Contents

1. Laws
2. Accounting Standards
3. Listing Rules
4. Official Codes and Guidelines
5. Private Codes and Guidelines
6. Policy Committees

1. Laws

Companies Bill 2008
On October 23, 2008, the Minister for Corporate Affairs introduced the new Companies Bill 2008 into Parliament. The new bill, if passed, will replace the Companies Act 1956, and modernise the structure for corporate regulation in India, according to the government. In its press release, the government stated: "The Companies Bill, 2008 seeks to enable the corporate sector in India to operate in a regulatory environment of best international practices that foster entrepreneurship, investment and growth". A number of corporate governance improvements are also being proposed in the new bill, including allowing for board meetings to be conducted via video conferencing and recognising votes cast through email.

The Companies (Amendment) Bill, 2003
The Department of Company Affairs (DCA)* has amended the Companies Act, 1956** several times in recent years to improve corporate governance and modernise India’s company law. In 1999, it introduced provisions relating to “nomination facilities for shareholders” while further amendments in 2000 covered postal ballots and audit committees. A committee was set up in 2002 to take a fresh look at the Companies Bill, 1997 -- a comprehensive revision of the 1956 Act that had been pending in parliament for several years -- and suggest further changes. A report was submitted by the committee in September 2002.

On December 2, 2004, the Government constituted an Expert Committee on Company Law under the Chairmanship of Dr. J.J. Irani to make recommendations on a number of issues concerning the Company Law. Dr. Irani presented the report on May 31, 2005. (See below) Amendments to the Law are still pending.

For more details on all these developments, go to the MCA website.

*The Department of Company Affairs (DCA) is now known as the Ministry of Company Affairs.
**Note: The full text of The Companies Act, 1956 can be found under Acts on the MCA website and is provided in two parts.

Securities Law
Two Acts mainly govern the securities transactions in India: The Securities Contract (Regulations) Act, 1956; and The Securities and Exchange Board of India (SEBI) Act, 1992. The Securities Contract Act originally kept a watch on all the Indian Stock Exchanges and was administered by the Central Government but with the SEBI Act coming into effect in 1992, administration of the Act came under the Securities and Exchange Board of India (SEBI). A number of amendments have been enacted since then, with the latest one in 2002.

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2. Accounting Standards

Accounting & Auditing Standards
The accounting and auditing standards, including interpretations of the the accounting standards and recent opinions of expert advisory, are provided on this page.

Prime Minister Manmohan Singh said in March 18, 2006 that the government will introduce a new Company Law that includes aligning Indian accounting standards with International Financial Reporting Standards (IFRSs).

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3. Listing Rules

Amendments to the Equity Listing Agreement

On September 4, 2008, SEBI issued amendments to clauses 16, 19, 24 and 41 of the Equity Listing Agreement. The highlights of the amendments were:

• In order to safeguard the interest of shareholders, the listed company as well as the unlisted company which are getting merged shall each be required to appoint an independent merchant banker for giving a fairness opinion on the valuation done by valuers. Further, the “Fairness opinion” of the merchant bankers shall be made available to the shareholders at the time of approving the resolution under Clause 24.
• In order to bring more efficiency in the disclosures of financial results, certain amendments have been made with regard to timeline for submitting consolidated financial results to the stock exchange, publication thereof, and submission and placing of limited review reports before Board/Committee.

Clause 41 Amendment of the Listing Agreement

On July 10, 2007, SEBI issued an amendment to Clause 41 of the listing agreement, which deals with quarterly reporting. SEBI has now made it optional for companies to either present an unaudited or audited quarterly result and year to date financial results to the Stock Exchange within one month from the end of each quarter. If the option is for an unaudited result, then the results will be subject to a limited review, and the report will have to be submitted to the Stock Exchange two months from the end of the quarter.

Clarification on Revised Clause 49 (January 2006)
In January, the Securities and Exchange Board of India (SEBI), the main securities market regulator, issued a clarification on "Clause 49", the section of the Listing Agreement relating to corporate governance. SEBI said that henceforth:

• The maximum time gap between board meetings of a listed company could be increased from three to four months;
• Sitting fees paid to non-executive directors would not require the previous approval of shareholders; and
• Certification of internal controls and internal control systems by CEOs and CFOs would cover financial reporting only. Previous versions of Clause 49 did not make clear what the certification was intended to cover.

These clarifications follow significant revisions made to Clause 49 by SEBI in October 2004. Those changes included a tighter definition of independent directors, enhanced responsibilities for audit committees, and a requirement that boards adopt a formal code of conduct. SEBI originally set April 2005 as the date for full compliance, but extended this to December 31, 2005 after pressure from companies.

Revised Clause 49 (March 2005)
In October 2004, the Securities and Exchange Board of India (SEBI) published a revised Clause 49 of the Listing Agreement relating to corporate governance, setting forth a schedule for newly listing companies and listed companies to comply with the revisions. However, in March 2005, SEBI extended the date set for compliance with these new provisions to December 31, 2005, since a large number of companies were unprepared to fully implement the changes. Major changes in the clause include amendments/additions to provisions relating to definition of independent directors, strengthening the responsibilities of audit committees, and requiring Boards to adopt a formal code of conduct.

Clause 49 (February 2000)
In February 2000, the Securities and Exchange Board of India (SEBI) revised its Listing Agreement to incorporate the recommendations of the country’s new code on corporate governance, produced in late 1999 by the Birla Committee. These rules—contained in a new section, Clause 49, of the Listing Agreement—took effect in phases over 2000-2003.

