Corporate Governance

Compliance with the Combined Code

Companies that have shares traded on the Alternative Investment Market (AIM) of the London Stock Exchange are not required to comply with the disclosures of the Combined Code on Corporate Governance which is appended to the Listing Rules of the Financial Services Authority (‘the 2006 FRC Code‘). However, the Board is committed to maintain the highest standards of corporate governance, where appropriate for a company of this size.

The Board of Directors:

Board composition

The Board currently consists of four executive directors and two non-executive directors. The non-executive directors are free from any relationship with the executive management of the Company and the Board considers that both non-executive directors, other than through their shareholding, are independent directors. The non-executive directors bring a wide range of skills and experience to the Board and fulfill a vital role in corporate accountability.

Mr Brown is the Senior Independent non-executive director.

Board evaluation and performance

The Board completed a Board evaluation in respect of the year to 31 January 2008 when the functioning and composition of the Board and each Committee was assessed. It is the Board‘s intention to continue to review annually its performance and that of its Committees.

Company Secretary

All the directors have access to the advice and services of the Company Secretary and the appointment and removal of the Company Secretary is a matter for the Board as a whole. The Company Secretary through the Chairman is responsible for ensuring directors receive accurate, timely and clear information in a form that enables them to discharge their duties.

The Company Secretary attends all Board and Committee meetings and is responsible for ensuring compliance with the relevant procedures, rules and regulations.

Independent professional advice

All directors are able to take independent financial advice in the furtherance of their duties if necessary, at the Company’s expense.

Re-election of Directors

Under the Company’s Articles of Association, all new directors are required to resign and seek re-election at the first Annual General Meeting following their appointment. All directors are required to seek re-election at intervals of no more than three years.

Each of the executive directors has a service contract, which contains a notice period of one year. The non-executive directors do not have service contracts with the Company but have letters of appointment.

Board information

Board members are given appropriate documentation in advance of each Board and Committee meeting. Senior executives below Board level are invited to attend Board meetings for the purpose of making presentations on their areas of responsibility.

Committees of the Board

Audit Committee

The members of the Committee are Ms Wallis (Chairman) and Mr Brown. The external auditors also attend meetings. The Committee considers financial reporting and internal controls. It also reviews the scope and results of the external audit and the independence and objectivity of the auditors. It meets at least twice a year and reviews the interim and annual accounts before they are submitted to the Board. The Committee met three times during the year to 31 January 2008. The Committee considers annually whether the auditors remain independent for the purposes of the audit. Last year the fee for non-audit work is £10,000 against an audit fee of £39,000. The Committee is satisfied that the auditors remain independent for the purposes of the annual audit. The Committee consider that for the size of the Company and at its current stage of development that a separate internal audit function cannot be justified, but the matter is re-considered annually by the Committee.

Click here to view the Terms of Reference.

Remuneration Committee

The members of the Committee are Ms Wallis (Chairman) and Mr Brown. The Committee reviews and sets the remuneration of the executive directors. It reviews and recommends policy for the salaries and bonuses of all other staff. It advises on share schemes and approves the granting of share options. The Committee met four times during the year to 31 January 2008.

Click here to view the Terms of Reference.

Nomination Committee

The members of the Committee are Ms Wallis (Chairman), Mr Brown and Dr O’Brien. The Committee considers, at the request of the Board, candidates for new appointments to the Board and advises on all matters relating to Board appointments. The Committee met once during the year to 31 January 2008.

Click here to view the Terms of Reference.

Relations with shareholders

The Company seeks to maintain and enhance good relations with its shareholders. The Company’s interim and annual reports are supplemented by published updates to investors on technical and commercial progress. All investors have access to up-to-date information on the Company via its website, www.lidco.com which also provides contact details for investor relations enquiries. All shareholders are invited to make use of the Company’s Annual General Meeting to raise any questions regarding the management of the Company.

The Chief Executive and Chairman meet regularly with shareholders and the investing community and report to the Board feedback from those meetings. Both non-executive directors have the opportunity to attend shareholder meetings. The Board is kept informed on market views about the Company at all times.

Internal control and risk management

During the year to 31 January 2007 the Board completed a full and thorough risk and controls analysis. The Board has an established and formal process for the assessment of key risks to the business. The risk assessment is updated on an ongoing basis and reviewed bi-annually at Board meetings.

Monitoring of effectiveness

The composition of the Board and the senior management team provides a suitable range of knowledge and experience to enable adequate risk monitoring. The Company’s information systems provide detailed, regular variance reports that are reviewed and acted upon by the Board. The external auditors report separately to the Board on the Company’s accounting and internal controls as part of their normal audit work.