Limits of Authority Policy 2018 FINAL

Group Finance
Policy Family: Financial
Policy: Limits of Authority
Date of Approval: 23 Feb 2018

Morgan Board (Appendix 1) /
Approved By:
Group Executive
Policy Owner: Chief Financial Officer
Policy Administrator: Company Secretary
Next Review Date: January 2019
Version Number: 2018 v1
Limits of Authority Policy

Purpose
To ensure:
• Effective delegation of authority from the Morgan Board (“the Board”) through the different levels of
executive management; and
• That decisions in relation to material issues are made at the appropriate level of executive management
or by the Board as appropriate.
Responsibility
• The Board is responsible for setting and reviewing delegated authorities to the Chief Executive Officer
and other executives.
• The Chief Executive Officer and other executives are responsible for setting and reviewing appropriate
levels of delegation within their authority limits.
Policy Statements
• The Board shall maintain a schedule of items that are reserved for its consideration.
• The Board shall approve a Schedule of Authority of delegations to the Chief Executive and other
executives, defined in Appendix 1 (further explanatory information on these delegations is contained in
Appendix 2).
• Each Morgan entity shall maintain a schedule of authority containing authority levels for the activities
defined in Appendix 3, and have this agreed in writing with the relevant GBU.
• All Group employees, directors and controlled joint-ventures must operate in accordance with:
o The attached Schedule (Appendix 1) setting out the limits of authority set by the Board in relation to
certain matters and transactions.
o Applicable limits of authority set at Divisional, GBU or entity level.
• Any matter / transaction above an employee’s level of authority must be referred to the appropriate level
of executive management / the Board.
* up to 5 year lease commitment
www.morganadvancedmaterials.com
Morgan Advanced Materials plc Registered in England & Wales at Quadrant, 55-57 High Street, Windsor, Berkshire SL4 1LP UK Company No. 286773
Policy Implementation, Applicability & Enforcement
• This policy must be implemented by all Morgan operations worldwide.
• This policy applies to all employees, directors and controlled joint-ventures.
• The Company will take such disciplinary actions as it deems appropriate in enforcing this policy, up to and
including dismissal.
• In the event that the matter / transaction requires Board approval, the matter / transaction should be
referred to the Chief Executive Officer (“CEO”) or Chief Financial Officer (“CFO”) in the first instance.
External / Internal Monitoring & Compliance

• Divisions and GBUs are responsible for monitoring transactions to ensure that limits are not exceeded.
• Compliance with this policy is also monitored by the relevant Group functions and also subject to review
by Internal Audit, with any material instances of non-compliance reported to the Audit Committee of the
Board.
Exceptions / Non-Compliance Reporting

