eGuide to CG Code

The NC determines annually, and as and when circumstances require, if a director is independent, having regard to the circumstances set forth in Provision 2.1. Directors disclose their relationships with the company, its related corporations, its substantial shareholders or its officers, if any, which may affect their independence14, to the Board. If the Board, having taken into account the views of the NC, determines that such directors are independent notwithstanding the existence of such relationships, the company discloses the relationships and its reasons in its annual report.



Such relationships include business relationships which the director, his or her immediate family member, or an organisation which the director, or his or her immediate family member is a substantial shareholder, partner (with 5% or more stake), executive officer or director has with the company or any of its related corporations, and the director’s direct association with a substantial shareholder of the company, in the current and immediate past financial year. Where the director or his or her immediate family member, or a company that he, she or they are a substantial shareholder in, provides to or receives from the company or its subsidiaries any significant payments or material services, the amount and nature of the service is disclosed.

A. Explanation

This Provision sets out the responsibility of the NC in relation to director independence.

The need and criteria for Independent Directors (IDs) are covered in the Explanation for Provision 2.1.

To recap, the criteria for director independence are as follows:

  • An overall principle-based criterion as described in Provision 2.1: someone who is independent in conduct, character and judgement; and who has no relationship with the company, its related corporations, its substantial shareholders or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director's independent business judgement in the best interests of the company.
  • Specific circumstances that would, or could, result in non-independence:
    • Baseline objective tests of independence set out in the Listing Rules (MR 210(5)(d) and CR 406(3)(d)).
    • Other tests of independence, with several non-exhaustive examples set out in Practice Guidance 2.

MR 210(5)(d) and CR 406(3)(d) provide the following tests of independence where directors would definitively not be regarded as independent:

  1. Employed by the company or its related corporations for the current financial year, or past three financial years.
  2. Has an immediate family member employed by the company or related corporations for the past three financial years and whose remuneration is determined by the remuneration committee (RC).
  3. Has served for more than nine years as a director and not been specifically approved by two separate resolutions of (a) all shareholders and (b) shareholders excluding directors and CEO, and their associates.

Practice Guidance 2 then sets out examples of circumstances in which a director should be deemed to be non-independent, in the first instance:

  1. A director, or a director whose immediate family member, in the current or immediate past financial year, provided to, or received from, the company or any of its subsidiaries any significant payments or material services other than compensation for board service. As a guide, payments over S$50,000 a year should be deemed significant.
  2. A director, or a director whose immediate family member, in the current or immediate past financial year, is or was, (i) a substantial shareholder of, or a partner (with 5 per cent or more stake) in; or (ii) an executive officer of; or (iii) a director of any organisation which provided to, or received from, the company or any of its subsidiaries any significant payments or material services. As a guide, payments over S$200,000 a year should be deemed significant.
  3. A director who is, or has been, directly associated with a substantial shareholder of the company, in the current or immediate past financial year.

These circumstances are not exhaustive, and the NC and Board should determine, based on the overarching principle-based criterion in Provision 2.1 (as described above), whether there are any other circumstances or relationships which might impact a director’s independence, or the perception of his or her independence.

This Provision restates the point that other than the circumstances cited in MR 210(5)(d) and CR 406(3)(d) where the NC and the Board have no discretion but have to declare a director as non-independent, when a director falls within the scope of any relationship or circumstance that impacts his independence or perception of his independence (whether or not this falls under the examples described in Practice Guidance 2), the NC and the Board nevertheless still have the prerogative to deem him to be independent.

However, if the NC considers such a director to be independent, it should provide its recommendation and views to the Board for its consideration and ultimate decision. And where the Board decides to deem such a director independent, it should disclose those relationships and circumstances and its reasons for deeming the director to be independent notwithstanding such relationships.

The Provision states that a review of the independence of each director should be conducted annually, and when circumstances require. Throughout the year, each director is required to inform the Board as soon as practicable of any change in circumstances that may affect his independence.


B. Practice Guidance


C. Related Rules and Regulations
  • MR 210(5)(c) and CR 406(3)(c): Directors and Management.
  • MR 210(5)(d) and CR 406(3)(d): Directors and Management.
  • MR 720(1) and CR 720(1): Directors and Management.


D. CG Guides
  • NC Guide 2.2: NC Calendar [NC Agenda].
  • NC Guide 3.2: Types of Directors [Nomination and Appointment Process].
  • NC Guide 4.3: Assessment of Independence Status [Director Independence].
  • NC Guide 4.4: Criteria for Independence [Director Independence].
  • NC Guide 4.5: Tenure of Independent Director [Director Independence].
  • NC Guide Appendix 4B-1: Determining Director Independence [Director Independence].
  • NC Guide Appendix 4B-2: The Nine-Year Rule for an Independent Director [Director Independence].


E. Related Articles



eGuide to CG Code
Definition of Corporate Governance
History and Structure of the Code
Role of the Board
Role of the Chair
Focus on Long Term and Sustainability
Revised Code Structure and Approach
Mandatory Principles
Provisions and Variations
Thoughtful and Meaningful Application
Board Matters
Principle 1
Provision 1.1
Provision 1.2
Provision 1.3
Provision 1.4
Provision 1.5
Provision 1.6
Provision 1.7
Principle 2
Provision 2.1
Provision 2.2
Provision 2.3
Provision 2.4
Provision 2.5
Principle 3
Provision 3.1
Provision 3.2
Provision 3.3
Principle 4
Provision 4.1
Provision 4.2
Provision 4.3
Provision 4.4
Provision 4.5
Principle 5
Provision 5.1
Provision 5.2
Provision 5.3
Remuneration Matters
Principle 6
Provision 6.1
Provision 6.2
Provision 6.3
Provision 6.4
Principle 7
Provision 7.1
Provision 7.2
Provision 7.3
Principle 8
Provision 8.1
Provision 8.2
Provision 8.3
Accountability and Audit
Principle 9
Provision 9.1
Provision 9.2
Principle 10
Provision 10.1
Provision 10.2
Provision 10.3
Provision 10.4
Provision 10.5
Shareholder Rights and Responsibilities
Principle 11
Provision 11.1
Provision 11.2
Provision 11.3
Provision 11.4
Provision 11.5
Provision 11.6
Principle 12
Provision 12.1
Provision 12.2
Provision 12.3
Managing Stakeholder Relationships
Principle 13
Provision 13.1
Provision 13.2
Provision 13.3
Practice Guidance
Board Roles and Director Duties
Board Composition and Guidance
Chairman and CEO
Board Membership
Board Performance
Procedures for Developing Remuneration Policies
Level and Mix of Remuneration
Disclosure on Remuneration
Risk Management and Internal Controls
Audit Committee
Shareholder Rights and Engagement
Engagement with Shareholders
Managing Stakeholder Relationships
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