Company Overview
While pursuing long-term stable profits and sustainable development, CH Biotech attaches great importance to issues, such as environment, society and corporate governance and works to effectively reduce the risk caused by relevant personnel when performing their duties to the Company through a stable corporate governance system and tax policy, thereby protecting investors’ rights and interests, increasing and safeguarding the Company’s interests. We also follow the Company’s ethical standards to gain public trust and ensure sustainable growth and development.
Company in General
CH Biotech is a biotech company that engages in R&D of biotech drugs for agrochemical products. We specialize in regulating the growth and development of crops by regulating plant gene expression and physiological metabolism and creating biotech agricultural drugs to improve crop quality and yield. Our main business is R&D, production, and sales of agricultural biotech drugs. With an estimated world population of 9.7 billion by 2050, it is expected that the world will face food shortages in the future. In addition, climatic anomalies that affect crop yield and quality continue to increase. Also, as the world has reached a consensus toward the trend of reducing the amount of agrochemical products and carbon emissions, the efficacy and stability of traditional agrochemical products designed based on past climatic and environmental conditions are being challenged. With a focus on the current situation and future trends, we are committed to developing innovative product formulations, including highly efficient, precision, low-carbon, safe, and eco-friendly plant growth regulators and highly efficient fertilizers, to meet the needs of the new generation of agriculture.
The fermentation plant was built in the Changbin Industrial Park, Xianxi Township, Changhua County, with the main purpose of converting agricultural waste into small molecules of peptides and amino acid through efficient and eco-friendly decomposition processes, such as fermentation technology or subcritical hydrolysis technology, while optimizing the functionality and developing a series of functional new drug products, thereby achieving circular economy with a focus on both environmental protection and market values.
Business Activities
The Company is an agricultural technology company approved by the Council of Agriculture, Executive Yuan, (December 17, 2015) and a biotech pharmaceutical company approved by the Ministry of Economic Affairs (May 19, 2021). Its main business is agricultural biotechnology. Research, development, production and sales of new drugs.
Aiming at the business opportunities of the global agricultural market, CH Biotech R&D is innovating core key technologies independently and developing efficient, precise, and low-carbon plant growth regulators (PGR) and fertilizer products in alignment with the needs in modern agricultural production. The unique and innovative features of CH Biotech R&D products are:
A. Reduce carbon emissions from crop production.
B. Protect food production from climate change.
C. Reduce energy consumption for crop cultivation.
According to the agrochemical product registration regulations of major countries of crop cultivation in the world, CH Biotech’s products are currently classified as plant growth regulators and fertilizers. The Company’s main existing agricultural products are as follows:
CH Biotech’s sales volume of agrochemical products
Sales (supply) regions of major products (services)
Operating Performance
Business plan implementation results
As for CH Biotech’s revenue in 2021, the increase in vaccination rates in major countries and the gradual implementation of fiscal policies in various countries facilitated the gradual recovery of global economic activities, and the demand from end customers (farmers) rebounded. Also, the impact of rising raw material prices and supply chain bottlenecks continued. This led to frequent shortages of shipping containers, port congestion, unstable delivery, and rising freight costs. Therefore, our major clients placed orders to get prepared in advance in the second half of 2021, so as to supply farmers in time for the next year’s crop cultivation. Thus, the revenue in this period increased compared to 2020.
The Company’s consolidated operating income in 2021 is NTD 1,018,505 thousand. The main business as a percentage of the consolidated operating income is as follows:
Direct economic value generated and distributed by the organization
Government grants
R&D expenditures and achievements in the last two year
Tax Policy
To pursue sustainable development and fulfill corporate social responsibility, CH Biotech has formulated the tax policy below to implement tax governance:
1. Comply with local tax laws and regulations, file tax returns and pay taxes faithfully prior to a deadline and fulfill the social responsibility as a taxpayer.
2. Disclose tax information in financial statements as required to ensure information transparency.
3. Do not formulate a tax plan through tax havens or low-tax countries to evade taxes.
4. Engage in related-party transactions in compliance with the regulations on the internationally recognized transfer pricing guidelines published by the Organization for Economic Co-operation and Development (OECD) and the principles of non-arm’s length transactions.
