2. Corporate Governance Part 2 - Corporate Disclosure Requirements

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Questions and Answers

What should be done with rumors or reports that cause unusual trading activity?

They can be reported to shareholders at the next AGM.

They should only be confirmed through internal channels.

They should be clarified, confirmed, or explained. (correct)

Ignore them as they are not significant.

When are financial statements typically required to be announced?

Only when significant changes occur.

Annually on the last trading day of the year.

Quarterly or half-yearly, with specific deadlines. (correct)

After shareholder approval at the AGM.

What triggers the need for profit guidance disclosure?

When an issuer exceeds performance targets.

Only during annual financial reviews.

When the issuer is unlikely to meet previously disclosed performance targets. (correct)

If the issuer is likely to meet previously disclosed performances.

What is the maximum time frame for issuing a sustainability report after the fiscal year-end?

No later than 5 months after FY if external assurance is conducted. Signup and view all the answers

What condition requires a company to report its financials on a quarterly basis under Listing Rule 705(2)?

If auditors issue a qualified opinion or express a material uncertainty. Signup and view all the answers

What is the primary purpose of a diverse board according to the board diversity policy?

To better anticipate and face financial and governance challenges. Signup and view all the answers

How often are companies encouraged to provide voluntary business updates to their shareholders?

In between their semi-annual financial reports. Signup and view all the answers

What effect did the SGX announcement in 2020 have on quarterly reporting?

It established a risk-based approach for financial reporting. Signup and view all the answers

What does paragraph 7 of Appendix 7.1 of the Listing Rules prohibit?

Divulging information to anyone outside the issuer for privileged dealing. Signup and view all the answers

What is the key obligation regarding disclosure of material information as per Listing Rule 703?

To disclose material information as and when it arises. Signup and view all the answers

According to the court case Madhavan Peter v PP, what must the test in Listing Rule 703 refer to?

Information likely to effect a significant change in the price or value of an issuer’s securities. Signup and view all the answers

Which of the following is NOT considered material information that must be disclosed?

Significant personal achievements of directors. Signup and view all the answers

Under Rule 704, which event must be disclosed immediately?

Qualifications by auditors. Signup and view all the answers

Which of the following scenarios is likely to require immediate disclosure under Rule 703?

Firm evidence of significant changes in near-term earnings prospects. Signup and view all the answers

Which of the following conditions allows for withholding of disclosure under Listing Rule 703(3)?

The information is confidential and not expected to be disclosed. Signup and view all the answers

What does Listing Rule 703 aim to prevent in the context of securities trading?

The establishment of a false market. Signup and view all the answers

Which of the following is one of the three conditions that allows withholding of information under Listing Rule 703(3)?

Information related to incomplete proposals or negotiations. Signup and view all the answers

What must an issuer include in its annual report regarding board diversity policy?

Targets to achieve diversity and progress towards those targets Signup and view all the answers

Which aspect is NOT specifically mentioned as part of the board diversity policy?

Professional qualifications Signup and view all the answers

What is the primary responsibility of the Board regarding sustainability reporting?

To set strategic objectives including sustainability focus Signup and view all the answers

Which rule mandates that every issuer must prepare an annual sustainability report?

Listing Rule 711A Signup and view all the answers

What training is required for directors concerning sustainability matters?

A one-time training session Signup and view all the answers

What must the issuer's sustainability reporting process include?

Internal review of the reporting process Signup and view all the answers

How should the Board ensure that environmental, social, and governance factors are effectively managed?

By monitoring and managing identified material factors Signup and view all the answers

What should the nominating committee do if it assesses that a director does not require sustainability training?

Provide a justification for the exclusion of training Signup and view all the answers

What primary component must be included in the sustainability reporting for the financial industry by 1 January 2023?

Material environmental, social and governance factors Signup and view all the answers

Which aspect of sustainability reporting is specifically highlighted in Rule 711B(1)(aa)?

Climate-related disclosures consistent with TCFD recommendations Signup and view all the answers

If an issuer decides to exclude a primary component from their sustainability report, what must they provide?

Reasons for the exclusion Signup and view all the answers

Which industries are noted for the mandatory inclusion of climate-related disclosures starting 1 January 2024?

Materials and Buildings Signup and view all the answers

What must a sustainability report describe concerning governance structures?

The governance structure for sustainability practices Signup and view all the answers

Which of the following is NOT a primary component required in the sustainability report under Rule 711B(1)?

Financial projections Signup and view all the answers

What is the intended purpose of the sustainability reporting requirements outlined in Rule 711B(1)?

