Declaration on Corporate Governance

The corporate governance statement (Section 289f HGB) includes the declaration of conformity, information on corporate governance practices and a description of the working methods of the Executive Board and Supervisory Board. Our aim is to keep the presentation of corporate governance clear and concise. The complete declaration can also be found on the internet at https://www.paion.com/media-and-investors/corporate-governance/declaration-on-corporate-governance. The Executive Board and Supervisory Board prepare the corporate governance statement jointly and are each responsible for the sections of the report relating to them.

The corporate governance statement is combined for PAION AG and the Group. Accordingly, the statements apply equally to PAION AG and the Group, unless otherwise stated below.

 

Explanation on Corporate Governance

The Supervisory Board and the Management Board of PAION AG are committed to the principles of responsible management and control of the PAION Group with a focus on long-term value creation and attach great importance to these principles in their actions. In ensuring good and transparent corporate governance, the Supervisory Board and the Management Board of PAION AG are guided by the statutory provisions as well as the suggestions and recommendations of the Government Commission on the German Corporate Governance Code. These suggestions and recommendations set out in the German Corporate Governance Code are based on internationally and nationally recognized standards of good and responsible corporate governance.

In December 2022, the Supervisory Board and the Management Board issued an updated Declaration of Conformity with the recommendations of the Government Commission on the German Corporate Governance Code pursuant to Section 161 of the German Stock Corporation Act (AktG) and subsequently made it permanently available to shareholders on the Company's website (https://www.paion.com/media-and-investors/corporate-governance/declaration-on-corporate-governance ). Declarations of conformity from previous years that are no longer up to date can also be accessed on this website. Since issuing the last declaration of conformity in December 2021, PAION AG has complied with all recommendations of the German Corporate Governance Code as amended on December 16, 2019 (effective since publication in the Federal Gazette on March 20, 2020, "DCGK 2020") with the exception of the recommendations in F.2 regarding the timing of the public disclosure of mandatory interim financial information. Since publication in the official section of the Federal Gazette on June 27, 2022, the Code as amended on April 28, 2022 ("GCGC 2022") has applied. Since June 27, 2022, PAION AG also complied with all recommendations of the GCGC 2022 with the exception of the recommendations in A.1 regarding the newly introduced recommendations on social and environmental factors (often also referred to as "ESG"), with the exception of the recommendations in A.3 regarding the coverage of sustainability-related objectives in the internal control system and the risk management system, the recommendations in C.1 with regard to the competence profile of the Supervisory Board in terms of expertise on sustainability issues relevant to the company, the recommendations in D.10 with regard to knowledge and experience of the Supervisory Board in the field of sustainability reporting and its review and finally with the exception of the recommendations in F.2 with regard to the timing of the public disclosure of the mandatory interim financial information. PAION AG will continue to comply with the recommendations of the GCGC 2022 in the future with the aforementioned deviations. However, with regard to the aforementioned deviations of the recommendations regarding A.1, A.3, C. 1 and D. 10, PAION AG intends to fully comply with the recommendations in the future.
 

The declaration of conformity from December 2022 with the details is reproduced in full below.

 

Declaration of Conformity with German Corporate Governance Code

"Pursuant to Section 161 of the German Stock Corporation Act (AktG), the Management Board and the Supervisory Board of PAION AG are obliged to declare annually that the recommendations of the "Government Commission on the German Corporate Governance Code" (the "Code") as amended from time to time and published by the Federal Ministry of Justice in the official section of the Federal Gazette (Bundesanzeiger) have been and are being complied with or which recommendations have not been or are not being applied and why not.

PAION AG's last declaration of compliance with the Code was made in December 2021, at which time the Code as amended on December 16, 2019, published in the official section of the Federal Gazette on March 20, 2020 ("DCGK 2020"), was applicable.

Since its publication in the official section of the Federal Gazette on June 27, 2022, the Code as amended on April 28, 2022 ("GCGC 2022") has been applicable.      

