A. Explanation

This paragraph describes how the 2018 Code has evolved to be significantly different from the previous Codes in terms of its structure and how companies report their compliance with it.

In terms of its structure, the 2018 Code and its predecessors both had two levels:

• Principles
• Provisions (2018 Code), or Guidelines (2003, 2005 and 2012 Code)

However, the main differences are:

• While both Principles and Guidelines operated on a “comply or explain” basis in the predecessor Codes, in 2018, the Listing Rules now emphasise that compliance with the Principles is mandatory, while companies may vary only from the Provisions.
• A new section, “Comply or explain”, paragraphs 6 to 9, explains the broad intent of the Code and clarifies how companies should apply the “comply or explain” regime.
• A set of non-binding Practice Guidance, which did not exist in the predecessor Codes, now complements the 2018 Code.
• The Code is redrafted and streamlined in the 2018 version as follows:
  
  • Shift away from an instructive style and the use of “should”. The purpose is to move from a box-ticking mindset to more thoughtful and meaningful application of the key tenets of good corporate governance.
  • Important requirements or baseline market practices were shifted to the Listing Rules.
  • Overly-prescriptive or duplicative guidelines in the 2012 Code have been removed, or shifted to the Practice Guidance.
• The net result of the streamlining reduces the 2012 Code on several fronts:
  
  • From 16 to 13 Principles.
  • From 82 Guidelines to 51 Provisions.
  • Halving of the word count.

When the changes in the 2018 Code were announced on 6 August 2018, the SGX made consequential changes to its Listing Rules in the following areas:

• Prescribed training for first-time listed company directors.
• Criteria for director independence and the proportion of independent directors on a Board.
• Adequacy and effectiveness of internal controls and risk management systems.
• Mandatory internal audit function.
• Disclosure of reasons for non-payment of dividends.

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 1K: Outline of the 2-18 Code of Corporate Governance

D. Related Articles

• “The Singapore Code of Corporate Governance – its evolution” by Adrian Chan. (69KB)
• “Developments in governance: revisions to the Singapore Code of Corporate Governance” by Annabelle Yip. (101KB)
• “’Comply or explain’ or ‘comply or else’?” by Joyce Koh [2016 article] (253KB)
• “Making ‘comply or explain’ work” by Joyce Koh [2016 article] (441KB)
• “Explaining the ‘comply or explain’ regime by Tan Boon Gin. (330KB)
• “Unboxing Corporate Governance: Three Fabled Tests for a Better Code” by Lawrence Loh. (135KB)
• “Comply or Explain 2.0: What’s the Difference?” by Ng Siew Quan. (145KB)