eGuide to CG Code

The Provisions that underpin the Principles are designed to support compliance with the Principles. These Provisions, which replace the Guidelines of previous Codes, are drafted in a simple and direct manner, and describe the tenets of good corporate governance. Companies are expected to comply with the Provisions, and variations from Provisions are acceptable to the extent that companies explicitly state and explain how their practices are consistent with the aim and philosophy of the Principle in question. The explanations of variations should be comprehensive and meaningful.
A. Explanation

As (the previous) paragraph 7 makes clear, the 2018 Code has two levels:

  • Principles which are overarching and non-disputable statements of good corporate governance.
  • Provisions which are actionable steps that guide companies in complying with the substance of the Principles.

The “comply or explain” aspect of the Code is effected through MR 710 and CR 710. The implementation of the Listing Rules in relation to the Principles is explained in the paragraph 7. This paragraph covers the Provisions.

Compliance with the Principles is mandatory. Where a company varies from specific Provisions, the requirement is that “it must explicitly state, in its annual report, the Provision from which it has varied, explain the reason for variation, and explain how the practices it had adopted are consistent with the intent of the relevant Principle.” (MR 710 and CR 710).

  • An adequate explanation of why there has been non-compliance with the Provisions should have the following characteristics:
  • It should apply to variations from the Provisions and not the Principles, which companies are expected to adhere to.
  • It should be substantive and not perfunctory. The company is expected to explain how the alternative approach would comply with the relevant Principle of the Code.
  • It needs to be specific to the company’s position, not boilerplates.
  • It needs to:
    • Set the context and historical background.
    • Provide a convincing rationale for the action the company is taking.
    • Describe mitigating action to address any additional risk, and to maintain conformity with the relevant Principle.
B. Related Rules and Regulations
  • MR 710 and CR 710: Annual Report.
C. CG Guides
  • Board Guide 1.6: The “Comply or Explain” Regime [Corporate Governance]
  • Board Guide Appendix 1I: “Comply or Explain” – An Explanation of the Regime [Corporate Governance].
  • Board Guide Appendix 1J: “Comply or Explain” – Examples of Non-Compliance [Corporate Governance]
  • Board Guide Appendix 1K: Outline of the 2-18 Code of Corporate Governance [Corporate Goverance]
D. 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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