5. Establish honest communication relations of mutual trust with tax authorities.
6. Take into account the impact of taxes for the Company’s major transactions and decisions.
CH Biotech’s Accounting Department is the responsible unit for tax governance. When filing various tax returns in accordance with the tax laws and regulations, it submits report and obtains approval in accordance with the regulations. Meanwhile, we support the government in promoting corporate innovation, R&D and tax incentives and are committed to the transparency of tax information. Faced with the risks from tax operations, we strive to improve our professionalism in taxation and continue to train personnel to ensure that relevant personnel have the ability to handle tax operations and take the initiative to communicate with the competent tax authorities when encountering any issues related to taxes. We will also appoint or consult external professional consultants, depending on business needs, to ensure compliance with tax regulations and declaration obligations, thereby preventing potential legal sanctions for non-compliance with tax laws, financial losses, or reputational damage.
Tax payment
Information on 2021 net income and income or loss before tax by tax jurisdiction
Corporate governance
Composition and operation of the Board of Directors
CH Biotech’s highest governing body is the Board of Directors. As per regulations, the Board of Directors should meet at least once a quarter to govern and supervise the effective operation of the Company’s risk management system and mechanism. The Board is currently composed of 9 directors, including 6 directors and 3 independent directors, who are all experts in finance, management, and the Company’s business. Each director and independent director possess their own expertise. The 6 directors are specialized in leadership, operational judgment, business management, and crisis management with industry knowledge and international market perspectives. The other 3 independent directors, Por-Hsiung Lai, Chien-Chung Kuo, and Yong-Xiang Chiu excel at biotechnology industry, accounting and financing affairs, and law, respectively.
We completed the election of the 4th term of directors at the 2021 general shareholders’ meeting and elected 9 directors (including 3 independent directors): Cheng-Pang Wu (representative of Zhao Song Investing Co., Ltd.), Kuang- Fu Han, Brent Randall Smith, Yung-Ming Chou, Xian-Guo Hsu, Por-Hsiung Lai (independent director), Chien-Chung Kuo (independent director), and I-Hung Hsieh (independent director). As independent director I-Hung Hsieh resigned as an independent director on July 6, 2021, we held the first extraordinary shareholders’ meeting in 2021 for a by-election and elected an independent director: Yong-Xiang Chiu.
CH Biotech’s Board of Directors exercises its powers in accordance with the Company’s Articles of Incorporation and relevant laws and regulations. In 2021, the Board held a total of 10 meetings, and all directors’ annual average attendance was 92.86%.
Operations of the functional committees
To enhance corporate governance, we have established two functional committees: the Audit Committee and the Remuneration Committee.
Audit Committee
The Audit Committee is formed by all independent directors and aims to assist the Board of Directors in improving corporate governance performance, supervise the execution of the Company’s business and directors’ and managers’ due diligence, and pay attention to the implementation of the Company’s internal control system to reduce the chance of the Company’s financial crises and business risks. A total of six Audit Committee meetings were held in 2021, and all members’ average attendance was 100%.
Remuneration Committee
The Remuneration Committee should regularly review directors’ and managers’ annual and long-term performance goals and remuneration, policies, systems, standards, and structures and evaluate the achieving status of their performance goals. A total of four Remuneration Committee meetings were held in 2021, and all members’ average attendance was 90.90%.
Communication between independent directors and the Internal Audit Officer:
CH Biotech’s Internal Audit Officer regularly reports on the audit results to the members of the Audit Committee and reports on and discusses the audit business with the independent directors at the Audit Committee meetings. A total of six Audit Committee meetings were held in 2021, and 14 items were put forth for communication, which were then submitted to the Board of Directors after discussed and approved.
