Corporate Governance

Corporate Governance

Corporate governance is defined as the framework by which the Company is directed and controlled and the means by which relationships between the Company's management, its board of directors, and its shareholders are conducted.

The corporate governance defers to the provisions of law, the Company’s articles of association and general securities regulations.

Icelandair Group holds the view that well functioning Corporate Governance principles are essential for assuring shareholders and other stakeholders that the Company is doing its best to ensure sound and effective control of the Company's affairs and a high level of business ethics.

Exercising good Corporate Governance will, in the long run, build a solid Company returning shareholders satisfactory profits on their investment.

Corporate Governance serves to ensure an open and transparent relationship between the Company's management, its Board of Directors, its shareholders and other stakeholders.

In 2009, the Iceland Chamber of Commerce, the Iceland Stock Exchange and the Confederations of Icelandic Employers issued guidelines on Corporate Governance. These guidelines along with the articles of associations, and rules for Issuers of Securities listed on the OMX Nordic Exchange make up the framework for Icelandair Group Corporate Governance practices.

It is the opinion of the Board of Directors that Icelandair Group complies in all main respect with the Icelandic guidelines for Corporate Governance.  The Company however does not have a Nomination Committee as the Board of Directors has not seen the need for it.  That decision will however be reconsidered regularly.

The Iceland Chamber of Commerce, the Confederation of Icelandic Employers and the Center for Corporate Governance at the University of Iceland awarded Icelandair Group as "Exemplary in Corporate Governance" in 2013.  Icelandair Group is the first listed company in Iceland to receive that recognition.

 

Articles of Association

Articles of Association for Icelandair Group Hf.

1

THE NAME OF THE COMPANY, DOMICILE AND OBJECT

1.1 

The name of the Company Icelandair Group hf.,

1.2

The Company is a public limited liability company

1.3

The Company is domiciled at Reykjavíkurflugvöllur, Reykjavík.

1.4

The object of the Company is to own and run airlines and tourism companies,  purchase and sale of shares, especially shares in other companies working in the field of aviation, travel industry and transport, purchase and sale of real estate, lending and other related business.

 

2

SHARE CAPITAL OF THE COMPANY

Share capital – shares - votes

2.1

The Company‘s share capital is 5,000,000,000.

2.2

Each share is ISK one krona.

2.3

One vote is attached to each share at shareholders’ meetings.

(Special provisions on increase of share capital and other special provisions are contained in Clause 15 and 16).

 

Increase of share capital

2.4

Only a Shareholders’ Meeting may decide to increase the Company’s share capital, either by subscription of new shares or issuance of compensation shares.

 

Preemptive rights

2.5

Shareholders shall have a preemptive right to purchase new shares in proportion to their registered holdings. Exemptions from this are authorized; cf. paragraph 3 of Article 34 of Act no. 2/1995 respecting limited liability companies (the “Company Act”).

 

Shares – share register

2.6

The Company‘s shares shall be issued electronically in accordance with the provisions of the act on Electronic Registration of Title to Securities.

2.7

A share register in accordance with the provisions the Act on Electronic Registration of Title to Securities shall be regarded as sufficient proof ownership over shares in the Company and dividends and all notifications shall be sent to the party which is at each time registered as an owner of the relevant shares in the Company‘s share register. 

 

Sale of shares and changes of ownership

2.8

No restrictions are placed on the shareholder‘s right to sell his shares. The provisions of the Act on Electronic Registration of Title to Securities and rules based on the Act shall govern the change of ownership.

2.9

Sale of shares to foreign parties shall be governed by Icelandic law as it reads at the relevant time.

 

Rights and obligations of shareholders

2.10

Shareholders are obligated, without any statement on their behalf, to abide by the Articles of Association as they are issued or later lawfully amended. Shareholders will not, neither according to the Articles of Association or subsequent amendments, become obligated to increase their holdings in the Company and shall not be subjected to redemption of their shares. Shareholders are not responsible for the Company’s obligations exceeding their holding in the Company unless they take on such liability in a legally binding document. This provision will not be changed or discontinued by any resolution of a shareholders’ meeting.

2.11

No special rights accompany the shares.

 

Communication with shareholders

2.12

Electronic file communication and e-mailing is permitted between the Company and shareholders instead of sending and submitting written documents. The authorization extends to any kind of communication between the Company and shareholders, e.g. invitations to shareholders’ meetings, distribution of dividends and other notifications which the Board of Directors sends the shareholders. Such electronic communication is equal to correspondence written on paper. The Board of Directors shall set rules stipulating the conduct of electronic communication and the standards of the software used for this purpose. The rules shall be accessible to shareholders. Shareholders who wish to communicate electronically with the Company shall send the Company a confirmation thereof in accordance with the rules set by the Board of Directors.

 

3

CORPORATE GOVERNANCE

3.1

The Company shall be governed by:

a)         The Shareholders’ meetings.

b)         The Board of Directors.           

c)         The Managing Director.