Having said this, the Management Board and the Supervisory Board of PAION AG declare pursuant to Sec. 161 AktG:
 

1. German Corporate Governance Code as amended on December 16, 2019 ("GCGC 2020")

Since issuing the last declaration of conformity in December 2021, PAION AG has complied with all recommendations of the GCGC 2020 with the exception of the following deviations.
 Recommendation F.2 GCGC 2020:

According to Recommendation F.2 DCGK 2020, the consolidated financial statements and the Group management report shall be publicly accessible within 90 days of the end of the financial year and the mandatory interim financial information within 45 days of the end of the respective reporting period.

With regard to the timing of the public disclosure of mandatory interim financial information, the Company has not complied with recommendation F.2 DCGK 2020 with effect for the 2022 half-year report. The deviation from the recommendation is due to the following circumstance:

The sales reports of the Remimazolam licensees, which are essential for the preparation of the half-yearly reports, are not available until the end of July of each year at the earliest. This was also the case in 2022.

In order to be able to reflect the corresponding sales reports in the 2022 half-year report as well, the corresponding deadline in accordance with recommendation F.2 GCGC 2020 was not met.
 

2. German Corporate Governance Code as amended on April 28, 2022 ("GCGC 2022")

Since June 27, 2022 PAION AG also complied with all recommendations of the GCGC 2022 except for the following deviations:


Recommendation A.1 GCGC 2022:

According to Recommendation A.1 DCGK 2022, newly introduced by the DCGK 2022, the Management Board should systematically identify and assess the risks and opportunities for the company associated with social and environmental factors, as well as the ecological and social impacts of the company's activities. In addition to long-term economic goals, the corporate strategy should also give appropriate consideration to ecological and social goals. Corporate planning should include corresponding financial and sustainability-related targets.

Due to the short lead time since the recommendations on the topic of social and environmental factors (often also referred to as "ESG") newly introduced by the GCGC 2022 came into force, the processes required to implement the recommendations in A.1 GCGC 2022 could not be fully completed in the financial year 2022. Therefore, the identification of environmental and social impacts as well as the consideration of environmental and social objectives in the corporate strategy and their inclusion in the corporate planning as provided for in A.1 DCGK 2022 could not be completed so far. However, PAION AG intends to fully comply with the recommendations under A.1 DCGK 2022 in the future.
 

Recommendation A.3 GCGC 2022:

According to the new recommendation A.3 DCGK 2022 introduced by the DCGK 2022, the internal control system and the risk management system should also cover sustainability-related objectives, unless already required by law. This should include the processes and systems for recording and processing sustainability-related data.

Due to the short lead time since the new recommendations on ESG in A.3 GCGC 2022 introduced by the GCGC 2022 came into force, the processes required to implement the recommendations could not yet be fully completed in the 2022 financial year. The internal control system and the risk management system as well as the processes and systems for recording and processing data therefore do not yet fully cover all sustainability-related objectives and data. However, PAION AG intends to fully comply with the recommendations in A.3 DCGK 2022 in perspective.
 

Recommendation C.1, Sentence 3 GCGC 2022:

According to the recommendation in C.1, Sentence 3 DCGK 2022, newly introduced by the DCGK 2022, the competence profile of the Supervisory Board should also include expertise on sustainability issues of importance to the company.

Due to the short lead time since the entry into force of the new recommendation in C.1 sentence 3 DCGK 2022, the competence profile for the Supervisory Board of PAION AG could not yet be extended to include the expertise of sustainability issues relevant for the company. The Company intends to carry out an evaluation of the sustainability issues of importance to it and, based on the results, to expand the competence profile in accordance accordingly so that the recommendation in C.1 sentence 3 DCGK 2022 is fully complied with in the future.
 

Recommendation D.10, sentences 1 and 2 GCGC 2022:

According to recommendations D.10, sentences 1 and 2 DCGK 2022, as amended by DCGK 2022, expertise in the field of accounting shall consist of special knowledge and experience in the application of accounting principles and internal control and risk management systems, and expertise in the field of auditing shall consist of special knowledge and experience in the auditing of financial statements. Accounting and auditing also include sustainability reporting and its audit.

Due to the short lead time since the entry into force of the recommendations in D.10 sentence 1 and 2 GCGC 2022, as amended by the GCGC 2022, the members of the Supervisory Board and the members of the Audit Committee do not yet have knowledge and experience in the field of sustainability reporting and its audit. The company intends to build up the relevant knowledge and experience among existing and future members so that the recommendation in D.10 sentence 1 and 2 DCGK 2022 is fully complied with in perspective.
 

