Thursday, September 15, 2011

SGX Amends Listing Rules to Strengthen Corporate Governance Practices

Singapore Exchange (SGX) Wednesday announced amendments to its listing rules to strengthen corporate governance practices and foster greater corporate disclosure.

These amendments are undertaken to keep abreast of the challenges and developments of the industry and are part of SGX’s ongoing efforts to enhance the quality of the marketplace, the exchange said.

To come into effect from September 29 this year, the amendments will apply to the Mainboard Listing Rules, as well as the Catalist Rules where applicable, SGX said.

To strengthen corporate governance and safeguard shareholders’ interests, one of the key amendments is for issuers to have a robust and effective system of internal controls that addresses financial, operational and compliance risks.

Another key amendment is the disclosure of whether any of the issuer’s independent directors has been appointed to the board of the issuer’s principal subsidiaries based in jurisdictions other than Singapore. On an ongoing basis, announcements are required for the appointment and cessation of such independent directors to the board of these principal subsidiaries.

In addition, no transfer of securities will be allowed during a trading suspension, unless approved by SGX.

Under specific circumstances, such as where the issuer is the subject of an investigation of irregularities or other wrongdoing, SGX’s approval may be required for appointments of directors, chief executive officers and chief financial officers. The exchange’s right to take action against directors or key executive officers, such as public censure or objecting to their appointments to the boards of other issuers is also codified in this rule.

Another key amendment is requiring auditing firms appointed by the issuer to be registered with and / or regulated by Singapore’s Accounting and Corporate Regulatory Authority or an independent audit oversight body acceptable to SGX.

New Practice Notes have also been introduced to provide clarity on the wordings for responsibility statements, use of Right of First Refusal Agreements and submission of profit estimates, projections and forecasts.

Following consultation for the rule amendments, SGX also noted certain practical problems associated with implementing some of the proposed rules.

As such, the exchange said it will not proceed with requiring a Singapore resident independent director on the board of overseas principal subsidiaries. This is because the feedback highlighted the difficulty of sourcing for independent directors to serve on the boards of principal subsidiaries that operate in jurisdictions unfamiliar to a Singapore resident.

To have better control and oversight of overseas subsidiaries, SGX said it will require issuers to have a robust and effective system of internal controls. Disclosure requirements have also been imposed on issuers to announce whether the board of the issuer has appointed its directors to the board of the principal subsidiaries based in jurisdictions other than Singapore.

In addition, SGX said it will not proceed with requiring the appointment of a governance adviser as such a role is “too widely encompassing” to be managed by a single professional.

It added that such an appointment could also be “too demanding to impose on all newly-listed companies, including the well-governed ones.”

However, SGX said it retains the flexibility to require such an adviser on a “when-required” basis.

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