 

4

SHAREHOLDERS’ MEETINGS

4.1

The supreme power of the Company’s affairs, within the boundaries set by these Articles of Association  and Icelandic legislation is in the hands of lawful shareholders’ meetings.

 

Right to participation

4.2

Shareholders, shareholders’ agents, the Company’s accountants and the managing director, even if he is not a shareholder, have the right to participate in shareholders’ meetings. Furthermore, the Board of Directors may invite specialists to attend the shareholders’ meeting if their advice or assistance is required.

4.3

The Board of Directors is authorized to decide that shareholders may participate in shareholders’ meetings by electronic means without being physically present. If the Board of Directors feels that the Company has equipment which is sufficiently safe to allow shareholders to participate in shareholders’ meetings electronically without being physically present and the Board of Directors decides to use this authorization it shall be announced in the invitation to the meeting.

4.4

Shareholders who intend to participate electronically in shareholders’ meetings shall notify the Company’s office with 5 days notice thereof and submit written questions regarding the agenda or documents to be presented at the meeting which they require answers to.

4.5

The shareholders shall have access to instructions regarding electronic participation in shareholders’ meetings along with a password and necessary equipment for participation. An inserted password into a computer system is deemed to be equal to the shareholder’s signature and is viewed as valid participation in the shareholders’ meeting.

 

Electronic shareholders’ meetings

4.6

The Board of Directors may decide that a shareholders’ meeting only be held electronically.

4.7

If the Board of Directors feels that the meeting can be held only electronically with suitable equipment and thereby allowing shareholders to participate electronically, the invitation to the meeting shall clearly give information regarding the technical equipment and information on how shareholders notify the Company of their electronic participation and where they can receive information, instructions and a password for participation. An inserted password into a computer system is deemed to be equal to the shareholder’s signature and is viewed as valid participation in the shareholders’ meeting.

 

Voting outside a meeting

4.8

If the Board of Directors feels that it is not possible to allow shareholders to participate in shareholders’ meetings electronically they shall be allowed to vote on proposals or participate in voting in writing or electronically. The Board of Directors shall set rules regarding the execution of such voting.

 

Power of Attorney

4.9

A shareholder may send an agent to the shareholders’ meeting on his behalf. The agent shall submit a written or an electronic power of attorney which shall be dated.

4.10

A power of attorney will not be validly revoked after it has been submitted at the delivery of meeting documents or after the shareholders’ meeting has been declared open, which ever happens first.

 

Lawfulness of shareholders’ meetings

4.11

A shareholders’ meeting is lawful without regard to attendance if it is lawfully called for.

 

Annual General Meeting

4.12

An annual general meeting shall be held within eight months from the end of the financial year. Annual general meetings shall be called with the same method as other shareholders’ meetings in accordance with the provisions of Clause 4.16 and 4.17.

 

Agenda of the Annual General Meeting

4.13

The following matters shall be addressed at annual general meetings:

 

  • The Board of Director’s report on the Company’s operations in the past year shall be presented.
  • Confirmation of annual accounts and decision on the handling of profit or loss of the financial year.
  • Decision on payments to board members.
  • Proposals of the Board of Directors regarding the remuneration policy.
  • Election of the Board of Directors in accordance with the provisions of Clause 5.
  • Election of auditor in accordance with the provisions of Clause10.1.
  • Proposals from shareholders which shall be on the agenda according to the provisions of Clause 4.20, cf. paragraph 4 of Article 88 of the Company Act.
  • Other matters.

If shareholders who control at least 1/3 of the Company’s share capital insist in writing at the annual general meeting, a decision on item 2 on the agenda shall be postponed to the extended annual general meeting which shall be held no earlier than one month and no later than two months later. No further continuance can be requested.

The Company’s annual accounts, report of the Board of Directors, and report of the auditor shall be available for review by the shareholders at the Company’s offices 7 days before the annual general meeting.

 

Invitation to shareholders’ meetings

4.14

The Board of Directors shall call for shareholders’ meetings when it deems it necessary, or when the elected auditor or shareholders controlling at least 1/10 of the share capital insist in writing and suggest an agenda for the meeting.

4.15

When a lawful claim for a shareholders’ meeting is presented, the Board of Directors is obligated to call for a meeting within 14 days from receiving such a claim. If the Board of Directors has not called for a meeting within that time limit a meeting can be called for in accordance with the provisions of paragraph 2 of Article 87 of the Company Act.

4.16

Shareholders’ meetings shall be called for with a method which is considered to ensure swift access to the meeting on equal grounds. Trustworthy media shall be used which ensures the circulation of the invitation to the public in the European Economic Area. Such media includes the OMX information system and Huginonline. The meeting shall also be called for with an advertisement in Icelandic media.  

 

Deadline for calling meetings

4.17

Shareholders’ meetings shall be called for with a minimum of three weeks’ notice.