 Recommendation F.2 GCGC 2022:

According to Recommendation F.2 GCGC 2022 (which is unchanged from Recommendation F.2 GCGC 2020), the consolidated financial statements and the group management report shall be publicly accessible within 90 days of the end of the financial year and the mandatory interim financial information within 45 days of the end of the respective reporting period.

With regard to the timing of the public disclosure of the mandatory interim financial information, the Company has not complied with recommendation F.2 GCGC 2020 with effect for the half-year report 2022 (see above under 1.) and will not do so in the future with regard to recommendation F.2 GCGC 2022.

Information on the sales reports of the remimazolam licensees that is material for the preparation of the half-yearly reports is not available until the end of July of each year at the earliest. In order to ensure that this information, which is essential for the half-yearly reports, is taken into account in any case, the Company will not comply with recommendation F.2 DCGK 2022 with regard to the timing of the publication of the mandatory interim financial information in the future.
 

PAION AG will continue to comply with the recommendations of the GCGC 2022 with the aforementioned deviations.
 

Aachen, December 2022

 

Supervisory Board of PAION AG
For the Supervisory Board: Michael Schlenk, Chairman of the
Supervisory Board 

Management Board of PAION AG
Gregor Siebert, Chairman of the Management Board

Sebastian Werner, Member of the Board of Management"

 

Code of Conduct

PAION AG is a publicly listed specialty pharmaceutical company with innovative compounds for use in outpatient and hospital sedation, anesthesia and intensive care. As a publicly listed company, PAION has a high degree of responsibility towards different target groups. Physicians and patients trust that they will be provided with safe and effective products. Shareholders and investors must also be able to rely on the fact that all corporate activities and relationships with business partners and authorities are conducted within the framework of the principles of integrity in business transactions. These principles are set out in the "Code of Conduct". PAION's Code of Conduct can be found on the internet at: https://www.paion.com/media-and-investors/corporate-governance/code-of-conduct.

 

Information on corporate management and supervision

In accordance with the provisions of the German Stock Corporation Act, PAION AG has a dual management and control structure with two bodies, the Management Board and the Supervisory Board. The Management Board currently consists of two members, who are jointly responsible for the management of the Company. The Supervisory Board appoints, monitors and advises the Management Board and is directly involved in decisions that are of fundamental importance to the Company. In accordance with the Articles of Association, the Supervisory Board consists of five members. Since the Supervisory Board member Mr. Gregor Siebert, a member of the Supervisory Board until the end of November 2022, was appointed by the Supervisory Board of PAION AG pursuant to Sec. 105 (2) AktG for a period from December 1, 2022 to November 30, 2023 to succeed Dr. Phillips as a member of the Management Board and Chairman of the Management Board, the Supervisory Board consists of the following four members:

 

  • Michael Schlenk (Chairman), Member of the Supervisory Board since 2022
  • Dr. Karin Dorrepaal (Vice Chairwoman), Member of the Supervisory Board since 2012
  • Dr. Chris Tanner, Member of the Supervisory Board since 2017
  • Dr. Markus Leyck Dieken, Member of the Supervisory Board since 2019

 

The Supervisory Board will propose to the Annual General Meeting on May 24, 2023 that a further Supervisory Board member be appointed as the fifth member of the Supervisory Board so that the Supervisory Board as a whole is again composed in the size provided for in the Articles of Association. At the time of issuing this statement, the person in question has not yet been determined.

 

In determining the composition of the Supervisory Board, the Supervisory Board pays primary attention to the qualifications of the candidates, their experience and internationality, as well as to diversity, and in particular aims to give appropriate consideration to women. The Supervisory Board has further determined that these objectives shall be taken into account in the Supervisory Board's proposals for the election of Supervisory Board members to the Annual General Meeting. Taking into account the company-specific situation of PAION AG, the Supervisory Board has adopted the following objectives for its composition, which the Supervisory Board will take into account in its election proposals to the Annual General Meeting, both in the case of regular elections and in the case of by-elections:

 

The members of the Supervisory Board shall, as a whole, possess the knowledge, skills and professional experience required to properly perform their duties ("competence profile"). The competence profile includes:

 

  • Experience and knowledge in the areas of corporate governance, accounting and financial reporting, risk management, and governance/compliance, including with respect to social and environmental factors (often referred to as "ESG");
  • Understanding of the German and international capital market;
  • in particular the company-specific knowledge of PAION AG in matters of research and development, production, and marketing/sales of pharmaceuticals;
  • Understanding international partnering agreements (e.g., licensing agreements, development collaborations).

