Corporate Governance 2 - Public Listed Companies PDF

Audio file ========== [CCP VidLec2.mp4Transcript00:00:01Welcome to the second video lecture of Corporate Governance under the topic, corporate and commercial practice.00:00:11We will cover these topics today, disclosure requirements, the requirements for disclosing your board diversity policy and t...

Audio file ========== [CCP VidLec2.mp4Transcript00:00:01Welcome to the second video lecture of Corporate Governance under the topic, corporate and commercial practice.00:00:11We will cover these topics today, disclosure requirements, the requirements for disclosing your board diversity policy and the requirements for sustainability reporting as found in the as checks listing rules.00:00:26To begin, it\'s worthwhile to note that the Stock Exchange has transferred its regulatory unit.00:00:32To a subsidiary company called Singapore Exchange Regulation Private Limited, which is otherwise called SGX Redco.00:00:42It has a separate board and it undertakes all the frontline regulatory functions on behalf of the SGX.00:00:50This aims to enhance the governance of the Stock Exchange by making more explicit the segregation of its regulatory functions from its commercial and operating activities.00:01:03Now the obligation to disclose material information can be considered in two categories, the general and the specific.00:01:12Generally, an issuer must announce information concerning itself, its subsidiaries and its associated companies.00:01:22If the information is necessary to avoid the establishment of a false market, or is likely to materially affect the price or value of its securities.00:01:34In the landmark case of Peter Madhavan versus public prosecutor in 2012, the then Chief Justice Chancey Kyong held that the testing Rule 703 must refer to information that is likely to affect the significant change at the price or value of an issuer\'s securities.00:01:58There are some examples of material information to be disclosed found in paragraph four of the corporate disclosure policy set out in Appendix 7.1 of the listing rules. Here you will see a list of them.00:02:12This is a general category of disclosures that will list out events that require disclosure under Rule 703.00:02:23Rule 704 also spells out a specific list of events that are required to be disclosed, such as joint ventures.00:02:34Changes in near term earnings prospects, loss of contracts, significant litigation, etc.00:02:46Then we have exceptions to this general rule for disclosure. This is found in Rule 7033.00:02:54Before this, the first exception that\'s found in 703, subsection 2, is the requirement that immediate disclosure is not needed. If it is a breach of law to do so. So if you\'re actually breaching statute, then that is a legitimate ground to avoid disclosure.00:03:13Now let\'s go into the three conditions for withholding information. Under 7033, disclosure is not required. If these three conditions are met.00:03:23But if any of these conditions cease to be satisfied, the exception will similarly cease to be available, and the issuer must disclose the information immediately, so the issuer may temporarily withhold from disclosing information if these.00:03:39These conditions are met. These three conditions are met. \#1A reasonable person would not expect the information to be disclosed 2 the information is confidential and three the information relates to one of these listed categories.00:03:56The information concerns an incomplete proposal or.00:04:00Subject to negotiation concerns matters of supposition, or is insufficiently definitive?00:04:08Or information is generated for internal management purposes, such as internal budgets.00:04:13Or if it\'s a trade secret.00:04:19Please remember that an immediate announcement must be made of material information. The information must be made on extracts net, which is found on the Essex website, and to do that you need a security token issued by the SJX to upload information on its website.00:04:38The exchange will not waive any requirements under this rule and the fact that the information is generally available in the 1st place is not a reason to fail to disclose under Rule 703.00:04:53Material information must be disclosed when it arises, even during trading hours, if material information is to be disclosed during trading hours, the exchequers may expect the issuer to request a trading halt to facilitate the dissemination of the material information during trading hours.00:05:13A trading halt can be called for a minimum of 30 minutes to a maximum of three days, subject to certain exceptions that the extracts may permit.00:05:25As far as periodic financial reports are concerned, we have moved away from mandatory quarterly reporting for all listed companies and only certain companies are still required to undertake quarterly reporting for those that do, they should release their quarterly financial reports within 45 days from the end of the quarter.00:05:46For those doing half yearly reporting, they should do it within 60 