Invitation

4.18

The invitation shall include information regarding:

  • The place of the meeting, time and draft agenda.
  • Clear and precise rules on participation in and voting at shareholders’ meetings.
  • Where and how shareholders can get:
    • Unabridged documents as they will be presented at the shareholders’ meeting;
    • Unabridged proposals and/or comments of the Board of Directors or its committees on each item on the draft agenda;
    • Unabridged shareholder proposals as received by the Company.
  • Website where information can be located on the issues that shareholders shall, according to law, have access to in connection to a shareholders meeting.

4.19

If a proposal on amendments to the Company’s Articles of Association is to be addressed at the meeting the substance of the proposal shall be described in the invitation.

 

Proposals from shareholders

4.20

Each shareholder has the right to have certain matters addressed at the shareholder’s meeting if he so requests in writing or by electronic means to the Board of Directors of the Company with time enough in advance so that the matter can be placed on the agenda and presented to shareholders seven days before the meeting.

 

Agenda

4.21

The agenda shall be available for shareholders’ review at the Company’s office, along with final proposals to be addressed at the meeting, no later than seven days before the meeting.

 

Proposals for changes

4.22

Lawfully proposed additions or amendments may be presented on the shareholders’ meeting itself, even though they were not available for the shareholders’ review prior to the meeting.

 

Matters not on the agenda

4.23

Matters which have not been listed on the agenda may not be finally resolved at the shareholders’ meeting without the consent of all shareholders in the Company. Those matters may however be resolved as directions to the Board of Directors.

4.24

If proposals under them item “Other matters” are presented they may not be finally resolved at the meeting, cf. Clause 4.23.

 

Chairman

4.25

Shareholders’ meetings are chaired by a chairman elected by the meeting and he will nominate a secretary with the approval of the meeting. The chairman shall solve all matters which arise concerning the lawfulness of the meeting and its conduct in accordance with these Articles of Association and Icelandic legislation. He shall furthermore, decide the form of discussions, procedures for addressing matters at the meeting and voting. 

 

Minutes of shareholders’ meetings

4.26

Minutes of the meeting shall be kept in detail and all resolutions and results of voting recorded. The minutes shall be read out loud at the end of the meeting and comments on the minutes noted in the minutes. The minutes shall be signed by the chairman and secretary. The minutes shall constitute full proof of the events of shareholders’ meetings.

 

Weight of votes

4.27

A simple majority of votes will decide matters at shareholders’ meetings unless otherwise stipulated in these Articles of Association or Icelandic law. A proposal is stricken if votes are equal. If two or more men receive the equal amount of votes in elections a tossup shall determine the election. 

 

 

5

BOARD OF DIRECTORS

5.1

The annual general meeting of the Company annually elects 5 men for the Board of Directors. Their ability is determined by law. 

 

Candidacy

5.2

Those who intend to run for the Board of Directors shall notify the Board of Directors of their candidacy at least 5 days before a shareholders’ meeting. The notification shall list the name, identification number and address of the candidate along with information about his main employment, other board memberships, education, experience and shareholdings. Candidates shall furthermore list any interest connected to main clients and competitors of the Company and shareholders controlling more than 10% of the Company.

5.3

The Board of Directors shall review notifications of candidacy and give the candidate, in verifiable manner, the opportunity to correct any flaws the notification has within a specific time limit. If the flaws are not corrected within the given time limit the Board of Directors shall decide on the validity of candidacy. The Board’s decision can be put to the decision of the shareholders’ meeting which shall have supreme power in deciding the validity of the candidacy. 

5.4

Information about candidates for the Board of Directors shall be available for shareholders’ review at the Company’s offices no later than 2 days before the shareholders’ meeting.

 

 

6

ELECTION OF THE BOARD OF DIRECTORS

6.1

The election of board members shall be based on a majority vote between individuals. 

6.2

The election shall usually be written if the number of candidates is greater than the number of board members to be elected.

6.3

If the Company’s shareholders are more than 200, shareholders controlling at least 1/10 of the share capital can insist that the voting of board members be proportional or cumulative. If the shareholders are fewer than 200 shareholders who control 1/5 of the share capital can request these voting methods.

6.4

A claim for proportional or cumulative voting shall be presented to the Board of Directors at least five days before the shareholders’ meeting.

6.5

The two female candidates and the two male candidates that receive the most votes and the person who receives the most votes after the aforementioned in the election of board members shall be deemed as the rightfully elected board members.

 

 

7

DIVISION OF TASKS

7.1

The Board of Directors elects a chairman of the board from the members of the board. Otherwise the Board of Directors divides tasks as necessary.

7.2

The chairman of the Board of Directors calls board meetings and chairs the meetings. Board meetings shall be held whenever the chairman deems necessary. A meeting shall usually be held if a board member or the Managing Director insists. 

7.3

The board members may participate in board meetings through communication systems. Board meetings may also be held with the assistance of electronic media in so far as it is consistent with Article 70 of the Company Act.

 

 

8

MEETINGS OF THE BOARD OF DIRECTORS

Lawfulness of board meetings

8.1

A board meeting is able to make decisions when a majority of board members participate in meetings. If possible, an important decision may not be taken without all members of the Board of Directors having had a chance to discuss the matter.