• There are no exceptions to this policy.
• Employees and others should report any actual or suspected exceptions or breaches of the Group’s
policies and ethical principles or serious inappropriate behaviour by using a local channel or by contacting
the Ethics Hotline via email morganplc@expolink.co.uk , via the internet at
www.expolink.co.uk/whistleblowing-hotline/for-employees.htm (company code MORGAN C), or by phone
on +44 1249 661 808 (alternative local free phone numbers by country are available on the Group’s
intranet).
Group Finance
Company Secretariat
Appendix 1: Board and Executive Limits of Authority
Limits of Authority Schedule
Expenditure Board General CEO CFO President, Thermal President, Electrical
Purpose Products /Technical Carbon / Seals &
Committee Ceramics Division Bearings Division
Business
Capital Expenditure Above £1m - Up to £1m - Up to £150k Up to £100k
Litigation Above £1m - Up to £1m - Up to £100k Up to £100k
Property Transactions Above £2m - Up to £2m - Up to £250k* Up to £250k*
Business Reorganisation / Restructuring Above £2m - Up to £2m - Up to £100k Up to £100k
Acquisitions / Disposals Above £2m - Up to £2m - - -
New Company / Business Above £2m - Up to £2m - - -
Joint Ventures Above £2m - Up to £2m - - -
Intellectual Property Transactions Above £2m - Up to £2m - - -
Trading Contracts / Agreements Above £10m p.a. - a. Up to £10m p.a. - Up to £2m p.a. Up to £2m p.a.
b. > £5m liability limit
c. fixed price/price
down ≥ 3 y
d. duration > 5y
New Manufacturing Facility All - - - - -
Pensions All - - - - -
Remuneration of Exec members’ direct reports - - All - - -
PLC Guarantees (other than to Banks) - All - - - -
Treasury – all of the items below are subject to Group Treasury Review
Bank or other Borrowings (Long Term >1 Above £10m - - Up to £10m - -
year) facility limit facility limit
Bank or other Borrowings (Short term <1 year) Above £10m - - Up to £10m Up to £500k Up to £500k
facility limit facility limit facility limit facility limit
Creating Security over Assets Above £10m in any - - Up to £10m in any - -
6 month period 6 month period
Derivative Trades including Interest Rate - Above £50m Up to £50m Up to £25m - -
Swaps and Foreign Exchange Contracts with CFO
Loans made (other than Intra-Group) Above £2m Up to £2m - Up to £500k - -
* up to 5 year lease commitment
Appendix 2: Limits of Authority Schedule explanatory notes
BUSINESS
CAPITAL EXPENDITURE
1. Incurring expenditure on capital assets including improvements – the value is to be taken as the amount set out in any individual Capital Expenditure
Proposal.
2. Disposing of any capital asset – the value is to be taken as the higher of the original cost and the expected proceeds.
3. Leasing of any capital asset or disposing of any lease of any capital asset - the value means the total undiscounted committed liability under such
lease.
LITIGATION
1. Commencing proceedings or instructing lawyers to defend proceedings involving any claim – the value means the amount of damages sought in
the claim or in the absence of a quantification of the claim in the court papers a best estimate of the potential claim/liability. No approval is required
to commence proceedings to recover an undisputed debt of up to £100,000.
PROPERTY TRANSACTIONS
1. Acquiring or disposing of any interest in land or leasing land/buildings – the value in the case of leases means the total of committed rental and
other liabilities.
BUSINESS RE-ORGANISATION/RESTRUCTURING
1. Any business reorganisation or rationalisation of a subsidiary/division’s activities involving, for example, site relocation, redundancies etc. (any land
or buildings to be sold, acquired or leased are to be separately considered under Property Transactions) – the value means the aggregate of all
costs (cash and non-cash) associated with the re-organisation/restructuring.
ACQUISITIONS/DISPOSALS
1. Acquiring or disposing of any interest in any company or business undertaking - value means the greater of the consideration (which is the initial
and any deferred/contingent consideration and any debt assumed) and the net asset value attributable to the interest.
NEW COMPANY/BUSINESS
1. Investing in the formation of a new company or in any new business undertaking (i.e. any new business which is a significant departure from or
extension to the ordinary business of the subsidiary/division concerned) - value means the aggregate of any initial investment and any commitment
to invest.
JOINT VENTURES
1. The entering into of any joint venture arrangement involving the acquisition or transfer of any interest in a new or existing company or business
undertaking - value means the greater of the consideration and the net asset value attributable to the interest in the joint venture.
INTELLECTUAL PROPERTY TRANSACTIONS
1. Acquiring, disposing of or licensing any intellectual property - in the case of a license, value means estimated receipts/payments during the life of
the agreement.
TRADING CONTRACTS/AGREEMENTS
1. Entering into any contract for goods or services to be purchased, sold or supplied other than by way of capital expenditure (which should be
considered separately under Capital Expenditure) – value means the total amount of consideration passing under the relevant contract per annum.
2. Entering into any forward purchase contracts for metal or other commodity materials – the value means the total contracted amount. If the total
contracted amount is uncertain due to price variability, refer to limits for derivatives.
NEW MANUFACTURING FACILITY
1. Establishing a new manufacturing facility – including the cost of any land/buildings - value means the aggregate of any initial investment and any
commitment to invest.
PENSIONS
1. Establishing or terminating any pension scheme or improving the benefits structure under any pension scheme or extending the composition of the
membership of any pension scheme.
BINDING OTHER PARTS OF THE GROUP/PARENT COMPANY GUARANTEES
1. Entering into any commitment which might bind all or any other part of the Group as well as the subsidiary/division concerned – value is the upper
limit of the commitment.
2. Entering into any commitment which purports to bind Morgan Advanced Materials plc or promises that Morgan Advanced Materials plc will make a
commitment whether as guarantor or otherwise – value is the upper limit of the amount guaranteed.
TREASURY
BANK OR OTHER BORROWING FACILITIES (LONG TERM > 1 YEAR)
1. Borrowing money in any single transaction – the value is the loan amount (excluding interest and charges).
2. Arranging a Loan Facility – the value is the facility amount.
BANK OR OTHER BORROWING FACILITIES (SHORT TERM < 1 YEAR)
1. Entering into any type of banking facility – the value is the facility amount.
2. Raising finance through invoice discounting or factoring – the value is the total of receivables sold/secured which is outstanding at any time.
3. Arrangement of bonds and guarantees to be issued by a bank or other financial house – the value is the face value of the guarantee.
Note: Drawings under an existing pre-approved facility are deemed approved.
CREATING SECURITY OVER ASSETS
1. Mortgaging or charging or agreeing to grant any form of security (other than liens arising in the ordinary course of business) in relation to any assets
– value means the amount of the liability secured in any single transaction.
DERIVATIVE TRADES
1. Derivative Trades are contracts which change in value relative to a given underlying variable (e.g. an exchange rate between two currencies) based
on a given notional amount. An example of an interest rate swap is a contract to receive floating rate interest and pay fixed rate interest for a given
period based on a given notional amount – the value is equivalent to the value of the notional amount being hedged.
LOANS
1. Lending money to any third party, including subsidiaries of the Group which are not wholly owned - value means the loan amount (excluding interest
and charges).
DIVIDENDS
1. Declaring and paying any dividend or making any other distribution – value means the dividend amount.
Appendix 3: Entity level Schedule of Authority requirements
Entity Schedules of Authority must include defined approval limits for the following tasks. Items marked in bold flow directly from delegations to the
Divisional Presidents and those limits must not be exceeded.
Process area Task / Transaction type