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4. Official Codes and Guidelines

NEW
Corporate Governance Voluntary Guidelines 2009 (December 24, 2009)
On December 24, the Ministry of Corporate Affairs (MCA) published the "Corporate Governance Voluntary Guidelines 2009". While the Ministry sought recommendations from a number of parties for these Guidelines, they are based mainly on recommendations from two reports: the Naresh Chandra-Confederation of Indian Industry (CII) corporate governance task force report, and the "ICSI (Institute of Company Secretaries India) Recommendations to Strengthen Corporate Governance Framework".

The six issues the Guidelines cover are:

• Board of directors;
• Responsibilities of the board;
• Audit committee of the board;
• Auditors;
• Secretarial audit; and
• Institution of mechanism for whistle blowing.

The Ministry has stated that it will visit the Guidelines again in a year after it receives feedback from various quarters.

Guidelines on Corporate Governance for Central Public Sector Enterprises 2007 (June 2007)
Reform of central public sector enterprises (CPSEs) is high on the Indian government’s agenda as they are essential in “employment generation and as an important source of R& D in our industrial sector”. Strong PSEs, the government believes, would be better prepared to enter the capital market to raise funds, which means practices must be in place to ensure accountability. The push by the government has resulted in these guidelines issued by the Department of Public Enterprises in June 2007.

The main issues these guidelines cover are:

• Board of Directors
• Setting up of Audit Committees and its roles and powers
• Issues relating to subsidiary companies
• Disclosures
• Accounting Standards
• Risk Management

Even though the guidelines are voluntary, all CPSEs, both listed and non-listed, are meant to follow them, with compliance of these guidelines to be referred to in the Directors’ report, Annual report and the chairman’s speech during the Annual General Meeting. The Department will grade the companies on the basis of their compliance with the guidelines.

Issued on an experimental basis for a year, they will be revised “in the light of experience gained”.

Enhanced Disclosure and Investor Protection Guidelines (November 2002)
In late 2002, the Malegam Committee, a standing committee of the Securities and Exchange Board of India (SEBI) under the chairmanship of Shri Y H Malegam, Managing Partner of S.B.Billimoria & Company, produced a series of 18 recommendations for enhancing disclosure and investor-protection requirements in offer documents for public listings and rights issues. As a result, the SEBI (Disclosure and Investor Protection) Guidelines, 2000 were amended.

National Code on Corporate Governance (1999)
In late 1999, a government-appointed committee under the leadership of Shri Kumar Mangalam Birla, Chairman, Aditya Birla Group, released a draft of India’s first national code on corporate governance for listed companies. The committee’s recommendations, many of which were mandatory, were closely aligned to international best practices on corporate governance—and set higher standards than most other parts of the region at that time. The code was approved by the Securities and Exchange Board of India (SEBI) in early 2000 and was implemented in stages over the following two years (applying first to newly listed and large companies). It also led to changes in the stock exchange listing rules.

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5. Private Codes and Guidelines

CII Code on Corporate Governance (April 1998)

In April 1998, India produced the first substantial code of best practice on corporate governance after the start of the Asian financial crisis in mid-1997. Titled "Desirable Corporate Governance: A Code", this document was written not by the government, but by the Confederation of Indian Industries (CII).

CII began working on this document prior to the financial crisis. It is one of the few codes in Asia that explicitly discusses domestic corporate governance problems and seeks to apply best-practice ideas to their solution. Most codes are abstract statements of principle with equally general recommendations, and say little about local conditions.

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6. Policy Committees

Expert Group Headed by Justice M H Kania (former chief justice of India) for Suggesting Amendments to SEBI Act, 1992 (July 2005)

The SEBI Act 1992 has been amended three times, in 1995, 1999 and 2002 to reflect the changes and developments in the securities market. However, it was felt more was needed to be done to remove any ambiguities that exist and to bring the ACT in line with IOSCO, the World Bank and the IMF's benchmark Financial Services Assessment Programme (FSAP) standards. An internal group consisting of SEBI senior officers proposed amendments to the SEBI Act to achieve this, and in 2004 the SEBI Board formed an expert group under Justice M H Kania, former chief justice of India, to study the proposals. One of the proposals studied was the consolidation of existing securities laws into one Act along the lines of the Financial Services and Market Act, 2000 of the UK.

The committee, consisting of relevant stakeholders, produced its final report in July 2005. Some key recommendations included establishing a separate investor protection to promote investor education and awareness and to compensate small investors who are victims of among other things fraud, adding a provision that ensures monies or securities that clients have with an intermediary be held in the form of a trust, which could not be attached or seized by any authority. However, it fell short of endorsing the consolidation of securities laws, instead stating that the Central Government should make the decision through a policy statement. All its recommendations were approved by SEBI in March 2006 and the report has been forwarded to the Law Ministry.

Expert Committee on Company Law (May 2005)
In December, 2004, the Ministry of Company Affairs set up the Expert Committee under the Chairmanship of Dr. J. J. Irani, Director, Tata Sons, to advise the Government on proposed revisions to the Companies Act, 1965. The Government wanted "to have a simplified compact law that will be able to address the changes taking place in the national and international scenario, enable adoption of internationally accepted best practices as well as provide adequate flexibility for timely evolution of new arrangements in response to the requirements of ever-changing business models".

Prior to the setting up of the Committee, a Concept Paper was produced in-house by the Ministry of Company Affairs and put up on its website. Interested parties then gave their feedback, and it was this Paper with the suggestions from a number of organisations, professional bodies and individuals which was given to the Committee to deliberate on, with the proviso "not to feel constrained or limited by the concept paper or feedback".

The Expert Committee consisted of 13 members and 6 special invitees. They included members from trade and industry, chambers of commerce, professional institutes, representatives of Banks and lawyers, while Government Ministries and regulatory bodies concerned with the subject were represented through special invitees.

