SGX Rulebooks
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Director Independence

There should be a strong and independent element on the Board.

An independent director (ID) should have no relationship (whether familial, business, financial, employment, or otherwise) with the company, its related corporations, substantial shareholders1 or officers, which could interfere or be perceived to interfere with the director's independent judgment.

Rule 210(5)(d) of the SGX Listing Rules (Mainboard)/ Rule 406(3)(d) of the SGX Listing Rules (Catalist) sets out the following specific circumstances in which a director should be deemed to be non-independent:

(a) a director who is or has been employed by the company or any of its related corporations for the current or any of the past three financial years;
(b) a director who has an immediate family member who is, or has been in any of the past three financial years, employed by the company or any of its related corporations and whose remuneration is determined by the Remuneration Committee (RC); and
(c) a director who has been a director of the company for an aggregate period of more than nine years (whether before or after listing). Such director may continue to be considered independent until the conclusion of the next annual general meeting of the company.2

In addition to these, the Nominating Committee (NC) and Board should consider the following circumstances in which a director should also be deemed to be non-independent:

(a) 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 (which may include auditing, banking, consulting and legal services), other than compensation for board service. The amount and nature of the service, and whether it is provided on a one-off or recurring basis, are relevant in determining whether the service provided is material. As a guide, payments aggregated over any financial year in excess of S$50,000 should generally be deemed significant;
(b) a director, or a director whose immediate family member, in the current or immediate past financial year, is or was, a substantial shareholder or a partner in (with 5% or more stake), or an executive officer of, or a director of, any organisation which provided to or received from the company or any of its subsidiaries any significant payments or material services (which may include auditing, banking, consulting and legal services). The amount and nature of the service, and whether it is provided on a one-off or recurring basis, are relevant in determining whether the service provided is material. As a guide, payments3 aggregated over any financial year in excess of S$200,000 should generally be deemed significant irrespective of whether they constitute a significant portion of the revenue of the organisation in question; or
(c) a director who is or has been directly associated4 with a substantial shareholder of the company, in the current or immediate past financial year.

The above examples are not exhaustive and the NC and Board should determine whether there is any circumstance or relationship which might impact a director's independence, or the perception of his or her independence. Other than the circumstances set out in the SGX Listing Rules, these examples are meant to illustrate situations of likely non-independence and the NC and Board can still consider a director to be independent notwithstanding the existence of any of the above-mentioned situations. However, if the Board, having taking into account the view of the NC, does so, it has to fully disclose the nature of the director's relationship, and why the Board has determined the director to be independent.

Proportion of Non-Executive Directors

A key duty of the Board is to set objectives and goals for Management, monitor the results, and assess and remunerate Management on its performance. Executive directors who are part of Management may face conflicts of interest in these areas. To avoid undue influence of Management over the Board and ensure that appropriate checks and balances are in place, non-executive directors should comprise at least a majority of the Board.

Role of the Lead Independent Director

The lead independent director (Lead ID) plays an additional facilitative role within the Board, and where necessary, he or she may also facilitate communication between the Board and shareholders or other stakeholders of the company. The company should clearly communicate to shareholders and other stakeholders on how the Lead ID can be contacted.

The role of the Lead ID may include chairing Board meetings in the absence of the Chairman, working with the Chairman in leading the Board, and providing a channel to non-executive directors for confidential discussions on any concerns and to resolve conflicts of interest as and when necessary. In addition, the Lead ID may also help the NC conduct annual performance evaluation and develop succession plans for the Chairman and CEO and help the RC design and assess the Chairman's remuneration.

Board Diversity Policy

Principle 2 requires a board to have an appropriate level of independence and diversity of thought and background in its composition to enable it to make decisions in the best interests of the company.

Provision 2.4 expands on the concepts of independence and diversity in Principle 2 by stating that the Board and board committees should be of an appropriate size, and comprise directors who as a group provide the appropriate balance and mix of skills, knowledge, experience, and other aspects of diversity such as gender and age, so as to avoid groupthink and foster constructive debate.

With effect from 1 January 2022, Rule 710A(1) of the SGX Listing Rules (Mainboard) / Rule 710A(1) of the SGX Listing Rules (Catalist) requires issuers to maintain a board diversity policy. The rules take reference from the elements of Provision 2.4, and state that a board diversity policy must address gender, skills and experience, and any other relevant aspects of diversity.

It is recognised that diversity is multi-dimensional in nature, encompassing various aspects. Certain aspects of diversity are widely tracked by investors and other stakeholders globally. The SGX Listing Rules ask that issuers maintain a board diversity policy that minimally addresses gender, skills and experience. Boards may incorporate other aspects of diversity as are relevant for the company.

To provide investors and other stakeholders with relevant information, Rule 710A(2) of the SGX Listing Rules (Mainboard) / Rule 710A(2) of the SGX Listing Rules (Catalist) also requires an issuer to include in the disclosure of its board diversity policy, the following:

(a) the issuer’s targets to achieve diversity on its Board;
(b) the issuer’s accompanying plans and timelines for achieving the targets;
(c) the issuer’s progress towards achieving the targets within the timelines; and
(d) a description of how the combination of skills, talents, experience and diversity of its directors serves the needs and plans of the issuer.

The NC is responsible for setting the board diversity policy, including the targets, plans and timelines, for the Board’s approval. The NC should review the progress towards meeting the policy targets and keep the Board updated.

The board diversity policy should have measurable targets that are numerical or quantitative, to be achieved within an appropriate timeline (for example, achieving specific numerical targets for female representation on its board within a specified time period). The accompanying plans for achieving the targets should describe the concrete steps that the company will undertake. Aspirational or qualitative targets (for example, ‘creating an inclusive culture’) may also be included, but these should also be accompanied with a description of the initiatives to be undertaken to translate the aspiration into results.

Companies should provide updates on their progress toward their targets by stating what they achieved within the year under report and what is to be achieved beyond the year under report. If companies face challenges in meeting their stated targets within the relevant timelines, they should provide an explanation and describe their plans to overcome these challenges. Companies should strive to build on their achievements each year, and may consider disclosing how their performance relative to their targets has changed over the years.

The description of how the Board’s combination of skills, talents, experience and diversity serves the needs and plans of the company should be made in the context of the company’s current plans and future strategy.


1 A "substantial shareholder" is a shareholder who has an interest or interests in one or more voting shares (excluding treasury shares) in the company and the total votes attached to that share, or those shares, is not less than 5% of the total votes attached to all voting shares (excluding treasury shares) in the company, in line with the definition set out in section 2 of the Securities and Futures Act (Chapter 289) of Singapore.

2 Rule 210(5)(d)(iv) of the SGX Listing Rules (Mainboard) / Rule 406(3)(d)(iv) of the SGX Listing Rules (Catalist) takes effect at an issuer’s annual general meeting held for the financial year ending on or after 31 December 2023. For further details on transitional arrangements, please refer to Transitional Practice Note 4 of the SGX Listing Rules (Mainboard) and Transitional Practice Note 3 of the SGX Listing Rules (Catalist).

3 Payments for transactions involving standard services with published rates or routine and retail transactions and relationships (for instance credit card or bank or brokerage or mortgage or insurance accounts or transactions) will not be taken into account, unless special or favourable treatment is accorded.

4 A director is considered "directly associated" with a substantial shareholder when he is accustomed or under the obligation, whether formal or informal, to act in accordance with the directions, instructions or wishes of the substantial shareholder in relation to the corporate affairs of the company. A director will not be considered "directly associated" with a substantial shareholder by reason only of his or her appointment having been proposed by that substantial shareholder.