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SGX amends listing rules after MAS accepts corporate governance council’s recommendations

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The exchange expects to roll out the new rules in the fourth quarter, subject to regulatory approval. On Thursday, it launched an exercise to gather public feedback.

THE Singapore Exchange (SGX) on Monday said it will make amendments to its listing rules following the Monetary Authority of Singapore’s (MAS) acceptance of a slew of recommendations to encourage board renewal and diversity as well as strengthen director independence.

The recommendations to amend the Code of Corporate Governance and the listing rules were made by the Corporate Governance Council after a public consultation exercise.

The rule changes include moves to strengthen director independence by rationalising tests of independence,  lowering the shareholding threshold to determine a director’s independence to 5 per cent from 10 per cent, and limiting the tenure for an independent director (ID) to nine years through a two-tier shareholders’ vote by all shareholders, and all shareholders excluding directors, CEO and associates.

Another major rule change, aiming at enhancing board composition and diversity, is to have at least one-third of boards comprise IDs - if the chairman is not independent, for the majority of the board to comprise IDs, otherwise for the majority of the board to comprise non-executive directors. Companies must also disclose their board diversity policy and progress made.

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The listing rule changes will come into effect on Jan 1, 2019, except for the rules on the nine-year tenor for independent directors and the requirement for independent directors to comprise one-third of the board which come into effect much later on Jan 1, 2022.

"The longer transition period accords companies sufficient time to ensure the composition of their boards is able to meet the requirements of the listing rules, it said.

The Corporate Governance Council, which was set up by the MAS in February last year to review the Code of Corporate Governance, on Monday submitted to the authority its final recommendations on revisions to the code.

"The recommended revisions to the Code and SGX Listing Rules seek to enhance board quality by strengthening board independence and diversity, and encourage better engagement between companies and their shareholders as well as other stakeholders," it said.

Chew Choon Seng, council chairman, added: “The council had robust discussions over the last year to balance the perspectives of the various stakeholder groups. We have refined the recommendations in relation to director independence and board composition after taking into consideration feedback from the public consultation."

The council also recommended the establishment of an industry-led Corporate Governance Advisory Committee (CGAC).

The MAS has in turn accepted all the recommendations by the council and issued the revised code, which makes clear how companies should adopt the comply-or-explain regime.

In line with the recommendations, it also expects to set up an independent CGAC by the end of this year to monitor companies’ implementation of the code, and provide support to companies by promulgating good practices and areas for improvement. The CGAC will also advise regulators on corporate governance issues. It will comprise senior practitioners with experience as board chairmen or directors, corporate governance experts and representatives from diverse stakeholder groups.

The MAS added that the SGX listing rules have been amended to clarify the expectations under the comply-or-explain regime, to ensure that companies provide meaningful disclosures to their stakeholders.

Key changes to the Code to encourage board renewal, strengthen director independence and enhance board diversity will reinforce board competencies, it added.

"Other code revisions on disclosures of the relationship between remuneration and value creation, and consideration of the interests of groups other than shareholders will encourage better engagement between companies and all stakeholders."

Ong Chong Tee, deputy managing director (financial supervision) at the MAS said: “The revised code is more concise and less prescriptive, and is designed to encourage more thoughtful application. It will help spur better corporate governance practices among companies to sustain long-term business performance. The establishment of the CGAC will strengthen the corporate governance eco-system and enhance market discipline.”

CG Council recommendations

READ MORE: Corporate governance rules need 'deliberate calibration', not kneejerk response: MAS deputy MD