Murthy Committee on Corporate Governance (February 2003)
In late 2002, the Securities and Exchange Board of India (SEBI), in response to rapidly evolving international standards and corporate collapses in the US and elsewhere, formed a new committee to "evaluate the adequacy of existing corporate governance practices and further improve these practices". Chaired by Shri N.R Narayana Murthy, Chairman and Chief Mentor of Infosys, the committee examined a range of issues relating to audit committees and reports, independent directors, related party transactions, risk management, director compensation, codes of conduct and financial disclosure. It then made a series of recommendations that aim to encourage companies to follow the substance, not just the form, of good governance. The committee's report was released on February 8, 2003. The intention is to incorporate its main recommendations into SEBI's Listing Agreement.

Given the overlap with the Naresh Chandra Committee formed by the then Department of Company Affairs in August 2002 (see item below), the Murthy Committee suggested that the mandatory recommendations of the Chandra Committee, as they relate to corporate governance, should also be incorporated into SEBI's Listing Agreement.

Chandra Committee on Auditing and Governance (2002)
Following the collapse of Enron in 2001 and the passing of the Sarbanes-Oxley Act in July 2002, the then Department of Company Affairs (DCA) formed a high-level committee in August 2002 to undertake a wide-ranging examination of corporate auditing and independent directors. Chaired by Shri Naresh Chandra, a former Cabinet secretary, the committee produced a report in late 2002 that made a series of strong recommendations regarding such things as the grounds for disqualifying auditors from assignments, the type of non-audit services that auditors should be prohibited from performing, the need for compulsory rotation of audit partners (but not firms), a stricter definition of "independent director" and the need for independent directors to make up no less than 50% of boards. While the committee was clearly influenced by Sarbanes-Oxley, it did not follow its dictates slavishly. We have provided a link to an executive summary of the Chandra report.

Task Force on Corporate Excellence (November 2000)
In May 2000, the then Department of Company Affairs (DCA) formed a broad-based study group under the chairmanship of Dr. P.L. Sanjeev Reddy, Chairman, DCA. The group was given the ambitious task of examining ways to "operationalise the concept of corporate excellence on a sustained basis", so as to "sharpen India's global competitive edge and to further develop corporate culture in the country". In November 2000, a task force set up by the group produced a report containing a range of recommendations for raising governance standards among all companies in India. It also suggested the setting up of a Centre for Corporate Excellence.

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Contents

1. Laws
2. Accounting & Auditing Standards
3. Regulations
4. Listing Rules
5. Official Codes & Guidelines

1. Laws

Company Act
The Company Act was enacted on December 26, 1929 and is administered by the Ministry of Economic Affairs. There have been three amendments to the law: in November 2001, June 2005 and February 2006.

Securities and Exchange Act
The Securities and Exchange Act was enacted on April 30, 1968 and is administered by the Financial Supervisory Commission. It has since undergone a number of amendments, most recently in May 2006.

New Item:
On May 30, 2006, a new regulation went into effect that clarifies the meaning of "material information" in relation to insider trading under Article 157-1 of the Securities and Exchange Act. (See "Regulations" below for more).

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2. Accounting & Auditing Standards

Accounting Research and Development Foundation
Founded in 1984, the Foundation is responsible for issuing accounting and auditing standards in Taiwan. Its website provides summaries and full translations of the country's "Statements of Financial Accounting Standards" and summaries of its "Statements of Auditing Standards".

IAS Plus: www.iasplus.com
IAS Plus, a website run by Deloitte, provides the latest updates on accounting standards in Taiwan.

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3. Regulations

Expanded Insider Trading Rules (May 2006)
The Financial Supervisory Commission published new and more detailed regulations governing insider trading on May 30, 2006: "Regulations Governing the Scope of Material Information and the Means of its Public Disclosure Under Article 157-1, Paragraph 4, of the Securities and Exchange Act". As its title suggests, the new regulation clarified the meaning of "material information" under the Securities and Exchange Act and the way that issuers should disclose such information to shareholders and the public.

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4. Listing Rules

Taiwan Stock Exchange Corporation Regulations Governing Review of Securities Listings
Taiwan's listing rules date from March 1990 and have been amended several times since, the latest being in July 2008.

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5. Official Codes and Guidelines

TSEC/GTSM Best-Practice Principles, 2002
In October 2002, the Taiwan Stock Exchange Corporation (TSEC), the main board, and the GreTai Securities Market (GTSM), the second board, released the country's first set of corporate governance best-practice principles for listed companies. The Principles state that a listed company should encourage its shareholders to actively participate in corporate governance. Drawing on both global standards and Taiwanese company law, the document outlines a non-mandatory system of independent directors, board committees (starting with audit) and independent supervisors. It also touches upon stakeholder rights.

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Contents

1. Laws
2. Regulations
3. Accounting Standards
4. Listing Rules
5. Official Codes and Guidelines

1. Laws

The Companies Ordinance (including subsidiary legislation)
The Ordinance, including subsidiary legislation, is administered and enforced by the Companies Registry.

The Securities and Futures Ordinance (including subsidiary legislation)
The Hong Kong Securities and Futures Commission (SFC) is the statutory regulator for the securities and futures market in Hong Kong and administers the Securities and Futures Ordinance.

