| 1.0 | Introduction |
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| 1.1 | Rule 15.25 of the Listing Requirements provides that a listed corporation must include in its annual report, a narrative statement of its corporate governance practices ("Corporate Governance Statement") with reference to the Malaysian Code on Corporate Governance 2012 ("Code"). In making the Corporate Governance Statement, the listed corporation must include the following information: |
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| | (a) | how the listed corporation has applied the Principles set out in the Code ("Principles") to its particular circumstances, having regard to the Recommendations stated under each Principle ("Recommendations"); and |
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| | (b) | any
Recommendation which the listed corporation has not followed, together with the
reasons for not following it and the alternatives adopted by the listed corporation,
if any. |
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| 1.2 | Rule 15.26(b) of the
Listing Requirements requires a listed corporation to ensure that its board of
directors make a statement in its annual report about the state of internal
control of the listed corporation as a group ( “Internal Control Statement”). |
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| 1.3 | This Guidance Note
clarifies the obligation of the listed corporations in making the Corporate
Governance Statement and the Internal Control Statement. |
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| 2.0 | Location
of the Corporate Governance Statement and the Internal Control Statement in the
annual report |
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| 2.1 | A listed corporation
may combine both the Corporate Governance Statement and the Internal Control
Statement (both statements are collectively referred to as “said Statements"). |
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| 2.2 | A listed corporation
must set out the said Statements prominently and clearly in its annual report.
The said Statements must not be incorporated into the Chairman’s statement in
the annual report as referred to in paragraph 8 of Part A in Appendix 9C of the
Listing Requirements. |
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| 3.0 | Contents
of the Corporate Governance Statement |
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| | General |
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| 3.1 | A listed corporation
must be mindful that the purpose of the Corporate Governance Statement is to
give shareholders a meaningful description or discussion of its corporate
governance practices, rather than just complying with provisions of the Listing
Requirements. Therefore, a
listed corporation must ensure that the Corporate Governance Statement contains
adequate information to enable an informed assessment by shareholders of its
corporate governance practices. |
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| 3.2 | In disclosing the
application of each Principle, a listed corporation must ensure that it has regard to
the Recommendations stated under the Principle. If the listed corporation has
not followed any of the Recommendations, it must deal with them individually,
give reasons for not following them and state the alternatives adopted, if any |
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| 3.2A | In explaining the
reasons for not following any of the Recommendations, a listed corporation must
not use compliance with the requirements under the Listing Requirements as a
reason justifying the departure from the Recommendations (in areas where both
the Listing Requirements and the Code govern the same subject matter). The
listed corporation must still explain the reasons for not following the
Recommendations, and state the alternatives adopted, if any. |
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| 3.3 | In assessing whether a Recommendation is followed, a listed corporation must have regard to the commentaries set out in the Code which provide guidance to the listed corporation in implementing the Recommendation ("Commentaries"). |
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| 3.4 | A listed corporation
must also ensure that the Corporate Governance Statement covers its corporate
governance practices for the whole financial year. If a practice had been in
place for only part of the financial year, the listed corporation must state so
and the period during which it had been in place. |
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| 3.5 | If a listed
corporation has not followed any Recommendation for a certain part of the
financial year, but – |
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| | (a) | intends to take steps
or has taken steps to follow such Recommendation; or |
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| | (b) | intends to establish or has established an alternative approach, |
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| | such listed corporation should make a statement to that effect. |
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| 3.6 | [Deleted]. |
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| | Additional
considerations |
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| 3.7 | In making the
Corporate Governance Statement, a listed corporation must also consider the
following |
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| | (a) | Treat the Corporate Governance Statement as a tool to communicate effectively with shareholders and the investing public and describe the actual governance practices in a coherent and concise manner, whilst ensuring adherence to the spirit of the Code. |
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| | | Note: Ask the following questions: |
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| | | (i) | Is the listed corporation addressing the right issues? |
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| | | (ii) | Is the listed corporation reporting the issues clearly? |
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| | | (iii) | Is the listed corporation linking the issues
coherently? |
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| | | (iv) | Is there any information that has been missed out? |
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| | (b) | Ensure that key messages on governance are clearly set out and avoid compliance box-ticking or boilerplate statements. The listed corporation must avoid taking a mechanical or legalistic approach in making the Corporate Governance Statement. For example, the listed corporation should not merely - |
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| | | (i) | list down those
Principles which have been applied or Recommendations which have been followed;
or |
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| | | (ii) | state the process and
procedures without further elaboration on how such
processes and procedures have been applied during the financial year. |
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| | (c) | Report how the
Principles have been applied, based on the listed corporation’s actual
corporate governance practices having regard to its particular circumstances
and business. The listed corporation must avoid - |
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| | | (i) | reporting in form
over substance; or |
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| | | (ii) | vague or general
statements without any real connection to the listed corporation’s situation. |
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| | (d) | Provide a balanced report
by describing key issues and incidences of failure, and explaining how the
issues were managed, actions that were taken to remedy the failures and lessons
learnt. |
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| | (e) | Ensure that the
information is easy to understand. This can be achieved by using simple, plain
everyday language and avoiding legalistic or technical terms. |
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| | (f) | Use the listed
corporation’s website to add depth to the governance reporting and keep
shareholders updated throughout the year. Avoid cluttering the Corporate
Governance Statement with static information such as policies, charters and codes that have not
changed, or long convoluted write-ups, so that the key information and messages
are not lost in the volume of data presented. Where possible, publish such static information on the listed corporation’s
website. |
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| 4.0 | Contents
of the Internal Control Statement |
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| 4.1 | In making the
Internal Control Statement, a listed corporation is required to address the
Principle, Recommendation and Commentary in the Code which relate to internal
control, namely the following: |
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| | (a) | Principle 6 of the
Code on recognizing and managing risks which reads as follows: |
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| | | "The board should establish a sound risk management framework and internal control system." |
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| | (b) | Recommendation 6.1
read together with the Commentary of the Code which states as follows: |
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| | | The board should establish a sound framework to manage
risks. |
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| | | Commentary: |
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| | | - The board should determine the company’s level of risk
tolerance and actively identify, assess and monitor key business risks to
safeguard shareholders’ investments and the company’s assets.
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| | | - Internal controls are important for risk management
and the board should be committed to articulating, implementing and reviewing
the company’s internal controls system.
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| | | - Periodic testing of the effectiveness and efficiency
of the internal controls procedures and processes must be conducted to ensure
that the system is viable and robust.
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| | | - The board should disclose in the annual report the
main features of the company’s risk management framework and internal controls
system."
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| 4.2 | In making the
Internal Control Statement, a listed corporation should be guided by the Statementon Risk Management and Internal Control: Guidelines for Directors of Listed Issuers
which is issued by the Taskforce on Internal Control with the support and
endorsement of the Exchange. |
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| 4.3 | A listed corporation
must ensure that the Internal Control Statement contains adequate information
to enable an informed assessment of its state of internal control. |
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| 5.0 | The
said Statements |
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| 5.1 | The said Statements must clearly identify the board of directors of the listed corporation as the party which is making the statements. Back to Top |