 

Voting

8.2

A simple majority of votes decides matters in board meetings. Proposals are stricken if votes are equal. If votes are equal in elections between men a tossup shall decide the election.

 

Minutes of meetings

8.3

Board members shall keep minutes of meetings and confirm the minutes with their signature.

 

Goals and obligations

8.4

The Board of Directors has supreme powers in matters concerning the Company between shareholders’ meetings and sets the Company’s goals regarding its business and represents the Company’s and the shareholder’s interests in accordance with the object of the Company. The Board of Directors governs the social affairs of the Company between shareholders’ meetings and binds the Company with its resolutions and agreements. The Board of Directors hires a managing director, one or more, decides his terms of employment and executes a written contract of employment.  

8.5

The Board of Director grants power of procuration. 

8.6

The signature of the majority of the Board of Directors is required to bind the Company.

8.7

The Board of Directors works in accordance with rules set by the Board of Directors in accordance with the Company Act.

Board committees

8.8

If committees working on behalf of the Board of Directors are elected in accordance with provisions of the rules of the Board of Directors their conclusions shall only be directive for the Board of Directors and it is not bound by their conclusions when resolving matters unless otherwise stipulated by law. 

 

 

9

MANAGING DIRECTOR

9.1

The Managing Director handles the day to day operations of the Company in accordance with the rules the Board of Directors has or will set forth. The day to day operations do not include matters which are unusual or of great significance.

9.2

The Managing Director shall make sure the Company’s accounts are kept in accordance with law and practice and that the Company’s assets are kept in a secure manner.

9.3

The Managing Director is obligated to abide by all instructions of the Board of Directors. He shall give the auditor any information he requests. 

 

 

10

ACCOUNTING AND AUDITING

10.1

The financial year of the Company is the calendar year. The annual accounts shall be audited by an auditing company. An auditor or auditor company shall be elected at an annual general meeting for a term of one year. 

 

 

11

THE COMPANY’S SHARES

11.1

The Company is authorized to own up to 10% of the Company’s share capital. Votes are not attached to shares owned by the Company. The Company can only acquire shares in accordance with the authorization of a shareholders’ meeting to the Board of Directors only in order to establish a market making agreement regarding shares in the Company or to establish a buy-back programme. An authorization to the Board of Directors to purchase shares in the Company may not be valid for more than 18 months at a time. Rules concerning purchasing and selling shares shall be stipulated in the rules of the Board of Directors.

 

 

12

CHANGES TO THE ARTICLES OF ASSOCIATION

12.1

The Articles of Association may only be changed by a lawful shareholders’ meeting as long as the proposal for the change is described in the invitation to the meeting. The decision is only valid if approved by 2/3 of the votes and approved by shareholders controlling at least 2/3 of the votes represented at the shareholders’ meeting.

 

 

13

DISSOLUTION

13.1

Should it be advisable or necessary to dissolve the Company, proposals thereof shall be governed by Chapter XIII of the Company Act. 

 

 

14

MERGER

14.1

The provisions of Chapter XIV of the Company act shall apply to a merger of the Company with other companies.

 

 

15

SPECIAL PROVISIONS ON INCREASE OF SHARE CAPITAL

 

 

16

OTHER PROVISIONS

16.1

Where the provisions of these Articles of Association do not stipulate the form of proceedings the provisions of the Company Act shall be abided by.

 

 

Headlines of specific articles and information in smaller font within brackets do not form part of these Articles of Association but are inserted for practical reasons.

These Articles of Association were approved by the Company's shareholder's meeting on 21 May 2010 and replace the older Articles of Association.

Article 2.1 was changed on 9 September 2010.

Article 2.1 was changed on 27 December 2010.

Article 5.1 was changed on 23 March 2012.

Article 15.1 was changed on 23 March 2012.

Article 6.5 and 6.6 were changed on 13 March 2013.

Article 5.1 changed and article 6.6 removed on 11 March 2015.

Article 11.1 changed and aritcle 15 removed on 10 March 2016.

Rules of Procedure

Rules of Procedure for the Board of Directors Icelandair Group. hf.

1.

Division of tasks and election of board members

1.1

The board of directors shall be elected at each annual general meeting of the company, where five directors and one alternate director shall be elected. In exceptional cases the election of board members can be done at shareholder’s meetings.

1.2

The board of directors shall hold a meeting immediately following each annual general meeting. At that meeting, the board shall elect a chairman and vice-chairman and shall delegate other tasks among the members as applicable.

1.3

At the first meeting following the annual general meeting, the senior member of the board shall preside the meeting. If more one or more board members have served equally long on the board the senior from that group shall preside the meeting.  

1.4

Simple majority presides the election of board members. If votes are equal, a toss decides the vote.

 

2.

The representative of the board of directors and other activities

2.1

The chairman is the representative of the board of directors. The chairman may assign others to represent the board. The chairman and the chief executive officer represent the company vis-á-vis external parties in accordance with the company‘s customs and general rules.