1a) Consultation on new legislation

Companies Ordinance Rewrite: Consultation Paper on Accounting and Auditing Provisions (March 2007)
On March 29, 2007, the Financial Services and the Treasury Bureau (FSTB) issued this consultation paper, the first in a series of public consultations on the Companies Ordinance (CO) rewrite. The paper aims to consult the public on legislative proposals to improve the accounting and auditing provisions in the CO. The proposals have been developed to improve the disclosure and transparency of information in annual accounts, enhance compliance with the relevant requirements and save compliance and business costs incurred by companies. They include:

• Making directors' reports more forward-looking, analytical and informative by requiring the inclusion of a business review, which would cover among other things, the principal risks and uncertainties facing the company and the likely future developments in its business while allowing most private companies to prepare simplified directors' reports.
• Requiring directors to make a statement in the directors' report concerning their awareness of relevant audit information of which the auditors are unaware to ensure that the directors consider carefully whether they have disclosed all such information to their auditors.
• Modernising and streamlining the provisions on directors' remuneration, along the lines of the Standing Committee on Company Law Reform's previous recommendations regarding the disclosure of individual director's remuneration packages, and the introduction of a directors' remuneration report.

A Consultation Paper on Proposed Amendments to the Securities and Futures (Stock Market Listing) Rules (January 2005)
The consultation document gives the background and principles in drafting the proposed rules. The Securities and Futures Commission (SFC) proposals would put into force subsidiary legislation in accordance with its rule-making powers under the proposed revised section 36 of the Securities and Futures Ordinance (SFO). This paper should be read in conjunction with the "Consultation on statutory backing for Listing Rules" (read below), which sets out the government's proposals that would make certain amendments to primary legislation, mainly the SFO. The publication contains two appendices; Appendix 1 is the consultation draft to the Securities and Futures (Stock Market Listing) Rules, while Appendix 2 is the explanation and analysis of substantive changes from the current Stock Exchange Listing Rules.

Consultation on statutory backing for Listing Rules (January 2005)
In early 2005 the Hong Kong Government released an outline of the legislative amendments required to give "statutory backing" to parts of the Listing Rules. This followed a decision in 2004 to take some of the responsibility for enforcing the Listing Rules away from the Stock Exchange and give it to the Securities and Futures Commission (SFC), the aim being to improve enforcement and allow for a wider array of sanctions to be applied (such as fines and director disqualification). The sections of the Listing Rules to be given legislative backing include rules on disclosure, notifiable transactions and connected transactions. The SFC will start to enforce these sections once the amendments are passed (originally expected in 2006, but delayed), while Hong Kong Exchanges and Clearing will continue to enforce the remainder of the Listing Rules. The SFC also released a consultation paper in early January on the specific wording of its proposed amendments to the Securities and Futures (Stock Market Listing) Rules. For more, see www.sfc.hk

Consultation Conclusions on Proposals to Enhance the Regulations of Listing (March 2004)
On March 2004, the Financial Services and Treasury Bureau published the conclusions to its consultation paper on enhancing the regulation of listing. It recommended that the more important listing requirements be codified in statutory rules to be made by the Securities and Futures Commission (SFC) under section 36 of the Securities and Futures Ordinance. The Government, with the support of the SFC and the Hong Kong Exchanges and Clearing Ltd, would take the lead in improving the regulatory framework by amending the primary legislation.

Consultation Paper on Proposals to Enhance the Regulation of Listing (October 2003)
In October 2003, the Financial Services and Treasury Bureau (FSTB) published this paper to gather public opinion on a number of issues relating to better regulation of listing. They included:

• Legal status of certain fundamental requirements in the listing rules of the Stock Exchange of Hong Kong (SEHK);
• The manner of their enforcement; and
• The roles of both the Securities and Futures Commission (SFC), as the statutory regulator, and the Hong Kong Exchanges and Clearing Ltd(HKEx), as the market operator, in performing the listing functions.

The consultation period ended on December 31, 2003, and the conclusions were published on March 2004.

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2. Regulations

Fit and Proper Guidelines (September 2006)
The new guidelines replace the December 2000 Fit and Proper Criteria and set out the criteria which the Securities and Futures Commission (SFC) will deploy to determine the eligibility of people applying to be licensed or registered under the Securities and Futures Ordinance, Cap. 571. The sponsor guidelines, incorporated into these guidelines, came into effect on January 1, 2007.

2a) Consultation Papers

Consultation Conclusions to the Consultation Paper on the Regulation of Sponsors and Compliance Advisers (April 2006)
In April 2006, the Securities and Futures Commission (SFC) published the conclusions to the June 2005 consultation paper on the regulation of sponsors and compliance advisors. The document includes new sponsor guidelines, which are attached as Annex I. The guidelines, which will become effective on January 1, 2007, are part of the new regulatory regime and will be inserted in the Fit and Proper Guidelines.

Consultation Paper on the Regulation of Sponsors and Compliance Advisers (June 2005)
Due to a number of corporate scandals linked to initial public offerings because sponsors had failed to carry out proper due diligence on listing applicants, the Securities and Futures Commission embarked on a two-stage course of action to strengthen the sponsor regulatory regime.

In June 2005, this consultation paper, part of the second phase of action, was published containing proposals that would add a set of additional requirements specific to sponsors to the current licensing regime. The proposals have three main aspects:

1. A sponsor should have proper internal controls and adequate supervision to ensure compliance with relevant regulatory requirements.
2. The management, including the responsible officer, has the ultimate responsibility for the work conducted by the sponsor; and
3. The sponsor should have competent staff and sufficient resources to carry out its work.

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3. Accounting Standards

Hong Kong Financial Reporting Standards
The Hong Kong Financial Reporting Standards (HKFRS) includes all HKFRS, Hong Kong Accounting Standards (HKAS), Statement of Standard Accounting Practice (SSAP), and interpretations issued by the Hong Kong Institute of Certified Public Accountants (HKICPA). Accounting standards in Hong Kong are fully compliant with International Financial Reporting Standards (IFRSs), with the exception of several Hong Kong interpretations that do not have a counterpart in IFRSs.

