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Singapore Corporate Governance: Key Rules and Regulations from a Compliance Perspective

Singapore Corporate Governance: Key Rules and Regulations from a Compliance Perspective

Singapore has always remained committed to enforcing the highest standards of business integrity, ethical values and governance amongst businesses following the general principles of corporate governance. It has long recognized the responsibility of business to conduct its affairs with prudence, transparency, fairness, accountability and social responsibility whilst safeguarding the interest of all stakeholders. The Singapore Corporate Governance (CG) encompasses legislation, codes and best practices including the “comply or explain” code similar to codes issued in the UK and many other countries. The Code was originally introduced in 2001 and later updated in 2005, 2012 and 2018 and 2021.

Certain mandatory rules defining the minimum requirements of corporate governance compliances in Singapore make the foundation of the corporate regulatory framework.

What is Corporate Governance?

The set of systems and processes for providing direction and control of companies is known as corporate governance and the goal of corporate governance is to ensure entrepreneurial, prudent and effective management for the long-term success and sustainability of the company.

The corporate ecosystem includes management, shareholders, auditors, regulators, creditors and all other stakeholders. Boards of directors are primarily responsible for appointing and supervising the management who governs the company on a day-to-day basis. The shareholders are given the role of electing the directors and approving the appointment of the auditors to their satisfaction.

Key Features of the Corporate Regulatory Framework in Singapore

The Singapore-corporate-governance regulatory framework can be broadly classified into two following categories.

  • Legal Framework including Legislation and Subsidiary Legislation. While Company Act is legislation, Accounting Standard becomes a Subsidiary legislation
  • Codes and Best Practices Framework as outlined in the Singapore Code of Corporate Governance

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Legal Framework

The Legal framework is most crucial for corporate governance practices and stipulates certain mandatory rules under

Codes and Best Practices Framework

Besides the legal framework, codes and best practices also play a pivotal role in corporate governance regulations. These are not statutory, however, breaches can attract sanctions including monetary penalties. The Code came under the purview of the Monetary Authority of Singapore (MAS) and SGX with effect from September 1, 2007.

Altogether, 15 principles are specified in the Code and supplemented by Guidelines and Recommendations relating to:

  • Board Matters covering Principles 1 to 6
  • Remuneration Matters on Principles 7 to 9
  • Accountability and Audit specifying Principles 10 to 13, and
  • Communication with Shareholders for Principles 14 and 15

The Code doesn’t mandate corporate actions, but rather encourages companies, especially the listed companies to adopt practices that focus on accountability and help create long-term shareholder value. The companies are advised to make sufficient disclosure to help shareholders evaluate governance practices of the company and make informed decisions.

The key practices under the CG framework include:

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“Comply or explain” in Corporate compliance requirements

Rules and codes issued by a regulatory body that needs to be either complied with or an explanation provided for non-compliance. the Code of Corporate Governance, mandating Principles with provisions for non-compliance with a valid explanation. This is the middle ground where mandatory rules meet voluntary adoption of best practices.

The Takeaway

In Singapore, the role of directors holds profound importance as directors must be aware of numerous legislations and company laws applicable to the companies they serve as a board of directors such as the Competition Act (Cap 50B) and the Personal Data Protection Act (Cap 26). They should be thoroughly conversant with the duties and disclosure requirements expected of a director and seek guidance from the Company Secretary or compliance executives on corporate governance compliances in Singapore for complying with legal obligations.
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