days of the full year or Q4 financial quarter.00:05:54Turning to the annual report, it needs to be issued 14 days before the annual general meeting by releasing it to shareholders on exchanges, net and the date of your annual general meeting should not be held more than four months after the end of the financial year.00:06:11Since 2017, there\'s the requirement to issue a sustainability report.00:06:17For all listed companies and that needs to be done no later than four months after the financial year end.00:06:22If the listed company has undertaken to have its sustainability report audited by external auditors.00:06:29Then you\'re given one extra month and you can release that sustainability report five months from the financial year end.00:06:38Then we have rules against selective disclosure.00:06:42Which is an expression of the policy on having thorough public dissemination of material information.00:06:50What is selective disclosure?00:06:52Well, that\'s the disclosure of material information to any person outside the issuer and its advisers in such a way as to place that person in a privileged dealing position.00:07:04Now, although the exchange recommends the issuers observe an open door policy in dealing with analysts, journalists, stockholders and others, under no circumstances should disclosure of material information be made on an individual or selective basis to analysts, stockholders or other persons, unless that information.00:07:25Has previously been fully disclosed and disseminated to the public via SJX net.00:07:34As I mentioned a couple of slides ago, we have moved away from mandatory quarterly reporting.00:07:40In the year 2020, we dispense with mandatory quarterly reporting for all listed companies and the Stock Exchange has now undertaken a risk based approach to assess which companies still need to undertake quarterly reporting for the sake of investors and shareholders. Usually this means that there is a higher risk.00:08:00For debt listed issuer and therefore shareholders, investors should be kept abreast more frequently on its financial results.00:08:08This would include companies that have auditors that have issued an adverse audit opinion, a disclaimer, opinion or if there\'s a material uncertainty related to the listed companies going concern basis. These companies still need to undertake quarterly reporting.00:08:28The store exchange publishes and up-to-date lists of the companies that are still required by them to undertake quarterly reporting on a mandatory basis. The rest of the companies need to do semi annual or half yearly reporting.00:08:43That means once every six months, you know, once for the half year and once for the full year.00:08:50Although everyone is encouraged to provide voluntary business updates to shareholders on a quarterly basis so that investors can still be kept abreast of the financial position and prospects of that listed company.00:09:05From 20/22 it has become mandatory for all listed companies to disclose in their annual reports about diversity policy.00:09:15Now this board diversity policy should address how the listed company intends to address gender diversity, skills, diversity, experience, diversity and other relevant aspects of diversity, which can include diversity in tenure, diversity in age, diversity in ethnicity or nationality.00:09:35Autographical experience.00:09:40And also needs to disclose its targets to achieve diversity on its board and it plans and timelines to achieve these targets.00:09:49Listed companies must spell out its progress towards achieving these targets.00:09:54And how the combination of skills, expertise, talent, experience and diversity actually serves the listed company itself.00:10:07Finally, dealing with sustainability reporting.00:10:11The Code of Corporate Governance does state that companies should embrace all tenets of good governance, including sustainability, as a way to achieve long term business performance.00:10:22It is not just a compliance requirement, but it should be part of your performance obligations.00:10:33As the board bears ultimate responsibility for sustainability reporting, the board can delegate how it is to satisfy these requirements to identify, determine.00:10:44ESG or environmental, social and governance factors, what we call ESG factors that are material to the list of companies business decide how best to monitor and manage these factors.00:10:57All directors are required to undergo a one time training on sustainability. If the nominating committee feels that the director already has expertise in sustainability matters, then the nominating committee must justify why it is recommending the dispensation of training for that particular director.00:11:19The listing rules require the listed company to prepare an annual sustainability report describing the listed companies sustainability practices, with reference to certain primary components set out and listing rules 711 B.00:11:34On a comply or explained basis, much like the Code of Corporate Governance.00:11:40The sustainability