Hong Kong Standards on Quality Control, Auditing, Assurance and Related Services
This term encompasses:

• Hong Kong Standards on Quality Control (HKSQCs);
• Hong Kong Framework for Assurance Engagements;
• Hong Kong Standards on Review Engagements (HKSREs);
• Hong Kong Standards on Assurance Engagements (HKSAEs);
• Hong Kong Standards on Investment Circular Reporting Engagements (HKSIRs); and
• Hong Kong Standards on Related Services (HKSRSs).

It also gives an overview of the relationship between Hong Kong's standards and the International Standards on Quality Control, Auditing, Assurance and Related Services issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants.

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4. Listing Rules

Rules and Guidelines on Listing Matters
Hong Kong's listing rules are extensive: six general chapters, 17 chapters on equity securities, two on listed investment vehicles, 16 chapters on debt securities, numerous practice notes, and 23 appendices. Despite a trend towards creating a "disclosure-based regime", the Stock Exchange of Hong Kong (SEHK) retains significant discretion in deciding whether or not to approve new listings. Rule 2.04 states: "It is emphasised that the Exchange Listing Rules are not exhaustive and that the Exchange may impose additional requirements to make listing subject to special conditions whenever it considers it appropriate." Primary enforcement of the listing rules rests with SEHK, although these powers will soon be shared with the Securities and Futures Commission (see above) and a dual-vetting regime for IPOs has been in place since 2003.

4a) Joint Policy Statement Regarding the Listing of Overseas Companies (March 2007)
On March 7, 2007, a joint policy statement was issued by the Securities and Futures Commission (SFC) and the Stock Exchange of Hong Kong (SEHK) to:

• clarify the Listing Rules requirements governing the listing of overseas companies; and
• provide a clear roadmap to assist companies incorporated outside Hong Kong or the Recognised Jurisdictions (the People’s Republic of China, Bermuda and the Cayman Islands) and their advisers when seeking a primary listing either on the Main Board or the Growth Enterprise Market (the “GEM”).

The statement also covered factors that would affect the eligibility of companies that were looking to list in Hong Kong

4b) Amendments to the Listing Rules

Rule amendments relating to corporate governance issues (March 2004)
In January 2004 the Hong Kong Exchanges and Clearing (HKEx) amended a number of listing rules. Key changes included:

• Listed issuers must appoint at least three independent non-executive directors, instead of only two as before.
• Listed issuers must disclose the remuneration of individual directors; previously they could disclose remuneration of directors by "bands".
• Independent shareholder approval is required for any refreshments of the general mandate after the annual general meeting. Previously,listed issuers could issue securities representing up to 20% of their issued share capital under a general mandate approved by shareholders, and there was no restriction on the number of refreshments of the general mandate.
• Definition of "transactions" for the purpose of notifiable transactions.

For a summary of the amendments, please read the press release from HKEx.

4c) Consultations on Amendments to the Listing Rules

NEW
Consultation Conclusions on Proposals in the Combined Consultation Paper
On November 28, 2008, Hong Kong Exchanges and Clearing Limited (HKEx) published the conclusions to its January 2008 consultation paper (see below), listing the amendments to the listing rules, which will come into effect on January 1, 2009.

Among the new amendments that will bring changes to the corporate governance structure are:

• Voting by poll will be mandatory for all resolutions at shareholder meetings from January 1, 2009;
• A new provision will be added to the Code on Corporate Governance encouraging companies to release their meeting notices and final agendas at least 20 working days (ie, 28 calendar days) before AGMs and EGMs. Although voluntary, this provision will be governed by the Code’s “comply or explain” requirement; and
• The information gathering powers of HKEx have been strengthened with regard to investigations and disciplinary cases.

HKEx Combined Consultation Paper (January 2008)
On January 11, 2008, Hong Kong Exchanges and Clearing Limited (HKEx) published this consultation paper, combining a number of proposed changes to the Listing Rules. The paper seeks the market’s views on eighteen substantive policy issues. It sets out draft amendments to the Main Board Listing Rules and the Growth Enterprise Market Listing Rules to implement those proposals. The proposals and draft Rule amendments have been prepared in consultation with the staff of the Securities and Futures Commission (SFC).

The substantive policy issues dealt with in the paper include:

• Proposed amendment to the Listing Rules with regard to the minimum level of public float and the constituents of “the public”, as well as seeking views on the need for a minimum level of market float and the manner in which it should be regulated.
• Proposed Listing Rules’ amendments to codify disclosure practices about announcements for issues of securities for cash, regardless of whether general mandates are involved, and disclosure of the allocation basis for excess shares in the rights issue/open offer announcement, circular and prospectus.
• HKEx seeks public comment on the extent to which voting by poll should be made mandatory at general meetings and the minimum notice period required for convening shareholders meetings.

The consultation period ends on April 7, 2008, with publication of the conclusions to be in the second quarter of 2008.

Final proposal to upgrade the Listing Rules (January 2003)
On January 17, 2003, Hong Kong Exchanges and Clearing Ltd (HKEx), the holding company for the stock and futures exchanges and the regulator of listed companies, released a set of proposals for enhancing corporate governance standards within its Listing Rules. These amendments should be implemented by mid-2003.

Proposal to upgrade the Listing Rules (January 2002)
In January 2002, Hong Kong Exchanges and Clearing (HKEx), the holding company for the stock and futures exchanges, released a consultation paper on raising corporate governance standards in the Listing Rules. A five-month consultation period followed, with the final report being published in early 2003.

HKEx Continuing Listing Criteria (November 2002)
In November 2002, Hong Kong Exchanges and Clearing (HKEx), the holding company for the stock and futures exchanges, issued a consultation paper on whether or not Hong Kong should introduce continuing listing standards that companies must meet in order to remain listed. The paper also considers the issues of low-priced securities, which are often subject to market manipulation, and alternative markets for delisted securities. The consultation period ended on February 28, 2003.

