Further Guidance On The New CMA Circular On Corporate Governance

Following on from our recent article on the Capital Market Authority's (CMA) recent Circular (E/10/2016) clarifying aspects of the new Code of Corporate Governance for Public Listed Companies (the Code), we now discuss some of the other salient points the Circular covers.

Holding board meetings by circulation, video conference or teleconference

Any ambiguity as to whether board meetings can be held by circulation, video conference or teleconference has finally been resolved.

The Code states that board meetings can be held by circulation. The Circular's additional guidance is that the exact rules and policy for how circular resolutions are adopted should be set by the company, ideally in its Articles of Association.

Under the Code, board meetings can also be held by video conference. The Circular clarifies that where only a few directors participate by video conference, these meetings do not count as one of the two video conference board meetings permitted per annum under the Code.

A further key point clarified by the Circular is that meetings held by teleconference are not permitted as directors should be able to see and hear each other.

The role of the board secretary

Under the Fifth Principle of the Code, the board shall appoint an experienced and qualified secretary to assist the board in complying with the Code and applicable laws and regulations.

The CMA advises that boards should consider appointing a new secretary from time to time to ensure impartiality.This is based on the CMA's past experience which has demonstrated that board secretaries who remain in their posts for long periods may become influential and thereby impede board efficiency and independence.

The direction is that the secretary should report in performing his/her duties to the board only. The Circular clarifies that it is permissible for the secretary to hold other positions within the company (such as the compliance officer, internal auditor or the secretary of other committees), but there should be safeguards in place to protect the secretary from the influence of the senior executive management or from conducting two roles that both report to the board (e.g. the secretary should not also be the CEO, general manager or the CFO). Secretaries should have suitable experience of not less than five years and listed companies can engage a professional firm as long as they meet the requirements...