To improve corporate governance transparency Signup and view all the answers

Under which circumstance can the Board statement associated with sustainability practices be excluded?

It cannot be excluded in any circumstances Signup and view all the answers

Study Notes

Disclosure Requirements

Listing Rule 703 requires immediate disclosure of material information that could impact a company's security prices.
Information considered material must be "likely to effect a significant change in the price or value of a issuer’s securities".
Disclosure examples: Property, assets, business, financial condition, mergers and acquisitions, dealings with employees, suppliers and customers, material contracts or development projects, significant changes in ownership of shares by insiders, developments affecting the rights or interests of shareholders.
Specific events to be immediately disclosed under Rule 704: Appointment/ resignation of directors, general managers, or equivalent executives, qualifications by auditors.
Events likely to require immediate disclosure under Rule 703: joint ventures, mergers or acquisitions, evidence of significant change in near-term earnings prospects, acquisition or loss of significant contracts, purchase or sale of significant assets, significant litigation or disputes.
Three conditions for withholding disclosure: a reasonable person would not expect information to be disclosed, information is confidential, information concerns an incomplete proposal or negotiation, comprises matters of supposition, is insufficiently definite to warrant disclosure, is generated for internal management purposes, or is a trade secret.
Announcements must be made through SGXNET first or simultaneously with disclosure through other media
There are no waivers for disclosure of material information.
Information being generally available is not a reason for failing to disclose,
If information is materially price-sensitive, a trading halt or suspension may be required.
Profit guidance required if an issuer is unlikely to meet its performance targets.
No selective disclosure of information is allowed.

Quarterly Reporting

In 2020, SGX removed the quarterly reporting requirement for listed companies unless they are associated with higher risks.
Companies require quarterly reporting if they are in the following situations:
- Auditors have issued an adverse opinion, a qualified opinion or a disclaimer of opinion on the issuer's latest financial statements or auditors have stated that a material uncertainty relating to going concern exists in the issuer's latest financial statements.
SGX publishes a list of companies required to do quarterly reporting.
All other companies are encouraged to provide voluntary business updates to shareholders in between their half-yearly financial reports.
Factors to consider when deciding whether to provide voluntary updates: investor expectations, competitive environment, and long-term business strategy.

Board Diversity Policy

A diverse board with a broad set of perspectives helps companies anticipate and address financial and governance challenges.
In 2022, SGX made it mandatory for all issuers to set a policy with specific disclosures around board diversity.
Listing Rule 710A requires issuers to maintain a board diversity policy that addresses gender, skills and experience, and other relevant aspects of diversity.
Issuers must disclose their board diversity policy in annual reports, including targets for achieving diversity, plans and timelines for achieving the targets, progress made, and a combination of skills, talents, experience, and diversity of the directors.

Sustainability Reporting

The Code of Corporate Governance notes that companies embracing good governance, including accountability, transparency, and sustainability tend to generate investor confidence and achieve long-term success.
The Board is responsible for the long-term success of the issuer and setting strategic objectives which should include an appropriate focus on sustainability.
The Board is ultimately responsible for the issuer's sustainability reporting and should determine the environmental, social, and governance factors that are relevant to the issuer's business.
All directors must undergo one-time training on sustainability matters, unless a nominating committee deems such training unnecessary due to a director's expertise, in which case the basis of the assessment must be disclosed.
Listing Rule 711A mandates annual sustainability reports outlining an issuer’s sustainability practices and addressing the primary sustainability components outlined in Listing Rule 711B, using a 'comply or explain' approach.
The issuer's sustainability reporting process must be subject to internal review and can be independently reviewed externally with an external assurance.
The sustainability report must refer to the following primary components:
- Material environmental, social, and governance factors.
- Climate-related disclosures according to the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.
- Policies, practices, and performance.
- Targets.
- Sustainability reporting framework.
- Board statement and associated governance structure for sustainability practices.
An issuer may exclude any primary component but must disclose the reason and explain what it does instead.
Businesses in the following industries cannot exclude the primary component in Rule 711B(1)(aa): Financial, Agriculture, Food and Forest Products, Energy (as of 1 January 2023) and Materials and Buildings, Transportation (as of 1 January 2024).

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Description

This quiz focuses on the disclosure requirements under Listing Rule 703, highlighting what constitutes material information and the specific events that necessitate immediate disclosure. It covers examples such as mergers, acquisitions, and significant changes in ownership that impact a company's securities. Test your knowledge on the importance of transparency in financial reporting.