Annual Report 2001/2002

Corporate Governance and Disclosure

The work of the Corporate Regulation and Governance Policy Committee continued apace during the year. One of the three review committees under its wing, the Disclosure and Accounting Standards Committee (DASC), had conducted two public consultations and issued its Final Report in September 2001.

The Government has accepted all of DASC’s recommendations, including: (i) making compliance with prescribed accounting standards by Singapore companies a legal requirement; (ii) adopting the accounting standards issued by the International Accounting Standards Board as Singapore’s prescribed accounting standard; (iii) establishing an independent panel com-prising representatives from business and relevant organisations to prescribe accounting standards as well as review corporate governance and disclosure practices in Singapore; (iv) requiring all listed companies to announce interim results on a quarterly basis instead of the present half-yearly basis and to present annual reports to their shareholders within 120 days instead of the present five months of the financial year-end for financial periods commencing on or after 1 January 2003; and (v) tightening rules on auditor independence. The third review committee, on Company Legislation and Regulatory Framework, has reviewed how Singapore’s corporate legislation and regulatory regime can be improved to benefit the business community. It will consider feedback received from its second public consultation, which was launched on 9 May 2002, before finalising its proposals.

The local banks have decided to implement more stringent corporate governance requirements with effect from their Annual General Meetings held from 1 January 2003. These measures include strengthening the independence of bank boards, as well as nominating, audit and compensation committees. In particular, the independence of directors will be assessed not just in terms of the business relationship element stated in the Code of Corporate Governance; but also by their independence of both executive functions and substantial shareholders.

Significant improvements have also been made in the disclosure of key information relating to corporate governance practices, financial performance review and risk exposure and management practices in the last financial year. Pertinent information such as the audit committees’ assessment of the independence of their external auditors, aggregate credit facilities to directors and director-related entities and information on the risk-taking philosophy, activities and various risks arising from these activities, have been disclosed in local banks’ 2001 annual reports.

In March 2002, as part of the ongoing effort to enhance the independence and effectiveness of external auditors, MAS introduced a requirement for Singapore incorporated banks to change their audit firm every five years. While they are required to comply no later than the end of their financial year in 2006, they have been urged to change their auditors as soon as is practicable.

On 6 December 2001, MAS, on the advice of the Securities Industry Council, issued a revised Singapore Code on Take-overs and Mergers (Take-over Code). The key changes include: (i) applying the Take-over Code only to listed companies and unlisted companies with 50 or more shareholders and net tangible assets of $5 million or more (instead of all public companies previously); (ii) changing the voting control levels at which a take-over offer is required to be made so that a person who acquires 30% (25% previously) or more of a company or, if he already holds between 30% and 50% of the company, increases his stake by more than 1% in any six-month period (3% in 12 months previously) will be required to make a general offer for the company; (iii) requiring an offeror to keep an offer open for a longer period (28 instead of 21 days previously), to give more time for the offeree company and its shareholders to consider the offer; and (iv) clarifying that a shareholder in an upstream company who acquires or consolidates effective control in a downstream company as a result of a distribution of the upstream company’s shareholdings in the down-stream company will not be required to make a general offer for the downstream company if he owns more than 50% of the upstream company or is not acting in concert with any upstream company director, and allowing other upstream shareholders to retain the higher of their minimum effective interests in the downstream company in the last three years or the mandatory offer thresholds stated in (ii).

[The Financial Sector] [Regulatory Initiatives] [Legislative Changes] [Financial Advisers Act] [Risk-Based Regulation] [Supervisory Initiatives] [Depositor Protection] [Corporate Governance and Disclosure] [Developing The Disclosure Regime] [Prudential Guidelines for Financial Institutions] [Improved Conduct Practices]

[Regulatory Initiatives] [Developmental Initiatives] [Market Infrastructure]

[Table Of Contents]