The following paragraphs provide corporate governance information.
DISCLOSURE REQUIRED BY LEGISLATIVE DECREE NO. 231/2001 ON THE ADMINISTRATIVE LIABILITY OF COMPANIES
The parent’s board of directors adopted the organisation, management and control model for the company and its group pursuant to Legislative decree no. 231/2001 with the resolution passed on 11 December 2007.
The current model is the updated version issued on 2 February 2017.
By resolution of the board of directors on 30 March 2012, the supervisory board’s duties were entrusted to the board of statutory auditors in accordance with Law no. 183/2011, which amended article 6 of Legislative decree no. 231/2001.
DISCLOSURE REQUIRED BY LEGISLATIVE DECREE NO. 196/2003 ON THE PROTECTION OF PERSONAL DATA
Companies required to comply with Regulation (EU) 2016/679 of the European Parliament and of the Council – the GDPR (the “General Data Protection Regulation”) – have updated their systems for the storage and protection of the personal data covered by the EU regulation, insofar as the changes introduced with respect to Legislative decree no. 196/2003. MAG received ISO 27001 certification during the year. It rolled out a data classification project based on international standards, which will be implemented by the other group companies in line with the related plan.
MANAGEMENT AND COORDINATION AND TRANSACTIONS WITH GROUP COMPANIES
In accordance with the provisions of articles 2497 and 2497-septies of the Italian Civil Code, it is noted that MAG acts as holding company for the group companies in which it directly or indirectly owns 100% investments. Accordingly, it is required, inter alia, to prepare consolidated financial statements and it also manages and coordinates its subsidiaries.
These management and coordination activities, which are typical of group companies, ensure that the group companies’ decisions are consistent, coordinated and in line with the group’s strategic guidelines. The parent manages and coordinates its subsidiaries based on the principles of integrity and transparency.
These principles are also found in the fair balancing of the subsidiary’s and group interests, justification for the resolutions passed by the subsidiaries’ management bodies and recording in the subsidiaries’ documentation.
Where such decisions affect the group companies’ performance, they are fully disclosed in the financial statements.
In accordance with the provisions of article 2497-bis of the Italian Civil Code, the statement of financial position and statement of comprehensive income highlights of MAG’s most recently approved financial statements are provided in the notes to the financial statements of the Italian companies that it controls.
These consolidated financial statements are filed, along with the separate financial statements, with the Company Registrar, even for group companies that have opted to apply the exemption from mandatory preparation of consolidated financial statements under article 27.3 of Legislative decree no. 127/91.
For additional details on the group’s structure and subsidiaries, reference should be made above (see HIGHLIGHTS OF MAIN CONSOLIDATED COMPANIES).
MAG is not managed or coordinated by another entity pursuant to article 2497-bis of the Italian Civil Code.
Intragroup transactions are of a trading and financial nature. Overall, they do not consist of significant amounts.
The following table summarises amounts generated by the parent’s transactions with other group companies in the year and infragroup balances at 30 September 2019, which were eliminated in the preparation of the group’s consolidated financial statements. Furthermore, information relating to the related party SBI S.p.A. is presented. Data on other related parties is given in the specific section of the notes (see 9.2 RELATED PARTY TRANSACTIONS):
|in thousands of Euros||SAT||Mecaer America Inc.||Mecaer Aviation Group Inc.||Vertex Aero Srl||SBI|
|Revenue from goods and services||-||768||1.923||-||-|
|Other revenue and income||3||237||49||177||20|
|Disposals of property, plant and equipment||-||-||-||-||-|
|Purchase of raw materials||-||1.756||432||-||-|
|Use of third party assets||-||-||-||-||1.376|
|Loans and receivables due WITHIN one year||2||341||2.009||347||26|
|Loans and receivables due AFTER one year||-||-||-||-||-|
|Liabilities due WITHIN one year||-||4.548||453||250||139|
MAG carries out trading transactions with the subsidiary Mecaer America, as the latter is the sub-contractor for the supply of hydraulic systems of the AW109, AW139 and AW380 landing systems.