2.2

In the event of an impediment of the chairman, the vice-chairman shall take his place.

2.3

Board of directors shall appraise the Act on Public Limited Companies, the Competition Act, Act on operation of stock exchanges and regulated markets, Act on Securities Transaction and other applicable laws. 

2.4

The board of directors shall familiarize themselves with and be bound by the rules on confidential information and procedural rules on the stock market set in accordance with the of the Act on Securities Transaction, including the company‘s rules in this regard.

2.5

The board of directors shall ensure that all shareholder‘s interests are well guarded. The board of directors shall not specially guard the interest of those who supported them to be elected to the board of directors.

2.6

It is assumed that directors have sufficient time to perform their duties.

2.7

In general, the operations of the board of directors shall take place at board meetings. If there is communication between board meetings, between board members or between board members and officers of the company, it should be discussed at the subsequent board meeting if the matter involves the company‘s interest and entered into to the record of minutes.

2.8

If, under unusual circumstances, the chairman should deem it impossible to wait and convene a board meeting, he may decide that to carry out voting among board members either in writing or by phone. A decision to this effect shall be confirmed at the board meeting immediately following such written or telephonic voting, and booked in the record of minutes.

 

3.

Calling of board meetings

3.1

Board meeting shall be held as frequently as needed, but not less than monthly. Each year an annual agenda of activities shall be put forward, which holds the agenda for regular board meetings as well as other meetings, and the visitation to subsidiaries of the company.

3.2

The chairman, or the chief executive officer as his representative, calls board meetings with at least seven days’ notice by the means of a letter, e-mail or other certifiable way. If urgent a board meeting can be called with shorter notice.

3.3

The minutes of the board meeting shall be submitted to board members, through the board‘s portal, at least two days in advance of a meeting or as soon as possible.

3.4

The chief executive officer of the company shall monthly and present the board with the financial status of the company’s group and other matters regarding operations of the company as well as the results of operations.

3.5

The chairman shall annually acquaint the board members of the written information the board receives from the chief executive officer regarding the operation of the company, its group companies and financial status of the group, to ensure that the board members get the information needed to carry out their work according to these rules of procedure, the company‘s articles of association and applicable laws.

3.6

The chairman is obligated to call a board meeting if a board member or the chief of executive officer of the company requests.

3.7

Board meeting notification shall include an agenda for the meeting.

3.8

The board of directors shall at least once a year have a meeting without the company‘s officers to evaluate their performance as board members.

 

4.

Legality of resolutions and chairman of the meeting

4.1

The board is not legally constituted unless all board members have received invitation according to Article 3.2. The board is not legally constituted unless at least half of the board attend the board meeting subsequently after the meeting invitation.

4.2

The chairman of the board chairs meeting of the board. Simple majority presides decisions at the meeting on all matters. If votes are equal, the matter recedes.

 

5.

Disqualification

5.1

Board members and the chief executive officer of the company shall not take part in any vote of the board of directors regarding transactions between the company and themselves, lawsuit brought against themselves or lawsuit against third party if they have a substantial financial interest which may be contrary to the company‘s interests. Board members and the chief executive officer of the company shall report to the board any matter that falls within any of the foregoing categories prior to taking of any board action with respect to such matter.

5.2

If a board member or the chief executive director of the company are considered to be disqualified in matters set out in Article 5.1., one shall not have access to documents that regard the matter. Furthermore, one shall recuse from the board meeting during board handling of the matter related.

5.3

Chairman of the board, or the vice-chairman in the event of the chairman impediment, can resolve that certain board members can not participate in discussion related to disqualification. 

5.4

The board of directors can propose a proposition that the chairman of the board, or the vice-chairman in the event of the chairman impediment, is deemed disqualified to discuss matter.

 

6.

Record of minutes

6.1

The chairman of the board shall ensure that the matters addressed and resolutions made at board meetings shall be recorded. The following shall be recorded in the record of minutes: A. Names of attendees. B. Description of matters on the agenda. C. Resolutions of the board.

6.2

In the record of minutes it shall be stated what documents where submitted before the meeting and what documents where submitted during the meeting.

6.3

The secretary of the meeting shall make a draft of record of minutes available for the board of directors no later than three business days following a meeting.

6.4

The record of minutes shall be approved and signed by attendees. The chairman of the board and the chief executive officer are permitted to have short comments on the minutes recorded, but all persons who attended the meeting shall sign the record of minutes. If a given board member did not attend the board meeting they shall familiarize themselves and confirm the record of minutes.   

6.5

If the record of minutes is not settled at the end of the meeting it shall be presented for approval at the next board meeting, or as soon as possible. If a board member or the chief executive officer wishes to make a short comment on the record of minutes it shall be made no later than at the beginning of next board meeting.

6.6

Record of minutes shall also be made for policymaking meetings of the board of directors.

6.7

The board of directors shall regularly evaluate whether it is necessary to change the meeting‘s agenda for the year or if the prioritization should be different.

 

7.

Scope of board activities and the board of director’s shares in the company

7.1

The board of directors shall supervise the company‘s operation in accordance with laws, regulations and articles of association.

