On 6 August 2018, a revised Code of Corporate Governance (Code) was issued after MAS accepted the recommendations of the Corporate Governance Council. The Code, together with associated changes to the listing rules (LR) will be effective for financial years beginning from 1 January 2019, except for specified requirements that take effect in 2022.

Key amendments are summarised below:

Structure of Code

  • New Introduction setting out objective of the Code.
  • Important requirements are shifted to LR.
  • Some overly-prescriptive or duplicate requirements already in LR are removed.
  • Code sets out core broad Principles, each supported by accompanying Provisions designed to support compliance with the underlying Principle.
  • New voluntary Practice Guidance to provide guidance on best practices.
  • Effective for annual reports of financial years commencing 1 January 2019 onwards, unless otherwise specified.

“Comply or Explain” Regime

LR is amended to clarify the “comply or explain” approach. LR clarifies that it is mandatory to:

  • comply with Principles in the Code;
  • disclosure deviations from Provisions of the Code, together with reason for variation and how the listed entity’s practices remain consistent with underlying Principle.

Director independence rule

  • Key tests of director independence made mandatory by shifting them to LR. Directors are not independent if:
    • employed by listed entity or related companies in current or any of past 3 years; or
    • have immediate family members in such employment whose remuneration is determined by the Remuneration Committee (RC) of the listed entity.
    • from 2022, LR also stipulates that directors are not independent if they have been directors exceeding nine years, unless their appointment is approved in both:
      • resolution by all shareholders; and
      • resolution by all shareholders excluding those who also serve as directors or CEO, and their associates.
  • Shareholding threshold for director independence lowered from 10% to 5%, which aligns with the “substantial shareholder” threshold in Companies Act and Securities and Future Act.
  • Onus placed on Nominating Committee (NC) to determine if a director is independent based on overarching definition in the Code, i.e.
“…one who is independent in conduct, character and judgement, and has no relationship with the company, its related corporations, its substantial shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business judgement in the best interests of the company.”

Board composition

  • Where Chairman is not independent, the Board should comprise a majority of independent directors, increased from current requirement for “at least half” to be independent.
  • New Provision is introduced for the Board to comprise a majority of non-executive directors.
  • Enhanced disclosures on Board diversity policy and progress made in achieving this policy.
  • Requirement for at least one-third of Board to be independent becomes mandatory in the LR from 2022 onwards.

Remuneration disclosures

New Provisions to disclose:

  • Relationship between remuneration, performance and value creation; and
  • Names and remuneration of employees who are substantial shareholders of the company, or are immediate family members of a director, the CEO or a substantial shareholder of the company, and whose remuneration exceeds S$100,000 during the year (revised from S$50,000 currently), in bands no wider than S$100,000 (revised from S$50,000 currently), stating clearly the employee’s relationship with the director/CEO/substantial shareholder.

Stakeholders engagement

New Principle for companies to consider and balance the needs and interests of material stakeholders, with accompanying Provisions to establish arrangements to identify such stakeholders and disclose stakeholder relationships in annual report.

Other changes to LR

The following additional requirements are shifted/ incorporated into LR and made mandatory:

  • Establishment and maintenance of an effective internal audit function on an ongoing basis, that is adequately resourced and independent.
  • Establishment of NC, RC and Audit Committee (AC), with written terms of reference which clearly sets out the authority and duties.
  • Prescribed training for a director with no prior experience as SGX director.  If the NC views that training is not required because the director has other relevant experience, the basis of this assessment should be disclosed.
  • Submission of directors for re-nomination and re-election at least once every three years.
  • Immediate disclosure of reasons for not paying dividends, where applicable.
  • Disclosures in the annual report:
    • Relationship between Chairman and CEO if they are immediate family members.
    • Identification of each director considered to be independent.
    • Board’s comment on the adequacy and effectiveness of internal controls (including financial, operational, compliance and IT controls) and risk management systems, with a statement on whether AC concurs with the above comment.
    • AC’s comment on whether the internal audit function is independent, effective and adequately resourced.
    • Material weaknesses identified by board or AC together with steps taken to address them.

Corporate Governance Advisory Committee (CGAC)

To strengthen corporate governance, MAS will establish an industry-led CGAC to monitor implementation and look into improvements.


It is expected that the revisions to the Listing Rules and Code of Corporate Governance can significantly impact the governance practices, annual reports, and disclosures of listed entities.

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