Implementation of corporate governance
Since the establishment, CH Biotech has firmly believed that only a sound corporate governance structure can a company operate sustainably. Therefore, we have formulated relevant organization charters and regulations as per the Corporate Governance Best Practice Principles for TWSE/TPEx-Listed Companies and disclose relevant information on the Market Observation Post System (MOPS). In the future, we will continue to improve the quality and performance of governance.
Proposal of amending “Regulations Governing Managerial Officers’ Remuneration and Performance Evaluation”.
The Department of Finance is the interim department in charge of the Company’s sustainable development. Responsible for coordinating sustainable policies, systems or relevant management approaches as well as propose and execution of specific promotion plan, the Department of Finance reports the practice of the Sustainable development Best Practice Principles at least once per year. On November 18, 2022, the latest report was sent to the Board. In the future, a specific department in charge for sustainable development will be established depending on actual operating status.
Appointment of a Corporate Governance Officer
We have appointed a Corporate Governance Officer, whose main duties include handling matters related to the Board meetings and shareholders’ meetings in accordance with the law, preparing the minutes of the Board meetings and shareholders’ meetings, assisting directors in taking office and taking continuing education courses and providing directors with materials required to perform duties, assisting them with compliance and handling other matters stipulated in the Articles of Incorporation.
Board performance evaluation
The Company has established the Performance Evaluation Methods of the Board of Directors. We conduct the performance evaluation of the overall Board of Directors, individual directors, and functional committees regularly every year. The evaluation results will be used as a reference for improvement to the operation of the Board and functional committees and for electing or nominating directors and the evaluation results of individual directors will be used as the reference basis for determining their remuneration.
We adopted an internal self-evaluation mechanism for the 2021 performance evaluation. The corporate governance team sent questionnaires to all directors and functional committee members for Board members to evaluate the overall operation of the Board, members of the functional committees to evaluate the overall operations of the committees, and directors to evaluate their individual performance. It then collected the completed questionnaires, analyzed the self-evaluation results, reported it to the Chairman and the Corporate Governance Officer.
The average scores of the internal self-evaluation of the Board, individual directors and functional committees in 2021 all reached 90 points or more (out of 100 points). The overall operations are great.
Directors liability insurance
To establish a sound corporate governance mechanism and reduce the risks borne by directors and the Company, we purchased directors’ liability insurance for all directors in 2021 for an insured amount of USD 3 million. The insurance period is from March 10, 2021 to March 10, 2022. The purchase was reported to the Board on May 11, 2021.
Directors’ continuing education
To strengthen the functions of the Board, we, as per the Corporate Governance Best Practice Principles and the competent authority’s regulations, arrange continuing education courses for directors regularly every year to keep abreast of domestic economic, environmental and social laws and regulations, including corporate governance topics related to finance, risk management, business, accounting, law or corporate social responsibility. In 2021, a total of nine directors took such courses, for a total of 66 hours and their training hours were 100% in compliance with the regulations.
Directors’ remuneration
The Remuneration Committee is established in accordance with the Corporate Governance Best Practice Principles. The committee is responsible for evaluating the remuneration policies and systems of CH Biotech’s directors and managers in a professional and objective manner. The directors’ remuneration is paid in accordance with the Articles of Incorporation. Their remuneration is determined by the Board of Directors as per their participation in the operation of CH Biotech and the values of their contribution, with the general standards in the industry considered.
Protection of shareholders’ rights and interests
Convening of shareholders’ meeting: We appoint a professional and independent shareholder service agency to handle the affairs of shareholders’ meetings in accordance with the Rules of Procedure for Shareholders Meetings, to ensure that a shareholders’ meeting is held legally, effectively, and safely. Shareholders can also vote by electronic means to exercise their rights as shareholders.
Information disclosure: We duly implement a spokesperson system. The spokesperson announces information to the public on behalf of the Company to ensure that information that may influence stakeholders can be disclosed in a timely and appropriate manner. In addition, we have set up a website in both Chinese and English and disclose an email for investors, and various financial and business information is available on the website. In addition, we continue to improve the integrity and timeliness of information to be disclosed, including:
1. We release material information on major resolutions adopted on the day after a Board meeting or a shareholders’ meeting is concluded.