7.2

The board of directors, along with the chief executive officer, shall formulate the company‘s policy for short and long term. Information that relate to policy formulation matters shall be temporally accessible for the board, at least four business days before the matter is to be discussed at the board meeting.

7.3

The board shall monitor that the company‘s organization and operations are carried out properly. The board shall with the assistance of the company‘s internal and external auditors ensure that accounting and investments are carried out with appropriate diligence.

7.4

The board shall take decisions in matters that are unusual or major decisions within Icelandair Group hf. and its subsidiaries. The board can however assign to the chief executive officer to take such decisions or other person that the chief executive officer appoints.

7.5

The board shall not take decisions that relate to daily operations unless they are major decisions or matters that the chief executive officer decides to put the matter for voting.

7.6

Under unusual circumstances the board of directors can assign certain board member, one or more of the representatives of the board, a matter to handle.

7.7

The chairman of the board shall annually give the board report about the board members shares in the company or its subsidiaries.

7.8

The board shall ensure that proper risk management is available at the company, e.g. in relation to work related accident, external events, legal risk and reaction to emergency incidents.

7.9

The chief executive officer, shall have consultation with the board in relation to hiring senior officers for the company and its subsidiaries.

 

8.

The chairman of the board

8.1

The chairman of the board shall ensure that new board members receive necessary information, among other things rules on insider trading and other obligations according to laws and regulations, guidance in relation to the board working methods and matters related to the company, among other things the company‘s policy, goals, risk guidelines and operation. To ensure this the chairman shall, along with the chief executive officer, have meeting with new board members where foresaid matters are presented. Furthermore it shall be ensured that new board members have access to the board‘s data base where all necessary information are kept.

8.2

The chairman of the board shall ensure that the board updates, at least annually, in regulated ways, its knowledge on the company and its operation, along with ensuring that the board in general receives specific and clear information and documents to perform their work as board members.

8.3

The chairman of the board shall endeavor that board members receive the necessary guidance in relation to management of the company, including constitutional obligation and responsibility, or that board members attend special seminar in that regard.

8.4

The chairman of the board is responsible for the communication of the board with the shareholders of the company and shall inform the board of the shareholder‘s opinion. The chairman should furthermore encourage open communication within the board and between the board and managing directors of the company.

8.5

The chairman of the board shall have initiative to review the rules of procedure for the board of directors, at least annually.

8.6

The chairman of the board shall compose board meetings agenda, in cooperation with the chief executive officer, as well as calling and managing the board meetings. Furthermore it shall be ensured that in board meetings there is time to discuss, take decisions, especially in relation to major and more complicated matters.

8.7

The chairman of the board shall monitor the progress of the board‘s decisions within the company and verify its introduction to the board.

8.8

The chairman of the board shall annually ensure that an impact assessment is done.

8.9

The chairman of the board shall annually ensure that the board defines the most significant matters of each year.

8.10

The chairman of the board shall annually ensure that the board defines and reevaluates its role.

 

9.

The chief executive officer: Employment agreement

9.1

The board hires the chief executive officer of the company, makes a written employment agreement with him and terminates his employment agreement. The remuneration committee handles such agreements (see Article 12.1.2.)

9.2

The employment agreement shall be in writing and filed with other important documents of the company.

 

10.

The chief executive officer: Scope of activity

10.1

The chief executive officer shall be responsible for the daily operations of the company with the commission of the board of directors and shall comply with the policy and instructions the board has given.

10.2

The daily operation does not include measures that are major or unusual. The chief executive officer can only perform such measures with the authority of the board, unless it is deemed impossible to wait for the board‘s decisions. In such instances the board shall immediately be informed of the measure.

10.3

The chief executive officer shall ensure that accounting and financial positions are in accordance with law and good methods and that the usage of the company‘s assets is secured.

10.4

The chief executive officer shall make decisions on operational matters which do not fall within the power of decision of others according to laws, articles of association of the company or these rules of procedure for the board of directors.

10.5

The chief executive officer shall have initiative to form a policy in relation the company‘s and its subsidiaries operations.

10.6

The chief executive officer shall make suggestions in regards to the board‘s power of procuration. If the chief executive officer has the power of procuration, he handles negotiation on behalf of the company which falls within his commission.

10.7

On regulated board meetings the chief executive officer shall attend and acquaint the board with operations of the company. The chief executive director can require other employees to attend the meeting as appropriate.

10.8

The chief executive officer shall attend board meetings, unless otherwise decided by the board in individual instances.

10.9

The board of directors shall in cooperation with the chief executive officer scope activity between them.

 

11.

Subsidiaries

11.1

The boards of the company‘s subsidiaries and affiliates defer to laws and articles of association which apply to them.

11.2

The boards of the company‘s subsidiaries shall be appointed in consultation with the board of Icelandair Group hf.

11.3

All decisions that are considered major for operation or other position of the subsidiaries shall be submitted to the board of the company as well as all changes made in the policy of the companies and investments in excess of investment program.