 

The Supervisory Board has determined that the Supervisory Board should not include more than one former member of the Executive Board. The Supervisory Board shall not include any persons who exercise executive or advisory functions at major competitors or have business or personal relations with the Company or the members of the Board of Management that could give rise to a material conflict of interest that is not merely temporary. Supervisory Board members should have sufficient time to perform their duties. Members who are also active members of the Executive Board should not hold more than three Supervisory Board mandates in total. There is also an age limit of 75 for Supervisory Board members. In addition, Supervisory Board members may not serve on the Board for more than 15 years. Exceptions to this rule are only permitted with the unanimous vote of the Supervisory Board. The international activities of the Company should be appropriately reflected in the composition of the Supervisory Board. For this reason, the Supervisory Board aims to have at least one member with an international background. Furthermore, the Supervisory Board has set itself the goal of having at least one woman on the Supervisory Board when it reaches a size of five members. This target is to be periodically reassessed and, if necessary, redefined in accordance with the applicable statutory provisions.

All members of the Supervisory Board of PAION AG were independent and younger than 75 years in the fiscal year 2022. The Chairman of the Supervisory Board, Mr. Michael Schlenk, coordinates the work of the Supervisory Board and chairs its meetings. The Chairman of the Supervisory Board is also in regular contact with the Management Board outside the Supervisory Board meetings. The Supervisory Board has defined the information and reporting duties of the Management Board, the allocation of responsibilities and cooperation within the Management Board, and transactions and business events requiring the approval of the Supervisory Board in the Rules of Procedure of the Executive Board. An Audit Committee has been established, chaired by Dr. Chris Tanner, an independent member of the Supervisory Board with special expertise in the fields of accounting and auditing. Michael Schlenk and Dr. Markus Leyck Dieken are also members of the Audit Committee. A Personnel & Nominations Committee has been established, chaired by Dr. Karin Dorrepaal, an independent member of the Supervisory Board. Furthermore, Mr. Michael Schlenk and Dr. Chris Tanner are members of the Personnel & Nominations Committee. The Supervisory Board has formed a Commercial Development Committee, to which Dr. Karin Dorrepaal, Mr. Gregor Siebert and Dr. Markus Leyck Dieken belong or belonged. Mr. Gregor Siebert was Chairman of this Committee until he joined the Management Board. The current Chairman of the Commercial Development Committee is Dr. Markus Leyck Dieken. The work of the Supervisory Board and its committees is also governed by rules of procedure. The Supervisory Board reviews and assesses the work of the Supervisory Board and its committees from time to time using a checklist[1] and a survey of Supervisory Board members ("self-assessment"). The Supervisory Board last carried out such a self-assessment on the effectiveness of its work and the work of its committees in January 2021 using the checklist and questioning of the Supervisory Board members. Further details on the work of the Supervisory Board can be found in the Report of the Supervisory Board.

PAION AG has taken out a D&O insurance policy for the members of the Management Board and Supervisory Board. The insurance conditions provide for a deductible for the Management Board and the Supervisory Board. Insurance coverage is excluded if the damages in connection with insured events are based on fraudulent acts, omissions or knowing breaches of duty.

The Supervisory Board has set an age limit of 65 for Management Board members. The Supervisory Board and the Management Board work together on long-term succession planning for Executive Board members.

The Management Board consists of the following two members:

 

  • Mr. Gregor Siebert (CEO) and
  • Mr. Sebastian Werner (CFO).

 

Mr. Sebastian Werner was appointed by the Supervisory Board as a member of the Management Board with effect from July 1, 2022. Mr. Werner succeeds Mr. Abdelghani Omari, who, at his own request and by mutual agreement, resigned early from his Management Board mandate, which was due to expire on December 31, 2022, with effect from August 31, 2022, and left the Company's Management Board to pursue new management challenges in the future.

