non-discretionary charitable contribution matching programs.
- Neither the director nor any Family Member is employed as an Executive Officer of another entity where at any time during the past three years any of the executive officers of the Company serve on the compensation committee of such other entity.
- Neither the director nor any Family Member is a current partner of the Company's outside auditor, or was a partner or employee of the Company's outside auditor who worked on the Company's audit at any time during any of the past three years.
- A director satisfies any additional requirements for independence promulgated from time to time by Nasdaq.
- Additional independence requirements for audit committee members. Audit committee members may not, other than in the capacity as a member the Board or any Board committee:
- accept directly or indirectly any consulting, advisory, or other compensatory fee from the Company or any subsidiary, other than fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided that such compensation is not contingent on continued service); or
- be an affiliated person of the issuer or any subsidiary.
"Company" includes any parent or subsidiary of the Company. The term "parent or subsidiary" is intended to cover entities the Company controls and consolidates with the Company's financial statements as filed with the Commission (but not if the Company reflects such entity solely as an investment in its financial statements).
“Family Member” a person's spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, and anyone (other than domestic employees) who shares such person's home.
“Executive Officer” includes NESR’s chief financial officer, financial controller, any vice president in charge of a NESR business unit, division or function (such as sales, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for NESR.