During the year, Mecaer America’s engineering unit carried out product development activities as a supplier of MAG, as part of a framework agreement governing the exchange of engineering services, for an amount totalling €2,079 thousand.
MAG and Mecaer America have a service centre agreement in place whereby the Canadian subsidiary performs repair and maintenance on MAG products in the North American market. These activities, which are part of the parent’s contractual commitments, are performed by Mecaer America, which holds valid airworthy certification for that market, for an annual fixed fee. Under the agreement, Mecaer America carries out the services under warranty and pays Mecaer a royalty of 7% of realised turnover for repair and maintenance activities covered by the agreement, as remuneration for the know-how made available by MAG.
In addition, under this agreement, MAG also supplies Mecaer America with parts and components for MRO activities on MAG’s proprietary products. Total sales of goods to the subsidiary Mecaer America in 2018/19 amount to roughly €768 thousand and also include parts for the A380 project, which Mecaer America, sub-supplier of the final system, is required to buy from MAG.
MAG supplies its subsidiary MAG Inc. with AW119 and AW139 interior kits, worth approximately €1,923 thousand in 2018/19.
MAG has an airport services outsourcing agreement in place with SAT. This agreement entailed the payment of a fixed fee of €155 thousand in the year.
The amounts related to Vertex Aero arise from the transfer of a MAG business unit, which took effect on 19 September 2019.
All transactions with group companies are carried out on an arm’s length basis.
In this respect, each year, MAG prepares the internal transfer pricing documentation pursuant to article 1.2-ter of Legislative decree no. 471 of 18 December 1997, transposed into Italian legislation by article 26 of Law decree no. 78 of 31 May 2010, converted, as modified, by Law no. 122 of 30 July 2010 (the “master file”).
The purpose of the master file is to document how transactions between the group companies are governed on an arm’s length basis in accordance with OECD guidelines.
There are no other infragroup financial transactions or transactions involving royalties (other than those mentioned above) or management fees.
RELATED-PARTY TRANSACTIONS, COMMITMENTS, GUARANTEES, CONTINGENT LIABILITIES AND OFF-STATEMENT OF FINANCIAL POSITION AGREEMENTS
Reference should be made to the notes to the separate and consolidated financial statements for information on transactions with related parties (6.10 CURRENT LOANS AND RECEIVABLES – RELATED PARTIES 6.19 LOANS AND BORROWINGS, 6.23 CURRENT FINANCIAL LIABILITIES – RELATED PARTIES, 7.3 OTHER REVENUE AND INCOME, 7.9 USE OF RELATED PARTY ASSETS, 7.13 FINANCIAL INCOME AND EXPENSE).
The sections on Other information in the notes to the consolidated financial statements and separate financial statements detail transactions with directors, statutory auditors and key management personnel of MAG (see 9.2 RELATED PARTY TRANSACTIONS).
In accordance with the provisions of articles 2427.22-bis of the Italian Civil Code, it is noted that the parent has not undertaken any material transactions with related parties other than on an arm’s length basis.
Pursuant to article 2427.9/22-ter of the Italian Civil Code, there are no commitments, guarantees, contingent liabilities or off-statement of financial position agreements at 30 September 2019 which could have a significant impact on the group’s financial position.
TREASURY SHARES, GROUP COMPANY SHARES AND SHARE CAPITAL
No group company holds any treasury shares or those of their parents, either directly or indirectly through trustees or nominees, or acquired, sold or held any of these shares during the year.
MAG’s share capital is fully subscribed and paid-up. At 30 September 2019, it totals €13,138 thousand and is divided into 13,138 thousand shares with a nominal amount of €1 (one) each.
There were no changes in the group’s ownership structure during the year. In the event of any transfers of shares or substantial changes in the group’s ownership structure, any termination of employment of key management personnel is regulated by specific agreements.
There are no stock option plans in place, nor are there securities granting special rights, employee equity interests or restrictions on MAG voting rights at 30 September 2019.
FINANCIAL RISK MANAGEMENT
Disclosure on the ascertainment and management of the group’s main financial risks is provided in the notes to the consolidated financial statements (see 5.3 FINANCIAL RISK MANAGEMENT).