SINGAPORE – Directors may be limited to holding five directorships in Singapore-listed companies, while listed firms may need to ensure that their key board committees have a majority of independent directors.
These are among the changes to the Code of Corporate Governance and Singapore Exchange (SGX) Listing Rules proposed by the Singapore Exchange Regulation (SGX RegCo) and the Corporate Governance Advisory Committee (CGAC), an industry-led body set up by the Monetary Authority of Singapore.
They aim to enhance board independence and quality, and sharpen listed companies’ focus on value creation in order to sustain investor confidence.
The corporate governance code applies to listed companies on a comply-or-explain basis, but the listing rules are mandatory.
Enhancing board quality and independence
The proposals aim to get listed company boards to raise the bar when it comes to quality and independence, since board independence supports long-term decision making and ensures benefits are accrued fairly to all shareholders.
For one, SGX RegCo and CGAC proposed to cap the number of listed-entity directorships that an individual may hold at five.
Around 4.9% of independent directors hold more than two listed company directorships.
In 2024, 25 directors held more than five SGX-listed board seats. Moreover, 49 companies out of 604 – around 8% – had directors with more than five SGX-listed board seats.
The proposed cap of five is also broadly aligned with listing rule requirements in Hong Kong and Malaysia.
The two organisations also proposed to require key board committees to be chaired by an independent director and to comprise a majority of independent directors. These apply to the nominating committee, remuneration committee and audit committee.
A lead independent director must also be appointed if the chairman is not independent.
Based on the Singapore Director Report 2025 by the Singapore Institute of Directors, 70 listed entities out of 615 – about 11.4% – did not appoint a lead independent director despite having non-independent chairs in 2025.
CGAC chairman Bob Tan said: “Ensuring that companies continue to focus on long-term value begins with the quality of the board.
“With a capable and engaged board, the company will naturally move beyond boilerplate practices to implement governance meaningfully.”
CGAC and SGX RegCo also proposed firming up certain independence thresholds, such as whether a director receives significant payment from the company or is associated with a substantial shareholder.
To enhance transparency in appointing directors, they suggested amending the appointment form to require companies to explicitly state the rationale for an appointment, the selection criteria, any board diversity considerations and the search and nomination process.
Companies should also disclose whether directors have gone for relevant professional training and describe them.
SGX RegCo chief executive Tan Boon Gin said: “Our market is skewed towards tightly held ownership structures. Board independence is therefore key to ensuring our corporate governance meets the standards of global institutional investors.”
He added that in focus groups, institutional investors spoke strongly about the need for “high-quality and truly independent boards.”
He said: “Boards need to be able to effectively challenge controlling shareholders if they are to create value for all shareholders. By introducing rules that require independent directors for critical roles, we want to push companies to embed independent thinking in their boards.”
Focus on creating value for shareholders
SGX RegCo and CGAC proposed refining the corporate governance code to reinforce boards’ responsibility for overseeing strategy, long-term value creation and investor engagement.
They also want companies to be required to disclose their capital management policies, going beyond dividends to include matters like investing retained earnings into the existing business and investments in mergers and acquisitions.
This would also require companies to provide timely and proactive engagement with the investment community, providing access to their assessment of their performance and prospects, and up-to-date financial information on their websites, among others.
Companies may also need to disclose their board’s assessment of main and emerging risks and how these risks are being mitigated.
Tan Boon Gin said: “We recognise that these proposals raise the bar, particularly for our small- and mid-cap companies. Some critics have argued that additional rules will increase compliance and listing costs.”
But money spent on improving disclosures and engagement is not a cost, but an investment.
“Our companies should keep their eyes on the bigger prize,” he said. “Issuers that actively create value for shareholders will, over time, enjoy an uplift in their market valuations.”
He also responded to concerns that more regulation will just lead to more boilerplate disclosures.
“A boilerplate disclosure is better than no disclosure at all,” he said. “In a disclosure-based regime, a baseline disclosure forms an essential starting point for investor assessment and engagement. It gives the market a benchmark.”
But he said investors can also compare listed companies. “The one with a detailed capital management policy will naturally capture trust and a premium. The one with a boilerplate will be left behind.”
Tan Boon Gin also noted: “Continued momentum in our market’s Value Unlock movement requires commitment from corporate boards.
“The proposed amendments to our rules would add structure to how boards think about leadership and accountability, thus fostering a culture of strong board governance.”
The Value Unlock programme helps listed companies to realise their full valuation potential by building greater awareness and focus on value creation in the boardroom.
Bob Tan added: “Maintaining trust in our capital markets relies on continuous improvements to our corporate governance.
“The CGAC’s proposals aim to elevate standards and build greater trust between listed issuers and investors.”
He also said that the proposals were benchmarked against approaches adopted in other major jurisdictions, but tailored to Singapore’s context.
Both CGAC and SGX RegCo also proposed updating the corporate governance code and practice guidance with intended outcomes and illustrative examples.
This stemmed from comments from focus groups where participants said the code is open to interpretation. By updating the code, companies can get greater clarity on what it seeks to achieve.
Bob Tan said: “Corporate governance is not a static set of rules; it is fundamental to building and sustaining investor confidence and supporting long-term value creation.”
The consultation paper is available on the CGAC and SGX websites. Responses should be sent by Jan 27 to sgxsecretariat@sgx.com or posted to SGX.
CGAC will then consider the feedback received and make its final recommendations to MAS and SGX.
MAS and SGX will determine the final changes to the code and listing rules and announce any implementation timelines and arrangements for companies to make the transition.