4d) Other Consultations

Consultation Paper on the Growth Enterprise Market (July 2007)
The consultation paper puts forward the proposals by the Hong Kong Exchange and Clearing Limited (HKEx) for the further development of the Growth Enterprise Market (GEM). HKEx began its review process in 2005, commencing with informal interviews with market practitioners. This led to a discussion paper which was issued in January 2006, and set out three structural options for GEM:

• GEM as a second board;
• GEM and the Main Board to merge as a single board;
• New alternative market.

Following the responses to the discussion paper at the end of April 2006, the market seemed to prefer the third option of a new alternative market, along the lines of London's AIM. However, HKEx and the Securities and Futures Commission does not feel the Hong Kong market is ready for the AIM model, and since the second option of a merger of GEM and the Main Board did not receive much support, HKEx is of the view that repositioning GEM as a second board is the best way forward. The consultation period ends on October 31, 2007.

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5. Official Codes and Guidelines

Non-statutory Guidelines on Directors' Duties (October 2007)
In October 2007 the Companies Registry of Hong Kong published this non-statutory guidelines on directors' duties. The booklet provides an outline of the general principles a director needs to be aware of while performing his functions and exercising his powers, such as:

• Duty not to enter into transactions in which the directors have an interest except in compliance with the requirements of the law.
• Duty not to make unauthorised use of company's property or information.
• Duty to keep proper books of account.

Companies should give copies of these guidelines to new directors, even if they do not organise formal induction training for directors. The Companies Registry recommends directors read more detailed reviews of the role and duties of directors in law at such websites as the Hong Kong Institute of Directors: www.hkiod.com.

Code on Corporate Governance (Appendix 14, HKEx Listing Rules, January 2005)
The new Code is a big improvement on Hong Kong's original Code of Best Practice, a terse document dating back to 1993, but still falls short of international standards in many ways. It has been published in conjunction with a new set of rules requiring issuers to include a "corporate governance report" in their annual reports.

New Hong Kong Code on Corporate Governance (November 2004)
On November 19, 2004, the Stock Exchange of Hong Kong published a final report on its new "Code on Corporate Governance Practices" (initially released in late January 2004 for public comment).

Guide for Independent Non-Executive Directors
In July 2000 the Hong Kong Institute of Directors (HKIOD) first published these guidelines for independent non-executive directors to provide concise, user-friendly guidance. A second edition followed in September 2003. The booklet aims to help directors understand the responsibilities of being an independent voice on the Board and the authority and limitations the role carries through twelve principles such as:

• The role of the independent non-executive director, which involves supervising management, participating in the direction of the company's business and affairs, and speaking out firmly and objectively on these and other issues that may come before the Board.
• Devoting sufficient time; it reminds people that before they accept an appointment to the Board they must have a realistic view of the amount of time they will need to devote to the job.
• Confidentiality and disclosure of interests. Directors should not divulge confidential company information to third parties that they learned in their capacity as a director without the permission of the company.

Hong Kong Code of Best Practice, Appendix 14 (1993) (Replaced)
Hong Kong enjoyed the distinction of being the first place in Asia to produce an official code of best practice--and the only market with one before the Asian crisis. It released its code in 1993, inspired in large part by the publication of the Cadbury Report in the UK the previous year. The code formed Appendix 14 of the Stock Exchange Listing Rules. The code had another distinguishing feature: it was Asia's shortest (just over a page), most narrowly focussed (relating mainly to board meetings and director behaviour) and least ambitious corporate governance code. In contrast to virtually all major Asian markets, for example, Hong Kong did not mandate audit committees.

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Contents

1. Laws
2. Accounting Standards
3. Regulations
4. Listing Rules
5. Official Codes and Guidelines
6. Circulars

1. Laws

The Company Law of the People’s Republic of China (2005)
The Company Law was first enacted in 1993 and subsequently amended in 1999 and 2004. It underwent a major amendment in October 2005, which came into effect on January 1, 2006.

Securities Law of the People's Republic of China (2005)
The Securities Law was passed on 1998 and revised in 2004. Like the Company Law, it underwent a major revision in October 2005, which came into effect January 1, 2006.

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2. Accounting Standards

Circular on Issuing the No.7 Questions and Responses of Information Disclosure Standards of Public Companies: Compilation and Disclosure of the Comparative Financial Accounting Information during the Transition Period between the New and Old Accounting Standards
On February 15, 2007, the China Securities Regulatory Commission issued this circular, in the form of a FAQ (frequently asked questions), to deal with questions from companies on the disclosure of comparative financial accounting information during the transition period between the new and old accounting standards for both listed companies and companies going for an initial public offering. The regulator also provides a short case study at the end of the circular for further clarification on transitioning from the old to the new.

China's New Accounting Standards: A comparison with current PRC GAAP and IFRS
In August 2006, Deloitte, an ACGA member, released a report on China's New Accounting Standards, which were announced on February 2006. The report compares Accounting Standards for Business Enterprises (ASBEs), consisting of a new Basic Standard and 38 specific ASBEs, with current Generally Accepted Accounting Practice in Chinese Mainland (PRC GAAP) and the International Financial Reporting Standards (IFRS).

According to the report, "the ASBEs do not simply expand the disclosure requirements. They make fundamental changes to current Generally Accepted Accounting Practice in Chinese Mainland ("PRC GAAP"). Accordingly, they may have a significant impact on the result and/or net asset of enterprises and on the presentation of financial statements".

