Understanding Code Of Corporate Governance In Singapore

Did you know that companies with strong corporate governance practices are more likely to attract investors? For business owners, compliance officers, and investors in Singapore, understanding and implementing the Code of Corporate Governance is crucial for long-term success.

This guide will walk you through the essentials of corporate governance in Singapore, explaining its importance and outlining practical steps to ensure your organization adheres to the highest standards.

Understanding the Code of Corporate Governance in Singapore

The Corporate Governance Code in Singapore is a comprehensive set of principles and guidelines designed to promote high standards of corporate governance among listed companies.

Originally introduced by the Corporate Governance Committee in March 2001, the Code came into effect on January 1, 2003. It operates on a “comply-or-explain” basis, meaning companies must either comply with the Code or explain why they do not.

What is corporate governance?

Corporate governance refers to the systems, processes, and structures that direct and manage a company’s operations to enhance long-term shareholder value. It also takes into account the interests of other stakeholders, including employees, customers, and the community. Good corporate governance builds investor and stakeholder confidence, making it a crucial aspect of running a successful business.

Recent updates of the Code

The Code was most recently revised on August 6, 2018, and updated on January 11, 2023. These updates aim to keep the Code relevant and effective in promoting good governance practices. Instead of viewing the Code as a burden, companies should see it as a framework that provides clear direction on best practices for Board and Management.

Key principles of the Code of Corporate Governance

The key principles of the Code serve as the foundation for ethical management and accountability, guiding your company toward transparency and responsible decision-making, which include the following:

Board independence

One of the primary principles of the Code is ensuring the independence of the Board of Directors. The Code specifies that at least one-third of the Board should be independent non-executive directors with this proportion increasing for larger companies.

An independent director is described as someone who is independent in conduct, character, and judgment. They should have no relationship with the company, its related corporations, substantial shareholders, or officers that could interfere, or be perceived to interfere, with their independent business judgment in the best interests of the company.

Remuneration matters

The Code emphasizes the importance of fair and transparent remuneration policies. These policies should attract, retain, and motivate directors and key management personnel. Companies are encouraged to establish a remuneration committee to oversee these matters, ensuring that compensation aligns with the company’s long-term interests.

Accountability and audit

Accountability and audit are cornerstones of good corporate governance. The Code requires companies to establish robust internal controls and risk management systems. Regular audits, both internal and external, help ensure these controls are effective. An independent Audit Committee plays a vital role in overseeing financial reporting and ensuring the integrity of financial statements.

Shareholder rights and responsibilities

Companies should facilitate the effective exercise of shareholders’ rights and ensure that all shareholders have the opportunity to participate effectively in and vote at annual general meetings.The Code encourages companies to engage with shareholders regularly and to consider their interests in decision-making processes.

Disclosure and transparency

Transparency is essential for building trust with stakeholders. The Code mandates comprehensive and timely disclosure of financial and non-financial information. Companies should provide clear, accessible, and accurate information about their operations, financial statements, and governance practices. This transparency helps stakeholders understand the company’s activities and assess its performance more effectively.

The information provided above is a brief overview of key aspects of corporate governance as outlined in the Code. For a more comprehensive understanding and detailed provisions, please refer to the full version of the Code of Corporate Governance by the Monetary Authority of Singapore (MAS).

How to ensure good corporate governance in Singapore?

Good corporate governance is fundamental to the long-term success and sustainability of your company in Singapore, fostering trust and accountability among stakeholders. To ensure good corporate governance, you can follow these key recommendations:

Maintain transparency and accountability

Transparency and accountability are critical for good corporate governance. Companies should establish clear policies and procedures for disclosing information to stakeholders. This includes but not limited to the following:

• Regular financial reporting, which include a balanced and comprehensive view of the company’s performance, financial position, and prospects
• Updates on significant developments, risks, and uncertainties that may impact the company’s operations
• Transparent and timely communication about the company’s strategy and performance, disclosing information to shareholders and the public.

Foster a culture of ethical behavior

A strong ethical culture is key to maintaining good corporate governance. Companies should establish a code of governance and ethical practices that outlines the expected standards across key business areas. This includes adhering to annual filing requirements set by regulatory bodies, such as submitting annual returns and filing estimated chargeable income and annual tax returns with IRAS.

Regular review and updates

Good corporate governance is not a one-time task, but an ongoing process. Companies should regularly review their governance practices and make necessary updates to ensure compliance with laws and regulations. This includes reviewing board structures, roles and responsibilities of directors, as well as internal controls and risk management procedures.

Utilize company secretary services

For many companies, particularly small and medium-sized enterprises, navigating the complexities of corporate governance can be challenging. Utilizing company secretary services, either through in-house or outsourced options, can help companies stay on top of their governance requirements.

Company secretaries are responsible for ensuring compliance with laws and regulations, maintaining accurate records, and providing support to the board of directors. They can also assist with drafting governance policies and procedures, as well as monitoring changes to regulatory requirements.

Conclusion

Good corporate governance is essential for the long-term success of any business. By understanding and implementing the Code of Corporate Governance in Singapore, companies can enhance their reputation, build stakeholder trust, and drive sustainable growth. Business owners, compliance officers, and investors all play a crucial role in this process.

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