SGX RegCo Proposes To Mandate Tenure Limit On IDs & Disclosure Of Directors' And CEOs' Remuneration Details

• Published date: 11 November 2022
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Directors and Officers, Corporate Governance
• Law Firm: Rajah & Tann
• Author: Mr Chia Kim Huat, Abdul Jabbar Bin Karam Din, Evelyn Wee, Tan Mui Hui, Raymond Tong, Cynthia Goh, Danny Lim and Howard Cheam

Executive Summary

The Singapore Exchange Regulation ("SGX RegCo") is conducting a public consultation on the following changes to institute better corporate governance practices relating to board renewal and disclosure of remuneration of directors and chief executive officers ("CEOs"):

1. Introducing a mandatory nine-year tenure limit on independent directors ("IDs") for issuers listed on the Singapore Exchange Securities Trading Limited ("SGX-ST");
2. Mandating disclosure of remuneration details of each individual director and the CEO of issuers listed on the SGX-ST.

The public consultation ends on 17 November 2022.

These proposals, which were recommended by the Corporate Governance Advisory Committee ("CGAC"), would be prescribed in the SGX-ST Mainboard Rules and Catalist Rules. CGAC 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' disclosure on remuneration details of their directors and CEOs has been lacking.

This Update provides a summary of these two proposals.

Mandatory Nine-Year Tenure Limit on IDs

Currently, 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 provide that a director of a listed issuer is not independent if he/she has 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 has been approved in separate resolutions by: (i) all shareholders of the issuer; and (ii) shareholders of the issuer excluding its directors and CEO and associates of the directors and CEO ("Two-tier Vote").

In line with CGAC's recommendation, SGX RegCo proposes to amend the SGX-ST Mainboard Rules and SGX-ST Catalist Rules to:

• provide that a director who has been a director of an issuer for an aggregate period of more than nine years (whether before or after listing) will not be considered independent. The nine-year tenure limit is aligned with the tenure limit...