The Monetary Authority of Singapore (MAS) has issued a revised Code of Corporate Governance (Revised Code). The Revised Code will replace the current Code of Corporate Governance 2012 (2012 Code) and, except as noted below, will take effect for annual reports covering financial years commencing from 1 January 2019.

Overall structural changes

Currently, corporate governance requirements set out in the 2012 Code apply on a comply-or-explain basis. On an overarching level, the main change is to split the corporate governance requirements into three tiers of compliance:

  • Some of the requirements will be migrated to the Listing Rules and made mandatory;
  • The Revised Code is a simplified and streamlined version of the 2012 Code, and the provisions that have been retained in it will continue to apply on a comply-or-explain basis; and
  • Certain provisions in the 2012 Code that were considered to be overly prescriptive have been migrated to a set of Practice Guidance, which will be non-binding.

While the requirement of comply-or-explain will continue to apply to the Revised Code, instead of simply disclosing the deviation from the requirement and providing an explanation for the deviation, the company must explain how the governance practices that it has implemented are consistent with the relevant principle of the Revised Code applicable to that provision.

Requirements that will be mandatory and that have been amended

Certain requirements currently in the 2012 Code will be migrated to the Listing Rules and hence made mandatory. Of the requirements of the 2012 Code that are to be made mandatory, some will in addition be amended as set out in the table below:

Requirements from the 2012 Code that will be mandatory

The following 2012 Code requirements will be made mandatory by incorporating them into the Listing Rules without change; companies that have chosen to explain rather than comply with these requirements may no longer continue to do so but will have to comply:

  • Independent directors must make up at least one-third of the board (Rule 210(5)(c)). This will take effect from 1 January 2022.
  • The following directors cannot be regarded as independent:
    • A director who is or has been employed by the company or any of its related corporations for the current or any of the past three financial years (Rule 210(5)(d)(i)); and
    • A director who has an immediate family member who is, or has been in any of the past three financial years, employed by the company or any of its related corporations and whose remuneration is determined by the remuneration committee (Rule 210(5)(d)(ii)).
  • Where dividends are not paid, companies must disclose their reasons together with the announcement that dividends are not being paid. (Rule 704(24))
  • The board must disclose the relationship between the chairman and the chief executive officer if they are immediate family members. (Rule 1207(10A))
  • All directors must submit themselves for re-nomination and re-appointment at regular intervals and at least once every three years. (Rule 720(5))
  • Companies must establish a nominating committee, remuneration committee and audit committee. (Rule 210(5)(e))

Corporate governance requirements that have been enhanced in the Revised Code

The following requirements in the 2012 Code will be amended in the Revised Code as set out in the table below:

New corporate governance requirements added to the Revised Code

The Revised Code will also include the following new requirements:

  • Directors with a conflict of interests should recuse themselves from discussions and decisions involving the issues of conflict. (Provision 1.1)
  • The number of board and committee meetings held and each individual director’s attendance at these meetings should be disclosed in the annual report. (Provision 1.5)
  • Non-executive directors should make up a majority of the board. (Provision 2.3)
  • The duties of the audit committee should also include reviewing the assurance from the chief executive officer and the chief financial officer on the financial records and the financial statements. (Provision 10.1(c))
  • The company should give shareholders a balanced and understandable assessment of its performance, position and prospects. (Principle 11)
  • The company should explain the reasons and material implications of resolutions that are bundled. (Provision 11.2)
  • Minutes of general meetings of shareholders should be published on the company’s corporate website as soon as practicable. (Provision 11.5)
  • The minutes should record substantial and relevant comments or queries from shareholders and responses from the board and management. (Provision 11.5)
  • The company should have a dividend policy and should communicate it to shareholders. (Provision 11.6)
  • The company’s investor relations policy should set out a mechanism through which shareholders may contact the company with questions and through which the company may respond to the questions. (Provision 12.3)
  • The company should have arrangements in place to identify and engage with its material stakeholder groups and to manage its relationships with such groups. (Provision 13.1)
  • The company should disclose its strategy and key areas of focus in relation to the management of stakeholder relationships during the reporting period. (Provision 13.2)
  • The company should maintain a current corporate website to communicate and engage with its stakeholders. (Provision 13.3)

Corporate Governance Advisory Committee

The MAS will establish an independent Corporate Governance Advisory Committee (CGAC) to advocate good corporate governance practices. The CGAC will monitor companies’ implementation of the Revised Code, and provide support to companies by promulgating good practices and areas for improvement. It will also advise regulators on corporate governance issues. The MAS expects to establish the CGAC by the end of 2018 and will announce further details in due course.