 

12.

The board of director’s committees: scope of activities

12.1.

Audit committee

12.1.1

The board of directors shall elect three members to sit on the company‘s audit committee.

12.1.2

The audit committee performs its activities independently but within the commission of the board. The board shall annually elect the audit committee.

12.1.3

The audit committee shall, in collaboration with internal auditor, coordinate the internal auditing of the company and supervise the internal and external auditor‘s work.

12.1.4

The audit committee shall supervise accounting regulation and changes in that regard. The committee shall possess knowledge in the field of accounting and report to the board of directors.

12.1.5

The audit committee supervises the auditing and shall follow up on the recommendation of internal and external auditors.

12.1.6

The main task of the audit committee is to supervise the external auditor‘s audit plan and evaluating the scope of internal auditing, communication with internal and external auditors, evaluating the auditor‘s qualification to perform special projects, supervision of the auditor‘s remarks, supervision of the auditing financial costs.

12.1.7

Remarks and suggestions from the internal and external which the auditors of the company want to make shall be filed to a special auditing book which the audit committee shall possess in a secure way for the board members. In the auditing book there should also be information about the auditing work committed and whether auditor‘s have noticed deficiency in the company‘s accounting, internal and external auditing, or in the company‘s operations. The chairman should immediately be announced if such deficiencies appear.

12.2

Remuneration committee

12.2.1.

The board of directors shall elect five members to the remuneration committee.

12.2.2

The remuneration committee performs its activities independently but within the commission of the board. The board shall annually elect the remuneration committee.

12.2.3

The remuneration committee has the role to prepare and execute propositions for remuneration for members of the board of directors, including the chief executive officer.

12.2.4

The remuneration committee forms a policy on options agreements as well as other bonus payments to officers of the company.

12.2.5

The committee shall form policy towards option plans for officers of the company and submit such plans for approval at each annual general meeting.

12.2.6

The committee’s objective is that officers are not involved in making decisions related to their own remuneration and that officers have a share benefit from the success which conforms with the long term benefits of the shareholders.

12.2.7

The main tasks of the remuneration committee is to form a policy on option agreements and bonus payments to officers, come up with an stock incentive plan, supervise the officer purchase of shares in the company, documentation, comparison of the officers remuneration and making of employee agreements. The remuneration committee shall furthermore make sure that the remuneration policy is regularly reviewed and that it is complied with.

12.2.8

The remuneration committee shall submit its results, as proper, for approval of the board of directors, including all employee agreements and/or employment termination agreements of the company‘s directors.

 

13.

Communication with the authorities

13.1

The board of directors shall make sure that Register of Enterprises and other authorities receive all the necessary information required by laws and regulations.

13.2

The board of directors shall supervise that information required by laws and regulation is submitted to the NASDAQ OMX Iceland.

 

14.

Execution of annual performance-evaluation

14.1

The board of directors shall annually evaluate its work performance, size, combination, procedures, e.g. in relation to submitting data at board meeting and procedures, as well as performance of the chairman of the board, the chief executive officer and other daily directors and the evolution of the company.

14.2

The annual performance evaluation is aimed at improving working skills and the board of director’s efficiency and the evaluation comprehends that the board evaluates its substantiality and weaknesses of their work and consider the elements that can be improved.

14.3

The evaluation shall be based on self-evaluation but as relevant, external help can be sought.

14.4

The board of directors shall also evaluate the performance of their committees.

 

15.

Confidentiality

15.1

The chairman of the board and the chief executive officer are representative for the company and other board members are obligated to observe officially about the company‘s matters. 

15.2

Board members are obligated to observe confidentiality concerning all matters informed of in relation to their work and according to articles of association of the company, laws or general rules. The general rule shall be that confidentiality concerns all matters of the company unless it is a matter that the board decides to make public or otherwise stated in laws or the articles of association of the company. The obligation to observe confidentiality shall remain in effect after the termination of board membership.

15.3

Board members shall familiarize themselves with the company‘s rules on confidential information, cf. Securities Transaction Act no. 33/2003.

 

16.

Relation to other rules of the company

16.1

Board members shall also embrace the ethic and insider trading rules of the company as well as other relevant rules, e.g. from the Financial Supervisory Authority and NASDAQ OMX Iceland.

 

17.

Amendment to the rules

17.1

Amendments to these rules of procedure shall require the approval of majority of the board.  

17.2

The original text of these rules of procedure, including, if appropriate, any changes that have been duly made to these rules, shall be kept in the company’s record of minutes. 

17.3

A copy of the valid rules of procedure and the valid company‘s articles of association shall be handed to the members of the board, the chief executive officer and the auditors of the company.

 

These rules of procedure are approved at a board meeting on 12 September 2007.

The above rules were amended at a board meeting on 15 November 2010 and 10 August 2012.

 

Code of Ethics

Icelandair Group hf. is among the best companies in its branch of industry, the pillar of Icelandic travel industry and a leader in the Icelandic economy. Therefore it is very important that we maintain the reputation and trust of the Company and that we ensure that integrity, responsibility, trust and quality work is always carried out. We have therefore put down the following principles and values which we have decided to obey.

