Executive Summary
On 11 January 2023, Singapore Exchange Regulation ("SGX RegCo") announced that the following new requirements will apply to issuers ("Listed Issuers") listed on the Singapore Exchange Securities Trading Limited ("SGX-ST") to institute better corporate governance practices relating to board renewal and disclosure of remuneration of directors and chief executive officers ("CEOs"):
- Mandatory nine-year tenure limit on independent directors ("IDs"); and
- Mandatory disclosure of remuneration details of each individual director and the CEO
The SGX-ST Listing Manual ("SGX-ST Mainboard Rules") and the Listing Manual Section B: Rules of Catalist ("SGX-ST Catalist Rules") were amended on 11 January 2023 to give effect to these changes. Transitional arrangements are in place to provide the Listed Issuers sufficient time to comply with these new requirements.
This Update provides a summary of these two new requirements.
Background Information
These changes stemmed from recommendations issued by the Corporate Governance Advisory Committee ("CGAC"), which was set up by the Monetary Authority of Singapore ("MAS") in 2019 to identify risks to the quality of corporate governance in Singapore, and take a leading role in advocating good corporate governance practices. CGAC's recommendations were made in response to the findings of a review published by KPMG in Singapore ("KPMG Review") of listed companies' disclosure on their compliance with the Code of Corporate Governance ("Code"). The findings of the KPMG Review suggest a concerning trend that long-serving IDs may become entrenched in listed companies in Singapore and that companies' disclosures on remuneration details of their directors and CEOs have been lacking.
SGX RegCo conducted a public consultation exercise from 27 October 2022 to 17 November 2022 to seek feedback on proposals to implement these changes. The respondents to the earlier consultation paper largely supported the proposals.
Mandatory Nine-Year Tenure Limit on IDs
Before 11 January 2023
Previously, Listing Rule 210(5)(d)(iii) of the SGX-ST Mainboard Rules and Listing Rule 406(3)(d)(iii) of the SGX-ST Catalist Rules provided that a director of a Listed Issuer was no longer independent if he/she had been a director of a Listed Issuer for an aggregate period of more than nine years (whether before or after listing) unless his/her continued appointment as an ID had been sought and approved in separate resolutions ("Two-Tier Vote") by:
- all shareholders of the Listed Issuer; and
- shareholders of the Listed Issuer, excluding its directors and CEO and associates of such directors and CEO.
Listing Rule 210(5)(d)(iii) of the SGX-ST Mainboard Rules and Listing Rule 406(3)(d)(iii) of the SGX-ST Catalist Rules further provided that his/her continued appointment as an ID pursuant to the Two-Tier Vote may remain in force until the earlier of:
- the retirement or resignation of the director; or
- the conclusion of the third annual general meeting ("AGM") of the Listed Issuer following the Two-Tier Vote.
With Effect from 11 January 2023 – Removal of Two-Tier Vote
On 11 January 2023, the SGX-ST Mainboard Rules and the SGX-ST Catalist Rules were amended to remove the Two-Tier Vote mechanism for IDs who have been directors for more than nine years with immediate effect.
Between 11 January 2023 and the Date of Listed Issuer's AGM for the Financial Year Ending on or after 31 December 2023 – IDs Who Have Been Directors for More Than Nine Years Still Considered Independent
In addition, on 11 January 2023, new Listing Rule 210(5)(d)(iv) of the SGX-ST Mainboard Rules and Listing Rule 406(3)(d)(iv) of the SGX-ST Catalist Rules were introduced to provide that a director who has been a director of a Listed Issuer for an aggregate period of more than nine years (whether before or after listing) will not be considered independent ("Nine-Year Tenure Limit"). Such director may continue to be considered independent until the conclusion of the next AGM of the Listed Issuer. The Nine-Year Tenure Limit takes effect for the Listed Issuer's AGM for the financial year ("FY") ending on or after 31 December 2023.
The Nine-Year Tenure Limit is aligned with the tenure limit imposed by MAS on IDs of Singapore-incorporated banks, insurers and managers of real estate investment trusts ("REIT Managers").
Click here to continue reading . . .
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