2. We disclose various types of information in English, including the shareholders’ meeting agenda handbook, the shareholders’ meeting notice, the annual report for the shareholders’ meeting and the annual financial report.
3. We regularly announce financial reports and relevant information on shareholders’ meetings, so that stakeholders can keep abreast of the Company’s operations in real time.
Ethical management
We, through the management organization, adopt a complete risk management structure and implement the structure to identify and keep abreast of the risks that we need to pay attention to and adopt the existing internal control management system to prevent potential fraud and misconduct risks, to minimize such risks. We also conduct inter- departmental inspections or appoint external entities (CPAs or consulting securities firms) to conduct inspections to ensure the compliance of relevant implementations. In terms of compliance, the definition of material events is subject to the material information verification and public announcement procedures for companies listed on the emerging stock market.
CH Biotech and our directors, managers, employees, personnel appointed, and ultimate controllers may not directly or indirectly offer, promise, demand, or accept any improper benefits, including kickbacks, commissions, facilitation payments, or provide or accept improper benefits to or from clients, agents, contractors, suppliers, public servants, or other stakeholders through other channels. The above personnel shall strictly abide by the integrity principle. We have clearly stipulated the code of conduct for employees, including professional ethics, laws and regulations, employee relations, gifts and entertainment, client privacy, intellectual property rights, discrimination, bribery, conflicts of interest, and protection of company assets and reputation. In R&D design, business promotion, and procurement business, we comply with laws and regulations and strictly abide by discipline, and clearly stipulate in the Ethical Corporate Management Best Practice Principles that we prohibit the offering and acceptance of bribes, illegal political contributions, improper charitable donations or sponsorships, and unreasonable gifts, entertainment, or other improper benefits, infringement of intellectual property rights, or unfair competition and prevent products or services from undermining stakeholders’ interests, to ensure clients’ rights and avoid loss of corporate assets, fines, and damage to our goodwill. Employees sign the non-disclosure and non-compete agreements on the first day of work, to allow them to understand the importance and necessity of ethical conduct in business. Meanwhile, we offer anti-corruption education and training courses to employees and continue to promote compliance education and training to enhance their concept of integrity and self-discipline.
We have established a whistleblower reporting system, operate business based on integrity and ethics, and comply with the laws and ethical standards in the place where the Company is located. To further strengthen compliance and corporate governance, the Board of Directors has passed relevant mechanisms, including the “Ethical Corporate Management Best Practice Principles” and “the Procedures for Ethical Management and Guidelines for Conduct to handle complaints”.
Education and training
To implement the principle of ethical management, we regularly arrange ethical management education and training every year. In 2021, we held an ethical management training course with a total of nine participants at the corporate governance unit. The attendance reached 100%. In addition, we held a lecture on the prevention of corporate corruption and crimes in November 2021 for all employees at the headquarters and R&D center, including managers and general employees, and they, to ensure the effectiveness of the training, took a test and all of them passed it.
Compliance
CH Biotech complies with the Company Act, the Securities and Exchange Act, the Business Entity Accounting Act, the Political Donations Act, the Anti-Corruption Act, the Government Procurement Act, the Act on Recusal of Public Servants Due to Conflicts of Interest, the regulations related to listing on TWSE/TPEx or other laws and regulations on business conduct, as the basic pre-condition for the implementation of ethical management. In 2021, we were not fined due to violation of social and economic regulations. We will continue to offer education and training and implement a sound management system as a management approach to strengthening compliance.
Recusal due to conflicts of interest and anti-corruption
The Rules and Procedures for Board of Directors’ Meetings stipulate that directors or the juridical representatives who have personal interest involved in the content of a motion should clarify the content of their interest at the Board meeting. The directors or the juridical representative should recuse themselves from the discussion or voting if their personnel interest may undermine the Company’s interest and are not allowed to vote on another director’s behalf.
