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Singapore – Revised Code Of Corporate Governance.

23 May 2013


Legal News & Analysis – Asia Pacific – Singapore – Regulatory & Compliance


The Monetary Authority of Singapore (“MAS“) has accepted all the recommendations made by the Corporate Governance Council (“Council”) on the Code of Corporate Governance (“Code”), with some minor modifications and has, on 2 May 2012, issued the revised Code of Corporate Governance.

The Council had initially recommended that the revised Code take effect for companies in respect of Annual Reportsrelating to financial years commencing from 1 July 2012 in order to facilitate compliance with the revised Code, however the revised Code will take effect in respect of Annual Reports relating to financial years commencing from1November 2012.

The key changes to the Code are focused on the areas of director independence, board composition, director training, multiple directorships, alternate directors, remuneration practices and disclosures, risk management, as well as shareholder rights and roles, as follows:

1 Director Independence

1.1 Relationships with External Organisations [Guideline 2.3(d)]

If a director, in the current or immediate past financial year, is/was a substantial shareholder, partner, executive officer, or director of any organisation to which the company or any of its subsidiaries made, or received significant payments or material services in the current or immediate past financial year, he will be deemed non‐independent.

In view of feedback received, the Council modified its initial recommendation to limit its scope to subsidiaries instead of all related corporations.

1.2 Relationship with Substantial Shareholders [Guideline 2.3(e)/(f)]

A director who is a 10% shareholder, or an immediate family member of a 10% shareholder, or is/was directly associated with a 10% shareholder in the in the current or immediate past financial year would be considered non‐independent.

While the original recommendation of the Council was for a look‐back period of three years and a shareholding threshold of 5% (i.e. a “substantial shareholder” as defined in the Companies Act), due to concerns about the practical impact of this recommendation, the MAS reduced the look‐back period to the “current or immediate pas tfinancial year” and raised the shareholding threshold from the proposed 5%to10%.

1.3  9 Year Period for Board Service [Guideline 2.4]

The independence of any director who had served on the Board beyond nine years from the date of his appointment should be subject to particularly rigorous review. Under such circumstances, the Board should explain why any such director should be considered independent.

2 Board Composition [Guideline 2.2]

Independent directors should make up atleast half of the Board where the Chairman and CEO(i) is the same person;(ii) are immediate family members;(iii) are part of the same management team; or (iv) if the Chairman is not independent. Otherwise, independent directors should make up at least one‐third of the Board.

A longer transition period of five years will be provided to allow sufficient time for listed companies to make these changes regarding board composition. Such changes will only need to be made atthe AGMs following the financial years commencing from1 May 2016 onwards.

3 Director Training [Guideline 1.6]

Companies should be responsible for arranging and funding the training of directors, and the Annual Report should disclose the induction, orientation and training provided to new and existing directors. The Nominating Committee (“NC”) should also make recommendations to the Board on matters relating to the review oftraining and professional development programmes for the Board.


4 Multiple Directorships [Guideline 4.4]

The NC should decide if a director is able to and has been adequately carrying out his duties, taking into consideration the director’s number of listed company board representations and other principal commitments. The Board should also determine and disclose the maximum number of listed company board representations which any directormay hold in the Annual Report.

5 Alternate Directors [Guideline 4.5]

Board should generally avoid approving appointment of alternate directors except for limited periods in exceptional cases.

6 Remuneration Practices and Disclosure

6.1 Alignment of Remuneration with Long TermInterest and Risk Policies of Companies [Principle 8] 


The level and structure of remuneration should be aligned with the long‐term interest and risk policies of the company, and should be appropriate to attract, retain and motivate directors and key management
personnel to provide good stewardship and successfully manage the company respectively.

6.2 Reclamation of Incentive Components of Remuneration [Guideline 8.4]

Companies should consider the use of contractual provisions to allow the company to reclaim incentive components of remuneration from directors and key management personnel in exceptional circumstances involving misstatement offinancial results, or misconduct resulting in financial loss to the company.

6.3 Relationship with Appointed Remuneration Consultant [Guideline 7.3]

The Remuneration Committee should ensure that existing relationships, between the company and its remuneration consultants will not affect the independence and objectivity of the remuneration consultants.

6.4 Disclosure on Link between Remuneration and Performance [Guideline 9.6]

Companies should disclose more information on the link between remuneration paid to executive directors, CEOs and keymanagement personnel, and performance.

6.5 Enhanced Disclosure of Remuneration [Guideline 9.2 / 9.3]

Company should fully disclose the remuneration of each individual director and the CEO on a named basis.

For the top five key management personnel (who are not directors orthe CEO), the existing requirement of disclosure in bands of S$250,000 on a named basis remains, but the total remuneration paid to these top five personnel in aggregate should also be disclosed.

7 Risk Management

7.1 Board Oversight on Risk Management[Principle 11]

The Board isresponsible for the risk governance of a company and should:


(i) determine the nature and extent of risks which the company may undertake;
(ii) ensure that Management maintains a sound system of risk management and internal controls; and
(iii) assess appropriate means to assist it in carrying out its responsibility of overseeing the company’s risk management framework and policies.

7.2  Assurance from the CEOand CFO[Guideline 11.3]

The Board should comment on whether it hasreceived assurance from CEO and CFO that:

(i) that the financialrecords have been properly maintained and the financial statements give a true and fair view of the company’s operations and finances;
(ii) an effective risk management and internal control system has been put in place

8 Shareholder Rights and Roles

8.1 Shareholder Rights and Roles [Principle 15]

A new principle and accompanying guidelines have been introduced to require companies to actively engage shareholders and put in place investor relations policy to promote regular, effective and fair communication with shareholders.

There is also a new annexure to Code regarding role of shareholders in
engaging with companiesin which they invest. 


8.2 Poll Voting at General Meetings of Shareholders [Guideline 16.5]

Companies should put all resolutions to vote by poll and make an announcement of the detailed results showing the number of votesfor and against each resolution and the respective percentages.


Shook Lin Bok LLP

For further information, please contact:

Gwendolyn Gn, Partner, Shook Lin & Bok


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