Overview of the corporate governance system

M.Video–Eldorado Group’s corporate governance system

M.Video–Eldorado Group considers the establishment of an effective corporate governance model to be a key factor in ensuring shareholders’ rights and creating trusting relationships with investors and other Group stakeholders.

As part of the development of its corporate governance system, the Group is guided by the requirements of the laws of the Russian Federation, the Listing Rules of PJSC Moscow Exchange and the principles and recommendations of the Corporate Governance Code recommended for use by the Bank of Russia.

The Group is structured as a holding company whose parent is PJSC M.video (hereinafter referred to as the ‘Company’). All strategic decisions, as well as key business decisions taken by the Group’s operating companies, are made at the level of the Company’s executive bodies, which makes it possible to achieve full coordination among operational divisions, to reduce administrative expenses and to the use the Group’s resources as efficiently as possible.

The Group’s main operating company is LLC MVMPrior to 31 October 2018, the company was called LLC M.video Management., a subsidiary of PJSC M.video, which operates the M.Video and Eldorado retail networks. As the main commercial operator within the Group, this company is the owner of the goods sold by M.Video and Eldorado, as well as the owner of the real estate assets used by both networks. In addition, LLC MVM owns 80% of the shares in LLC MARKETPLACE, which runs the Goods online platform.

Major changes in the Group’s structure since the reporting date

In February 2019, the merger of LLC ELDORADO into LLC MVM was completed as part of the legal integration of the Eldorado network into the Group. As a result, PJSC M.video’s effective ownership share of LLC MVM remained unchanged at 100%.

In an effort to optimise the Group’s structure, a decision was taken in H1 2019 to liquidate a number of Russian legal entities acquired by the Group as part of a deal to purchase the Russian business of MediaMarkt.

The key elements of the PJSC M.video’s corporate governance model are the General Meeting of Shareholders, the Board of Directors and its committees, the Management Board and the sole executive bodies (the President and Chief Executive Officer), the Audit Commission and the Company’s structural divisions responsible for the internal control and internal audit functions.

Oversight of the Company’s compliance with applicable corporate laws, the provisions of the Charter and the Company’s bylaws guaranteeing the exercise of the rights and legitimate interests of shareholders is carried out by the Corporate Secretary, who is appointed by the Board of Directors.

Additional guarantees of the veracity of the Company’s accounting and financial statements in accordance with Russian and international standards are provided by engaging an external (independent) auditor approved by the General Meeting of Shareholders.

Principles of corporate governance

The Company adheres to the following key principles, which are designed to secure the interests of shareholders and to ensure a reasonable balance between the powers of the governing bodies and those of the oversight bodies:

• providing shareholders with a genuine opportunity to exercise their rights related to participation in the Company;
• ensuring equal treatment of all shareholders and equal rights of shareholders who own an equal number of shares of the same type (category), including minority and foreign shareholders;
• implementation by the Board of Directors of the strategic management of the Company’s operations and its effective oversight of the activities of the Company’s executive bodies;
• accountability of the members of the Company’s Board of Directors to shareholders;
• executive management of the Company’s day-to-day activities in the interests of ensuring its long-term sustainable development, shareholder profit from these activities and accountability of executive bodies to the Board of Directors and the Company’s shareholders;
• timely disclosure of complete and accurate information about the Company that is necessary for shareholders to make informed decisions;
• ensuring effective oversight of the Company’s financial and commercial operations in order to protect shareholders’ rights and legitimate interests;
• social responsibility and respect for the rights and legitimate interests of other interested parties.

Development of the corporate governance system

The Company adheres to a policy of continuous development of its corporate governance system, taking into account the strategic goals and objectives of M.Video–Eldorado Group and best corporate governance practices.

Corporate governance assessment

The Board of Directors monitors the practice of corporate governance in the Company and plays a key role in material corporate events of M.Video–Eldorado Group. Assessing corporate governance falls within the remit of the Board of Directors and is also one of the tasks of the Company’s internal audit function.

PJSC M.video conducts an annual assessment of compliance with the principles and recommendations of corporate governance enshrined in the Corporate Governance Code recommended by the Bank of Russia (hereinafter also referred to as the ‘Code’). Every year, the Company strives to improve compliance with the principles and recommendations of the Code and discloses information on compliance with these principles and recommendations.

As part of its efforts to improve the Company’s corporate governance system, an external consultant conducted an assessment in 2017 of the work of the Board of Directors for 2016. In 2020, the Company plans to engage an external consultant to assess the work of the Company’s Board of Directors. In addition, the Company plans to conduct a self-assessment of the work of the Board of Directors in 2019.