 

Mr. Gregor Siebert was a member of the Supervisory Board until November 30, 2022 and has been appointed by the Supervisory Board as a member of the Executive Board with effect from December 1, 2022 until November 30, 2023 in accordance with Section 105 (2) AktG. In this respect, he succeeded the former Executive Board member Dr. James Phillips on a transitional basis, who resigned from office prematurely by mutual agreement with the Company on November 30, 2022 and left the Company.

 

Conflicts of interest of members of the Management Board or Supervisory Board must be disclosed to the Supervisory Board without delay. Conflicts of interest of Supervisory Board members within the meaning of Recommendation E.1 of the German Corporate Governance Code (as amended by GCGC 2020 and GCGC 2022) did not occur in the financial year 2022.

Both members of the Management Board are also managing directors of PAION Deutschland GmbH, PAION Holdings UK Ltd. and its subsidiaries as well as PAION Netherlands B.V. and PAION Scandic ApS . The other mandates of the members of the Management Board and Supervisory Board are listed in the notes to the consolidated financial statements.

 

 

Equal participation of women and men in management positions

When appointing members of the Management Board, selecting members of the Supervisory Board, and filling management positions, the Supervisory Board and Management Board strive to achieve an appropriate representation of women in these positions.

By resolution of June 2017, the Supervisory Board decided that at least one woman should be a member of the Supervisory Board, which has a total of five members. Consequently, a target of 20% was set for the reporting period that began on July 01, 2017. The deadline set for achieving the target ended on June 30, 2022. The Supervisory Board extended the resolution from June 2017 to June 30, 2027 and retained the target figure of 20%.

Until Dr. Dr. Antonijevic left the Supervisory Board in January 2022, two of the five Supervisory Board seats were each occupied by a woman, which corresponded to a quota of 40 %. Following Dr. Dr. Antonijevic's departure from the Supervisory Board in January 2022, the target was further achieved, as the Supervisory Board, which in accordance with the Articles of Association consists of five members but currently has only four members, includes one woman and thus has a quota of 25 %.

The Management Board of PAION AG consists of two members - Mr. Gregor Siebert (CEO) and Mr. Sebastian Werner (CFO). There are no women on the Company's Management Board. Due to the existing Management Board contracts, the Supervisory Board, in accordance with Section 111 (5) of the German Stock Corporation Act (AktG), had not envisaged a mandatory representation of women on the Management Board of PAION AG until the expiry of the set target achievement deadline on 30 June 2017. By resolution of 19 June 2017, the Supervisory Board decided that, due to the specific circumstances of the Company, no mandatory representation of women on the Management Board of PAION AG will continue to be provided for until 30 June 2019. By resolution dated May 21, 2019, the Supervisory Board extended this resolution until June 30, 2021, and by further resolution dated March 29, 2022, until June 30, 2023.

The Supervisory Board has dealt intensively with the issue of determining the proportion of women on the Executive Board and has set itself the goal of taking women into account when filling Management Board mandates. Due to the current number of Management Board memberships and the small size of the Company's Executive Board, the Supervisory Board has nevertheless initially refrained from setting a binding target for the proportion of women on the Executive Board of more than 0% for the period up to June 30, 2023, and gives the following reasons for this:

Since the beginning of 2021, the Management Board of PAION AG has consisted of only two members, none of whom is a woman. This corresponds to a ratio of 0%. Due to the size of the Company, the Supervisory Board does not currently consider it appropriate to increase the number of members of the Management Board. Against this background, specifying a quota of women of more than 0% would have meant specifying a quota of at least 50% (corresponding to one Management Board position). This is because a specification of a percentage must correspond to full numbers of persons in accordance with Section 111 (5) sentence 2 AktG.

