Friday, September 23, 2011

Singapore Exchange Listing Standards Enhanced for Corporate Governance, Outside Auditor Must Be Registered with Oversight Body

The Singapore Stock Exchange has amended its listing standards to enhance the corporate governance of listed companies. Among other things, effective Sept. 29, 2011, the Exchange will require a listed company's outside auditor to be registered with and regulated by the Accounting and Corporate Regulatory Authority (“ACRA”) or an independent audit oversight body acceptable to the Exchange [Rule 712]. Existing issuers who are unable to comply with this rule will be given one year from the date of implementation to fulfill this requirement. The Exchange will also require listed companies to have a robust and effective system of internal controls that addresses financial, operational and compliance risks [Rule 719].

Under specific circumstances, such as where the issuer is the subject of an investigation of irregularities or other wrongdoing, the Exchange’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. [Rule 720]. There are also disclosure enhancements.

The listing standards will require the disclosure of a company's loan agreements that make reference to control or controlling shareholder interest. Issuers with such loan agreements are to require an undertaking from their controlling shareholders to provide notification when share pledging arrangements are entered into such that details of the pledge can be disclosed by the issuer [Rule 704(31) and Rule 728]. Also, companies must disclose whether any of their independent directors have been appointed to the board of the issuer’s principal subsidiaries based in jurisdictions other than Singapore. On an ongoing basis, announcement is required for the appointment and cessation of such independent directors to the board of these principal subsidiaries [Rule 610(8) and Rule 704(12)].