The new standards, the report states, are in line with current IFRSs, with certain modifications for "China's unique circumstances and environment", and will become mandatory for all listed Chinese companies from January 1, 2007.

China Accounting Standards Committee: www.casc.gov.cn
The China Accounting Standards Committee, under the Ministry of Finance, is the advisory body for setting Chinese accounting standards.

IASPlus: www.iasplus.com
IAS Plus, a website run by Deloitte, provides the latest accounting standards updates for China.

New Accounting Standards (February 2006)
In mid-February, Chinese accounting standards took probably their biggest step towards convergence with global standards following the release of a system based closely on International Financial Reporting Standards (IFRS). The Ministry of Finance in Beijing released the "Chinese Accounting Standards for Business Enterprises, consisting of 39 standards, with the goal of further faclitating the development of a market economy in China, raising the quality of financial information, and boosting investor confidence. The new Chinese standards do not completely replicate IFRS, but will incorporate many of its key principles into local standards.

Meanwhile, the same day, the Ministry of Finance also released a new set of 48 "Auditing Standards for Certified Public Accountants", which bring China's auditing rules more closely into line with the International Standards on Auditing. Both sets of standards take effect from January 1, 2007.

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3. Regulations

Regulations on Information Disclosure of Listed Companies
These regulations were approved by the China Securities Regulatory Commission's 196th chairman meeting on December 13, 2006. They were issued and became effective on January 30, 2007.

CSRC Directive on Quarterly Reporting (March 2003)
In March 2003, the China Securities Regulatory Commission (CSRC) released an amended directive on quarterly reporting (replacing its original directive of April 2001). This directive focusses on the "form and content" of such reports and requires listed companies to deliver them within one month after the end of the first and third quarters. These quarterly reports must include, among other things, a profit statement and data on total assets and net cashflow from operations.

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4. Listing Rules

NEW
Corporate Governance self-evaluation form for listed companies in Shanghai (ACGA translation)
As the first step in becoming part of the SSE Corporate Governance Index, listed companies have to fill out this self-evaluation questionnaire. The results are then posted on the website for public viewing and opinion. It is also passed on to the special committee of companies from the securities, fund management, insurance, credit rating and research sectors for comments as well.

NEW
Process for compiling SSE Corporate Governance Index (ACGA translation)
Shanghai Stock Exchange and the China Securities Index worked on the assessment method that would allow listed companies to apply and be part of the SSE Corporate Governance Index that was launched on January 2, 2008.

Listing Rules (May 2006)(in Chinese)

4a) Guidelines

Guidelines for Information Disclosure of Listed Companies (No. 6) – Material Contracts (June 18, 2007) (in Chinese)
This guideline clarifies the type of contracts that needed to be disclosed. Contracts involving 50% or above of the audited asset, or involving more than RMB 1 billion have to be disclosed, as do contracts that may have a material effect on the financial position of the company. In disclosing the contracts, the company should provide information on the risks of the contracts, information on the contracting party, the content of the contracts, the effect on the listed company and any auditing procedures.

Shenzhen Stock Exchange Guidelines for Information Disclosure of Listed Companies (No. 5) – Rumours and Clarifications (May 9, 2007) (in Chinese)
These guidleines urge listed companies to avoid rumours by being careful in their communications with analysts and the media regarding sensitive information. If rumours should surface, the company should report them to the exchange and the exchange would act accordingly, such as suspending trading of the stock. In addition, the company should investigate the incident and clarify the rumours to the Exchange in accordance with the guideline within two working days.

Shenzhen Stock Exchange Guidelines for Information Disclosure of Listed Companies (No. 4) – Investment in Securities (May 9, 2007) (in Chinese)
This Guideline specifies the procedural requirements for listed companies to invest in the stock market, the rules for disclosure of the investment plans are provided.

Shanghai Stock Exchange Guideline for the Administration of Disclosure of Directors, Supervisors and Members of Senior Management Shareholdings in the Listed Company (May 2007) (in Chinese)
The guideline requires directors, supervisors and members of the senior management to report to the company any changes to their shareholdings within two working days. The company, upon receiving the information, is required to inform the Exchange within another two working days.

Shanghai Stock Exchange Guidelines for the Administration of Information Disclosure Mechanism of Listed Companies (April 2007) (in Chinese)
These guidelines offer the basic principles for creating such a system by listed companies, including disclosure rules for board secretaries, directors, supervisors, senior management, and shareholders with shareholding of 5% or above. While the guideline says companies should be encouraged to disclose as much information as reasonably possible, it also specifies that inappropriate release of confidential information shall be punished.

Notice on Public Apology and the Flexible Sponsors Testing System of Listed Companies on the Small and Medium Size Enterprises Board (June 4, 2007) (in Chinese)
The notice specifies the procedure of public apology by companies listed on the small and medium size enterprise. They have to apologize to the investors if their directors are condemned by the Exchange or they fail in the disclosure assessment conducted by the Exchange. The notice also ‘encourages’ the listed companies to reappoint sponsors to ensure full compliance of the listing rules should one of the two situations mentioned above happen.

Guidelines for the Behaviour of the Majority Shareholder, the de facto Controller of Listed Companies in the Small and Medium Size Enterprise Board (May 17, 2007) (in Chinese)
This is a code of conduct for the majority shareholder or the de facto controller of companies listed in the small and medium size enterprise board. It tries to regulate conducts that may affect the legitimate interest of the minority and seeks to ensure material information disclosure. It forbids the de facto controller from trading stock of the listed company 15 days before the released of fixed time reports? (e.g annual report, quarterly reports), 10 days before profit announcements and other situations. The de facto controller is obliged to disclose the following information:

• Change to shareholding
• Material structure payments
• Any pledging, freezing, judiciary abduction, trust creation or voting right restriction of share amount to 5% or more of the company’s total shares
• Any other situations that may affect the share price or its derivatives

The guideline is also applicable to the agent, spouse and infant of the controlling person.