report itself should be subject to internal review, which means the internal audit function should review the reporting and listed issuers are encouraged to to engage external assurance. That means external auditors to do an audit.00:11:57Now.00:11:59If an external audit firm audits the data and the report, there\'s a practice note 7.6 that gives more details.00:12:09In the previous slide I mentioned.00:12:11The primary components that should be reported on in the sustainability report and you see these on screen describing the components that you should address.00:12:21And if the listed company wants to exclude any of these primary components, it must again justify the exclusion and explain the reasons for doing so.00:12:35This is the last slide for today and explains how certain industries have been given timelines by which to comply in a mandatory way with Rule 711 B, one AA on climate related disclosures. If you are in the financial agriculture of food or energy or materials or building or transport.00:12:55Industries then with effect from these financial years on the screen you are required to address climate related disclosures in your sustainability reports and you are not allowed to exclude them. This is part and parcel of climate related financial disclosures required person.00:13:12To the task force on climate related financial disclosures or TCD.00:13:19Recommendations.00:13:21Well, that brings us to the end of video lecture 2.](https://1drv.ms/i/s!AGaPTZsZg5MLiboZ)Public listed companies and the listing manual - More than 50 shareholders, 50 members. Then you would have to convert to a public company. You\'re no longer a private company. listing rules are only apply to listed public companies, whether they\'re Singapore incorporated or overseas **[MANDATORY]** Disclosure Requirements - **Category 1: Obligation to disclose [General information] ([Rule 703])** - Madhavan Peter v PP \[2012\] SGHC 153 Rule 703 must refer to information that is likely to affect the **[significant change at the price or value of an issuer\'s securities \"materiality test\" OR to avoid a false market]** - **[Paragraph 4 of Appendix 7 of the Listing Rules]** - Chairman 6 months leave of absence due to cancer Examples of **[Material Information]** property, assets, business, financial condition and prospects mergers and acquisitions dealings with employees, suppliers and customers material contracts or development projects significant change in ownership of shares owned by insiders any developments that affect materially the present or potential rights or interests of shareholders - Exception to Rule 703 - Cnodition 1 + 2 + 3 - Condition 1: A **[reasonable person]** would not expect the information to be disclosed - Condition 2: The information is **[confidential]** - Condition 3: The information is of the type in **[one of the listed categories]**. - **Category 2: Duty to disclose [Specific information] ([Rule 704])** - Immediate disclosure via announcement and periodic disclosure via financial statements or reports -- **[Chapter 7, Practice Note 7.1. -]** **[Profit guidance required if issuer is unlikely to meet its performance targets]** as previously publicly disclosed; **[No selective disclosure]** - **[Annoucements -]** No waiver for requirements for disclosure of Material Information under Listing Rule 703 Fact that information is generally available is not a reason for failure to disclose Rumors or reports, especially if resulting in unusual trading activity, should be clarified, confirmed or explained - **[Periodic Reports]** Announced quarterly or half yearly Q1-Q3: 45-day reporting deadline Q4 & FY: 60-day reporting deadline - **[Financial Statements]** Announced quarterly or half yearly Q1-Q3: 45-day reporting deadline Q4 & FY: 60-day reporting deadline **[Annual Report]** Issued at least 14 days before AGM Issued to shareholders and SGX Date of AGM cannot exceed 4 months from the end of FY **[Sustainability report]** Issued no later than 4 months after FY Where issuer has conducted external assurance: no later than 5 months after FY - **[Rule 705(2)]** Risk-based approach to Quarterly Reporting - a company will have to report its financials on a **[quarterly basis if its auditors have issued an adverse opinion]**, a qualified opinion or a disclaimer of opinion on the issuer\'s latest financial statements or its auditors have stated that a material uncertainty relating to going concern exists in the issuer\'s latest financial statements - **[No Selective Disclosure]** - under no circumstances should disclosure of material information be made on an **[individual or selective basis to analysts]**, stockholders or other persons, unless that information had been disclosed previously. - Board **[diversity]** policy -- Rule 710A - **[mandatory]** for all issuers to set a policy with specific disclosures around board diversity - **[Sustainability reporting]** requirements -- Rule 711A, Rule 711B, Practice Note 7.6. All directors **[must]** undergo a one-time training on sustainability matters.