However, a requirement of 50% would have had the consequence that the Supervisory Board would have been significantly and, in the opinion of the Supervisory Board, unduly restricted in its search for a successor for a departing Management Board member. The Supervisory Board of PAION AG has so far been guided by the suitability of the candidates when filling the Management Board positions, so that the Management Board has the knowledge, skills and professional experience required to properly perform its duties. If, in addition, the search for a successor candidate for a vacant Management Board position were to be mandatorily limited to the selection of a woman in order to achieve a quota, this would represent a significant and disproportionate restriction. This is because PAION AG is a highly specialized company in the pharmaceutical sector. The market for promising executives in this industry is not very large, so that the search for professionally suitable candidates is already difficult. Further limiting the candidates considered on the basis of their professional suitability to a woman would therefore have meant a considerable risk that the Company might not be able to fill vacant Management Board positions in time or at all, or would have had to refrain from selecting a particularly suitable and promising male candidate. Such a risk in filling a vacant Management Board position particularly affects the Company as PAION AG is a relatively small company compared to its competitors. Problems in filling the Management Board may therefore not be adequately compensated and thus lead to significant competitive disadvantages compared to competitor companies. The Supervisory Board therefore considered it more expedient to strive for a consideration of women in the composition of the Management Board, but to refrain from a binding requirement of a share of 50 %.

In the reporting period that began on 01 July 2017, the Management Board of PAION AG had resolved to achieve a 20% share of women at the first and second management level below the Management Board by 31 December 2019. With a quota of 31.6% as of December 31, 2019, the set target was achieved. The Management Board also resolved in January 2020 to achieve a 35% share of women by December 31, 2021. The Management Board further resolved on December 13, 2021 to maintain the target ratio and has set a target of 35% for women by December 31, 2023. With a quota of 38.7% as of December 31, 2022, this target was achieved. Overall, the company therefore considers itself to be on the right track in its efforts to strengthen the participation of women in the first and second management levels.

 

Compliance as a key management task of the Management Board

Compliance in the sense of measures to ensure adherence to the law and internal corporate guidelines and their observance is a key management task at the PAION Group. Section 91 (2) of the German Stock Corporation Act (AktG) requires the management board to take appropriate measures, in particular to set up a monitoring system, so that developments that could jeopardize the continued existence of the Company are identified at an early stage. Pursuant to Section 91 (3) of the German Stock Corporation Act (AktG), the management board of a listed stock corporation must also establish an internal control system and risk management system that is appropriate and effective in view of the scope of the business activities and the risk situation of the company. The German Corporate Governance Code specifies this obligation to the effect that the Management Board must ensure that the company has a compliance management system ("Compliance Management System") and risk controlling system that is geared to the company's risk situation.

PAION AG has implemented a viable internal control system and risk management system in order to ensure the effectiveness and efficiency of its business activities, the correctness of its accounting and compliance with the relevant legal provisions in accordance with section 91 (3) of the German Stock Corporation Act (AktG) and thus to systematically and permanently prevent legal and regulatory violations. This system also ensures that risks are identified, assessed, managed and communicated in good time, that the risk management system as a whole is monitored and managed, and that potential risks to the Company and its subsidiaries are identified at an early stage in accordance with Section 91 (2) AktG. This is a Group-wide, comprehensive and effective internal control system and risk management system that is integrated into the operational business processes and flexibly adapted to the dynamics of the environment. Details on the internal control system and risk management system (compliance management system) implemented at the PAION Group are described in the group management report in the chapter "Risk and Opportunity Report".

In stock corporations, the management board is jointly and severally responsible for the dutiful fulfillment of organizational duties, especially in risk management and controlling. The management board is obliged to organize the company in such a way that the legality of business operations is ensured and any infringement of the rights and legal interests of third parties is excluded as far as possible. The Management Board can only be relieved of liability if it can prove that it has fulfilled its organizational duties.

The internal monitoring duty of the Management Board as part of the organizational duties incumbent on the Management Board is initially ensured by the existence of a formal schedule of responsibilities, subject to the limits of the allocation of responsibilities. The schedule of responsibilities forms part of the Rules of Procedure for the Management Board approved by the Supervisory Board. In addition, the members of the Management Board exchange information on significant transactions in their areas of responsibility at regular meetings and consultations. If there are indications of deficits or irregularities, the full Board of Management decides on necessary and appropriate countermeasures.

The Executive Board may not delegate management tasks to downstream levels. However, the vast majority of preparatory and executive measures are exempt from this. In the context of capital market compliance, the Management Board of PAION AG has delegated certain tasks to subordinate managers and employees of the Legal, Investor & Public Relations and Finance departments. The tasks and responsibilities are defined in the job descriptions. There is continuous monitoring, guidance and training of the employees involved in capital market compliance.