Prohibition of bribery and kickbacks
The Company has formulated the Ethical Corporate Management Best Practice Principles and the Codes of Ethical Conduct. The Company’ s directors, managers, employees, and de facto controllers shall not directly or indirectly offer, promise, request or accept any undue benefits when performing duties, including rebates, commissions, facilitation payments or other forms of benefits, to provide or receive improper benefits to or from clients or other stakeholders.
Insider trading prevention
To prevent insider trading, avoid improper leakage of information, and ensure the consistency and correctness of information disclosed to the public, we have formulated the Procedures for Handling Material Inside Information, which applies to our directors, managers and all employees. It is stipulated that those who learn about material information shall not disclose it to others nor shall they ask about or collect the Company’s undisclosed material information that is not related to their individual duties, for management of insider trading prevention.
Supplier Corporate Social Responsibility Statement
To ensure ethical conduct in the supply chain, we have requested suppliers to sign the Supplier Social Responsibility Statement since 2020 to ensure that they can comply with laws and social standards in the process of providing products and services and respond to environmental protection and social issues positively. In 2020, 98 suppliers signed the statement and a total of 216 suppliers have signed it in 2021, accounting for 54.68% of all suppliers.
Complaint channels
To improve the supervisory function of corporate governance, we have set up a complaint channel for sufficient communication between CH Biotech and employees, clients, suppliers, or investors on interests. An email (info@ chbio.com.tw) is available on the website.
Risk management
The Company focuses on the operation of the industry and formulates all its business strategies given that it is capable of controlling and bearing the risks. The Company also conducts regular or irregular checks by the internal audit unit to reduce the risks that the operation may face.
The risk management categories are mainly in the environment (E), social (S), and governance (G) aspects. We have identified various types of risks according to the three risk categories of preventable risk, strategic risk, and external risk, identify various risks and evaluated the risks of various issues as per the materiality principle, based on which we devised relevant risk management strategies accordingly and formulated the Risk Management Regulations, which have been approved by the Board, and set standards for risk identification, measurement, monitoring, response, and reporting to reduce the impact of risks. A summary of the operations of risk management is as follows:
COVID-19 pandemic prevention measures and response plan
Since the outbreak of the COVID-19 pandemic in 2020, the global economy has been in severely impacted, which has posed daunting challenges to business operations and prompted them to think about how to operate in a more sustainable manner. CH Biotech pays close attention to the global pandemic development and the relevant policies launched by various governments and has formulated countermeasures, supporting measures and the Quarantine or Self-health Monitoring Regulations of CH Biotech R&D to ensure employees’ safety, environmental sanitation and the stability of the Company’s overall operation.
Information security
Customer privacy and confidential information is one of the critical issues about which we are concerned. Therefore, we are committed to protecting customer privacy and confidential information to safeguard customers’ and suppliers’ rights and interests. This is regarded as one of our most important information security management goals.
We implement relevant protection mechanisms and corresponding measures in the three aspects of humanity, process and technology to ensure the security of clients’ and suppliers’ privacy and confidential information. The details are summarized as follows:
To continuously ensure clients’ privacy and the security of confidential information on the basis of the existing information security management, we implement the plan-do-check-act (PDCA) cycle to continue to improve and strengthen our information security and customer privacy management.
Actions taken in 2021
1. Performed regular information security audits of hosts.
2. Our website is controlled and managed by a qualified third-party supplier that has passed the ISO27001/ISO27011 international information security verification and is equipped with hardware to block malicious IPs to enhance the protection.
3. Regularly reviewed and updated anti-virus and anti-hacking mechanisms.
4. Established a data backup mechanism
Implementation results in 2021
1. The total number of information security notices sent was 33.
2. There was no complaint about any violation of customer privacy.
3. There was no complaint document from external and regulatory agencies.
2022 management plan
1. Continue to strengthen the log records for accessing members’ confidential information and privacy.
2. Continue to strengthen the optimization of information security goals.
3. Continue to strengthen customer privacy and confidentiality.
4. Continue to strengthen terminal control.
5. Continue to strengthen the data backup mechanism.
6. Evaluate and plan the international information security management system certification (ISO/IEC 27001)