The rules do not contain a complete description of appropriate behaviour, as employment agreements contain a more detailed description.

1.

Scope

This Code of Ethics applies to all employees and Board Members of Icelandair Group hf. and its subsidiaries.

2.      General Behaviour

We commit ourselves to obey the laws of the company and the internal rules in force at any time.

We always show our customers the utmost respect and our attitude is reflected by care and respect for the company’s service. When we are the costumers of the company we always behave modestly and let other customers take priority. 

We show each other mutual respect and prevent that injustice, such as bullying, sexual harassment, or discrimination based on aspects that are not reasonable to implement, such as gender, age, religion, nationality, disability or sexual orientation will take place in the company.

We shall exercise prudence when speaking publicly about the company and not make any comments which might tarnish the company’s image.

Employees who receive benefits at work do so in accordance with clear rules from the company. Such benefits are privileges but not the employee’s right.

3.      Confidentiality

In accordance with law we are subject to confidentiality in regards to everything that we become aware of regarding our customers as well as the operations of the company, even after retirement.

It is forbidden to use confidential information that we have been aware of in our work for the company, to profit for ourselves or others.

Special caution shall be applied when storing, copying, registering or destroying data to ensure confidentiality.

  

4.      Conflicts of Interest

It is expected that the interests of the company and the employees go hand in hand. Nevertheless it can occur that an employee has direct or indirect interests in a particular matter, regardless of the interests of the company. The concerned party shall, where appropriate, withdraw himself from the case, seek guidance from a supervisor or, if there is no other possibility, handle the case in a reasonable and transparent way so there is no doubt that the interests of the company were been kept in mind.

We do not accept gifts (other than small gifts) or any other payment or service, such as trips or entertainment except with a written consent from a Managing Director or CEO. This applies for gifts from customers of the company, those who wish to deal with the company or others who could profit from decisions made by the company.

We avoid making investments that could create conflicts of interest. The same applies to investments of spouses and minors, as well as other related parties as appropriate.

5.      Working Outside the Company

It is expected that the employees work for the company exclusively.

Consent must be granted by a Managing Director if an employee seeks to have a paid employment outside of Icelandair Group, and its subsidiaries, or to run some sort of an enterprise.

Such consent shall only be granted if there is no risk of conflicts of interests. 

6.      Board Membership

An employee cannot be a Board Member of other companies or organizations unless with a written consent from the CEO or the relevant Managing Director. The CEO shall seek the authorization of the Chairman of the Board in order to be allowed to sit on the Boards of other companies or organizations.

Such consent shall only be granted if there is no risk of conflicts of interests.

 

7.      Community Service

We encourage participation in community service and charities while we make sure that participation in political activities or other social activities will not impact our work for the company or its reputation.

 

8.      Information regarding illegal or improper behaviour

If an employee observes behaviour that is illegal, or that breaches this Code of Ethics, he shall report his concerns to his immediate Superior or to the Compliance Officer (compliance@icelandairgroup.is).

9.      To be in Breach if this Code of Ethics

We apply to this Code of Ethics and promote its values.

If an employee becomes in breach of this Code of Ethics it may be subject to termination of employment.

 

10.      Publication and Presentation

This Code of Ethics is available on the company’s intranet. Employees shall be informed of the existence of these rules and Supervisors shall introduce their employees to them.

 

Approved by the Board of Directors of Icelandair Group hf. on May 25th 2009 and changed on January 5th 2011 and November 18th 2016.

Auditors

A state authorised public accountant or accounting firm is elected as the auditor at each annual general meeting of Icelandair Group hf. for a term of one year. The Auditor examines the Company's accounts and all relevant accounts documents for each year of operation and has access to all the Company's books and documents for this purpose. Auditors are not elected from among the members of the board of directors of the Company or employees. The qualifications and eligibility of the Auditor at elections are in other respects governed by law. The chartered accountants and registered auditor of Icelandair Group hf. are:

KPMG Endurskodun hf.
ID-no. 590975-0449
Borgartún 27
IS-105 Reykjavik
Iceland.

Compliance officer

As provided for by law a compliance officer is employed within the Company. The compliance officer is directly responsible to and appointed by the Board of directors and is independent in his or her duties. The compliance officer monitors the implementation of insider rules adopted by the Company, including rules regarding securities trading by employees and primary insiders. The compliance officer is responsible for interpreting the rules, and makes decisions based on the rules. The compliance officer makes proposals for improved working procedures for various positions within the Company and helps develop and maintain the compliance monitoring system. A substitute compliance officer has been appointed by the Board of directors.

In accordance with applicable regulations and recommendations of the Icelandic Financial Supervisory Authority (FME) the Company has introduced the rules set out by the FME on the handling of inside information and insider trading.

Should any questions arise regarding Icelandair Group compliance please contact compliance@icelandairgroup.is or by telephone: 354-505 0227.