The board members and employees of the PAION Group are regularly sensitized to certain topics that are critical to the capital market. These include, in particular, the correct handling of sensitive, confidential information and also insider information.

 

Transparency and communication

Good corporate governance is also characterized by open, transparent and up-to-date communication. PAION AG ensures this through timely reporting on the company's website and the immediate forwarding of the relevant information to the bodies designated for this purpose (Company Register, German Stock Exchange, Federal Gazette, Europe-wide publication) for publication.

All insider information pursuant to Section 17 of the Market Abuse Regulation (MMVO), notifications of directors' dealings pursuant to Section 19 of the MMVO, publications of voting rights notifications pursuant to Section 40 of the German Securities Trading Act (WpHG), press releases, financial reports, information on the Annual General Meeting, and information on corporate governance are publicly accessible on the Company's website (https://www.paion.com). A financial calendar, also published on the website, provides information on future releases of financial publications, and a calendar of events provides information on upcoming corporate presentations. At all events and discussions, PAION AG ensures that no investor receives material information preferentially and that all shareholders are treated equally. Information such as insider information, press releases, quarterly announcements, half-yearly and annual financial reports are also made available in English.

PAION AG reports regularly and promptly on the business development and the net assets, financial position and results of operations of the Group. The annual financial report is published within 90 days after the end of the respective fiscal year.

Further information on transparency and communication can be found in our Investor Relations section of the Annual Report.

 

Shareholders and Annual General Meeting

The shareholders of PAION AG can exercise their rights at the Annual General Meeting, which is held annually. Each share grants one vote. Shareholders have the option of exercising their voting rights themselves or having them exercised by a proxy of their choice in text form. PAION AG facilitates the exercise of shareholders' voting rights by having the Management Board appoint a proxy to exercise shareholders' voting rights in accordance with instructions. The reports and documents to be issued in connection with the Annual General Meeting will also be deposited on the website of PAION AG (https://www.paion.com/media-and-investors/annual-general-meeting).

 

Auditing of the financial statements

The consolidated financial statements of PAION AG are prepared by the Management Board in accordance with International Financial Reporting Standards. Baker Tilly GmbH & Co. KG Wirtschaftsprüfungsgesellschaft, Munich branch, ("Baker Tilly") was appointed by the Annual General Meeting on May 25, 2022 as auditor and group auditor for the fiscal year 2022 .  It was agreed between the Supervisory Board and Baker Tilly that the auditor should report without delay to the Chairman of the Supervisory Board or the Chairman of the Audit Committee on all findings and occurrences of importance for the tasks of the Supervisory Board that arise during the audit of the financial statements. In addition, the auditors shall inform the Supervisory Board and the Audit Committee or make a note in the audit report if they discover facts during the audit which are inconsistent with the declaration of conformity issued by the Management Board and Supervisory Board pursuant to Art. 161 AktG. For the final audit of the consolidated financial statements and the review and approval of the annual financial statements by the Supervisory Board, please refer to the Report of the Supervisory Board.

 

Risk management and compliance management system

Good corporate governance also includes the responsible handling of risks by the Company. Details of the risk management system (compliance management system) implemented at the PAION Group in accordance with section 91 (2) and (3) of the German Stock Corporation Act (AktG) are described in the group management report in the chapter "Risk and Opportunities Report".

 

Remuneration of the Management Board and Supervisory Board / Remuneration System, Remuneration Resolution and Remuneration Report

The applicable remuneration system for the Management Board pursuant to Sec. 87a (1) and (2) sentence 1 AktG resolved by the Annual General Meeting on May 27, 2021, and the resolution of the Annual General Meeting on May 25, 2022 pursuant to Sec. 113 (3) sentence 2 AktG on the applicable remuneration system for the members of the Supervisory Board are available on the internet at

 

https://www.paion.com/media-and-investors/corporate-governance/compensation-management-board-and-supervisory-board

accessible.

 

The compensation report and the auditor's report pursuant to Section 162 of the German Stock Corporation Act (AktG) for the financial year 2022, which were submitted to the Annual General Meeting on May 25, 2022 for discussion pursuant to Section 120a (5) of the German Stock Corporation Act (AktG), are also publicly available on the aforementioned website.

