The last revision of Singapore’s Code of Corporate Governance (Code) that is applicable to listed companies in Singapore was in 2012. Owing to the evolution of global corporate governance practices and sentiments that there is room for Singapore listed companies to improve on their governance practices and disclosures, Monetary Authority of Singapore (MAS) convened a Corporate Governance Council (Council) in February 2017 to review the Code. On 6 August 2018, MAS accepted the Council’s final recommendations. The revised Code took effect for annual reports with financial years beginning from 1 January 2019.

The key changes to the Code relate to (i) the structure of the Code; (ii) clarification of the comply-or-explain regime, and (iii) strengthening board quality. This article is a discussion of these key changes.


The 2012 version of the Code had 16 Principles that were supported by 82 Guidelines. The requirements added over the years had resulted in a lengthy Code. The Council also noted that length, coupled with an overly prescriptive Code, could have encouraged a box-ticking mindset and boilerplate disclosures which did not provide meaningful information to stakeholders.

Hence, the main change to the structure of the 2018 Code is streamlining. Fifteen Guidelines in the 2012 Code that replicated Singapore Exchange Listing Rules (SGX LRs), or were overly prescriptive, have been removed. Twelve Guidelines that the Council considered to be important baseline requirements have been shifted to SGX LRs and will require mandatory compliance. Twenty-four of the remaining Guidelines that were overly prescriptive, or were less essential details, were shifted to the Practice Guidance. The 2018 Code now has 13 Principles that are supported by 51 Provisions (Guidelines have been renamed Provisions in the new Code).

In addition, an Introduction has been incorporated in the 2018 Code. This Introduction (i) explains the broad intent of the Code; (ii) references a board’s role in establishing corporate culture, and (iii) clarifies how companies should apply the comply-or-explain regime (this will be elaborated in the following section).

The language in the revised Code has also been re-drafted, departing from a prescriptive style including the use of the word “should”. Overall, the changes to the structure of the Code are implemented to shift companies away from the box-ticking mindset to meaningful engagement with stakeholders.


The comply-or-explain regime is a common approach to the regulation of corporate governance across major jurisdictions. The Council also noted the need for companies to be able to appropriately tailor corporate governance practices to their specific needs. Hence, the 2018 Code continues to apply on a comply-or-explain basis. To clarify any prior misconceptions about this regime, a two-fold approach is adopted – (i) the Introduction to the Code explicitly explains the application of the comply-or-explain approach, and (ii) enhancements have been made to SGX LR 710.

Introduction to Code        

The 2018 Code is structured to have Principles, supported by Provisions, and complemented by a Practice Guidance.1 The Code’s Introduction explicitly states that Principles are broad, core statements of good corporate governance to which compliance is mandatory. On the other hand, Provisions are actionable steps that companies can take to comply with the Principles. It is unequivocally stated in the Introduction that companies are required to describe how their corporate governance practices comply with the Code’s Principles and Provisions. However, variations from the Provisions are acceptable if accompanied by “comprehensive and meaningful” explanations of how alternative practices are consistent with the Principles.

Enhancements to SGX LR  

Amendments to SGX LR 710 now make explicit the following – (a) compliance with the Code Principles is mandatory; (b) companies are required to describe their governance practices with reference to both the Principles and Provisions (and not only when there are deviations), and (c) variations are acceptable to the extent that companies explicitly state and explain how their practices are consistent in substance with the intention behind the Code’s Principles.


Changes were introduced to strengthen board quality by enhancing board independence and encouraging board renewal, as well as improving board diversity.

Board Independence

As a result of shifting some Guidelines from the 2012 Code to SGX LRs and the Practice Guidance, it can be said that there is now a three-tier approach to the regulation of board independence. The SGX LRs form the baseline mandatory requirements of board independence. It is now a mandatory requirement that independent directors make up at least one-third of the boards.2 In addition, three explicit circumstances for which a director cannot be considered independent are mandated by SGX LRs. These circumstances are when a director is employed by the company (or any of its related corporations) for the current or past three financial years; when a director has an immediate family who is employed by the company (or any of its related corporations) for the current or past three financial years, and when a director has served on the board for more than nine years. However, a director who has served for more than nine years can be considered independent, subject to separate voting by all shareholders and shareholders excluding those who also serve as directors or the Chief Executive Officer of the company.3

In contrast, the Code’s Provisions detail requirements of board independence that are not technically mandatory, but for which deviations have to be explained. Under this category, there is now the requirement that when the Chairman of the board is not independent, independent directors should make up board majority (previously, the relevant Guideline from the 2012 Code required only “at least half” of the board).4 In addition, there is a new Code Provision that non-executive directors make up the majority of a board.5 The threshold for determining a director’s independence from substantial shareholders has been reduced from 10% shareholdings to 5%.6 However, this test of independence remains under a Provision, and was not moved to SGX LR as originally proposed by the Council.

Other tests of director independence which relate to business relationships between a director or his family members with the company, and direct associations between a director and substantial shareholders, have been moved to the Practice Guidance. These tests are meant to be illustrative examples of when non-independence is likely.7

Overall, the regulation of board independence appears to have been enhanced by more regulated mandatory requirements and stricter thresholds set as expected practices. At the same time, unnecessarily prescriptive and more subjective tests have been shifted to the voluntary application Practice Guidance.

Board Diversity

The revised Code now requires the board diversity policy and progress towards achieving the policy be disclosed in annual reports.8 There was no prior requirement for this disclosure. While there is growing recognition that board diversity can enhance corporate performance by preventing groupthink, encouraging forward thinking and enhancing adaptivity, the Council was careful not to be overly prescriptive in terms of requiring specific measures or targets, and instead, allows for flexibility.


Other changes include (i) the training of first-time directors with no prior experience, made mandatory by SGX LR;9 (ii) more disclosures on the link between remuneration and value creation for the company,10 and (iii) introducing a new Code Principle that requires the board to consider the interests of material stakeholders.11


Overall, the 2018 Code is simplified, substantially shortened and less prescriptive. Baseline good corporate governance practices have been moved from the Code, which applies under a comply-or-explain regime, to mandatory requirements under SGX LRs. The new Code takes a principles-based approach. Specific details, which can be considered illustrative examples of best practices, have been shifted to the Practice Guidance which applies on a voluntary basis. These changes were made in the hope that companies will take a less box-ticking mindset towards corporate governance and instead, engage in meaningful exchanges with stakeholders.

Chua Wei Hwa and Koh Wei Chern are Associate Professors of Accountancy, School of Business, Singapore University of Social Sciences.

1 The Practice Guidance provides guidance by detailing best practices, but adoption is voluntary for companies.

2 Rule 210(5)(c) of the SGX LRs (Mainboard)/ Rule 406(3)(c) of the SGX LRs (Catalist)

3 Rule 210(5)(d) of the SGX LRs (Mainboard)/ Rule 406(3)(d) of the SGX LRs (Catalist)

4 Provision 2.2 of the 2018 Code

5 Provision 2.3 of the 2018 Code

6 Provision 2.1 of the 2018 Code, and its corresponding footnote

7 Practice Guidance 2

8 Provision 2.4 of the 2018 Code

9 Rule 210(5)(a) of the SGX LRs (Mainboard)/ Rule 406(3)(a) of the SGX LRs (Catalist)

10 Principle 8 of the 2018 Code

11 Principle 13 of the 2018 Code