Sales New customer approval
Setting customer credit Limits
Customer pricing
Customer contractual/trading agreements
Agent commission rates
Procurement / AP New supplier approval
Expenditure commitment (e.g. creating POs)
Invoice approval
Accounting Accounting provisions/entries
Write-Offs: Inventory, Assets, Debt
Filing of statutory accounts
HR / payroll Recruitment decisions
Salary / benefit / reward changes
Employee credit card approval
Employee expense approvals
Cash / bank (subject to limits in Opening new bank accounts
Treasury Policy) Banking transactions (e.g. payment approval)
Fixed Assets Capex approval
Fixed asset disposal
Leasing
Property transactions Acquisition / disposal
Tax (subject to limits in Tax Filing of tax returns
Policy) Approval of tax payments/refunds

Limits of Authority Policy 2018 FINAL

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Group Finance

Policy Family: Financial

Policy: Limits of Authority

Date of Approval: 23 Feb 2018

Policy Administrator: Company Secretary

Next Review Date: January 2019

Version Number: 2018 v1

Limits of Authority Policy

* up to 5 year lease commitment

External / Internal Monitoring & Compliance

Exceptions / Non-Compliance Reporting

* up to 5 year lease commitment

INTELLECTUAL PROPERTY TRANSACTIONS

NEW MANUFACTURING FACILITY

BANK OR OTHER BORROWING FACILITIES (LONG TERM > 1 YEAR)

2. Arranging a Loan Facility – the value is the facility amount.

BANK OR OTHER BORROWING FACILITIES (SHORT TERM < 1 YEAR)

Note: Drawings under an existing pre-approved facility are deemed approved.

CREATING SECURITY OVER ASSETS

Process area Task / Transaction type

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