 

Remuneration of the Management Board

The structure and amount of the total compensation of the members of the Management Board are determined and regularly reviewed by the Supervisory Board on the basis of the compensation system approved by the Annual General Meeting. According to the compensation system presented to and approved by resolution of the Annual General Meeting on May 27, 2021, the compensation of the members of the Management Board comprises fixed annual compensation, an annual variable bonus, long-term performance-related compensation components in the form of a multi-year bonus and/or in the form of stock options, and fringe benefits.

In accordance with statutory requirements, the compensation of the members of the Management Board is disclosed on an individualized basis in the compensation report pursuant to section 162 of the German Stock Corporation Act (AktG). The complete compensation system and the full compensation report for fiscal year 2022 can be found on the internet at

 

https://www.paion.com/media-and-investors/corporate-governance/compensation-management-board-and-supervisory-board

 

To avoid duplication of presentation, reference is made to the detailed explanations in the compensation system and compensation report.

 

Remuneration of the Supervisory Board

The remuneration of the Supervisory Board is defined in the Articles of Association of PAION AG. The applicable remuneration system for the members of the Supervisory Board was adopted by the Annual General Meeting on May 25, 2022 together with a corresponding amendment to the Articles of Association. Accordingly, the members of the Supervisory Board receive a basic remuneration and attendance fees in addition to the reimbursement of their expenses. There is no performance-related compensation for members of the Supervisory Board. The annual basic remuneration amounts to EUR 25,000 and the attendance fee to EUR 1,000 per meeting. For committee work, the chairman of a committee receives EUR 7,000 per fiscal year, the other committee members each receive EUR 1,000 per fiscal year. Telephone conferences held between meetings are not taken into account when determining the attendance fee. The Chairman of the Supervisory Board receives double and his deputy one and a half times the basic remuneration or the attendance fee. The attendance fee is paid for a maximum of five meetings per year. The compensation paid to the members of the Supervisory Board for the financial year 2022 is presented on an individualized basis in the compensation report pursuant to § 162 AktG. This was submitted to the Annual General Meeting on May 25, 2022 for discussion in accordance with section 120a (5) AktG. The complete compensation report can be found on the internet at

 

https://www.paion.com/media-and-investors/corporate-governance/compensation-management-board-and-supervisory-board

 

To avoid duplication of presentation, reference is made to the detailed explanations in the compensation report. The members of the Supervisory Board did not receive any compensation or benefits for services provided personally, in particular consulting and mediation services, in the financial year 2022.

 

Share transactions and shareholdings of the Management Board and Supervisory Board

Members of the Management Board and the Supervisory Board as well as persons closely related to them are obliged to disclose the purchase or sale of shares in PAION AG pursuant to Section 19 MMVO if the value of the transactions reaches or exceeds EUR 20,000 in the calendar year. These transactions are published by PAION AG without delay on the Company's website and notified to the German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). In the fiscal year 2022, reportable transactions have been notified by Mr. Gregor Siebert on December 27, 2022.

As of December 31, 2022, Mr. Gregor Siebert held 50,000 shares with the same number of voting rights, corresponding to 0.07% of the shares of PAION AG. Mr. Sebastian Werner and the members of the Supervisory Board held no shares in PAION AG as of December 31, 2022.

 

Share-based incentive systems

PAION AG has established the stock option programs 2010, 2014, 2016, 2018 and 2020 as remuneration components with a long-term incentive effect and risk character. The stock option programs provide for the granting of stock options to employees and members of the Management Board. In the notes to the consolidated financial statements in the chapter "Other notes" (there under "Stock option programs") as well as in the remuneration report, the concrete structure of the active programs, e.g. waiting periods and exercise hurdles, as well as the options issued so far under these programs are presented. To avoid duplication of presentation, reference is made to the explanations in the notes to the consolidated financial statements and the compensation report.

 

Aachen, March 2023

 

Management Board of PAION AG

 

 

Gregor Siebert                       Sebastian Werner  

 

 

Supervisory Board of PAION AG

 

 

Michael Schlenk                    Dr. Karin Dorrepaal

 

 

 

Dr. Markus Leyck Dieken                     Dr. Chris Tanner                  

 


[1] The Efficiency Review of the Supervisory Board, A Guide to Evaluation, Hans Böckler Foundation

 

 

 


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