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5. Official Codes & Guidelines

Guidelines for Board of Directors Code of Conduct of Joint Stock Commercial Banks (Provisional) (September 2005)
The China Banking Regulatory Commission issued these guidelines on September 5, 2005, with an aim to standardize the operation of the boards of these banks. The provisional guidelines are divided into six sections, including the duties of directors, rules and procedures of board meetings and special committees under the board.

Guidelines on Corporate Governance Reforms And Supervision of Bank of China and Construction Bank of China (March 2004)
The China Banking Regulatory Commission issued these guidelines in 2003, which became effective in 2004. The guidelines were pilot joint-stock reforms of the Bank of China and China Construction Bank to ensure that within three years the banks would be "modern and internationally competitive" with "adequate capital, strict internal controls, safe and sound business operations, quality services and desirable profitability". The guidelines, divided into five chapters, concentrated on improving the banks' corporate governance, modernising their operating mechanisms, and raising their profit earning capacity.

China Code on Corporate Governance (January 2002)
On January 7, 2002 the China Securities Regulatory Commission and the State Economic and Trade Commission in Beijing issued a "Code of Corporate Governance for Listed Companies in China".

This is one of the most interesting codes in Asia--it does not merely lay down a series of abstract principles and general recommendations, it also reflects the governance challenges facing listed companies and their shareholders during this transition period in China's economic development.

China Guidelines on Independent Directors (August 2001)
On August 16, 2001 the China Securities Regulatory Commission (CSRC) issued new guidelines on independent directors of listed companies. On paper at least, these guidelines go well beyond comparable rules in many parts of the region, including Hong Kong. For a copy of the guidelines, visit www.csrc.gov.cn, go to the English version and look in "News Review". Read our highlights of these guidelines.

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5. Circulars

Notice of the Adjustments to the Offshore Investment Scope of Overseas Wealth Management Business of Commercial Banks on behalf of Their Clients
On May 10, 2007, the China Banking Regulatory Commission (CBRC) issued amendments to its 2006 "Notice of Overseas Wealth Management Business of Commercial Banks on behalf of their Clients". Amendments include allowing commercial banks to use foreign fund managers that have "been authorised or licensed by the overseas regulatory authorities which have signed with the CBRC a Memorandum of Understanding on Regulatory Cooperation with respect to Overseas Wealth Management Business of Mainland Commercial Banks on behalf of their clients (‘MOU’)".

Circular on Issues Concerning the Implementation of Trial Measures for the Administration of Overseas Securities Investments of Qualified Domestic Institutional Investors
This circular outlines how domestic institutional investors can apply for qualified domestic institutional investor (QDII) status and access offshore capital markets.

Circular on Issuing the No.7 Questions and Responses of Information Disclosure Standards of Public Companies (February 2007)
The China Securities Regulatory Commission issued a circular on February 15, 2007, to answer questions from companies on how to transition from the old accounting standards to the new ones that became effective on January 1, 2007. The FAQ deals with the disclosure of comparative financial accounting information between the new and old accounting standards for both listed companies and companies going for an initial public offering.

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Contents

1. Regulations
2. Listing Rules
3. Accounting And Auditing Standards
4. Official Codes and Guidelines

1. Regulations

Amendment to Takeover Regulations
On June 30, 2008, Bapepam released its amendment to the takeovers regulation, which state that a mandatory offer can only be triggered once a shareholder crosses the 50% threshold. Previously the threshold was 25%. Furthermore, there will no longer be the opportunity to take a company private or delist a company. An investor can make the mandatory offer for 100% of all the shares of the company, but within two years the acquirer will have to release 20% of its shares to the public after the tender offer is completed.

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2. Listing Rules

New JSX Listing Rules (July 2000)
In July 2000, the Jakarta Stock Exchange (JSX) released a set of new listing regulations that, among other things, raised the bar on corporate governance. Major new provisions included a minimum percentage of independent directors (30%) on the Board of Commissioners; the mandatory introduction of audit committees; a requirement for company secretaries; and tougher sanctions for late disclosure. An excerpt from the new listing regulations that outlines these governance measures is attached.

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3. Accounting And Auditing Standards

Financial Accounting Standards
The Financial Accounting Standards Board (DSAK) of the Indonesian Institute of Accountants (IAI) issues and revises accounting standards. The IAI website, which provides the accounting standards, is only in Bahasa.

IAS Plus: www.iasplus.com
IAS Plus, a website run by Deloitte, provides up-to-date information on accounting standards in Indonesia.

World Bank ROSC on Accounting and Auditing Standards, June 2005
On June 30, 2005, the World Bank issued a ROSC (Reporting on the Observance of Standards and Codes) on the accounting and auditing standards of Indonesia. The report concluded that while the “statutory regulator’s audit engagement reviews have been strengthened in the last few years, noncompliance with established accounting and auditing standards still exists due to weak enforcement and relatively light administrative sanctions and fines”. It made a series of recommendations to further improve the accounting and auditing professions, such as:

• The oversight framework for auditors needed to be consistent with international best practices.
• Enacting the Public Accountancy Law.
• Prioritising adoption of International Financial Reporting Standards (IFRS) and International Standards of Auditing (ISA), even though Indonesian Financial Accounting Standards would be converged with IFRS by 2008 and the Indonesian Institute of Accountants had decided to fully adopt ISAs for the 2007 financial year audits.
• Streamlining reporting requirements of various regulatory bodies.
• Developing a different framework for financial reporting and auditing of small and medium enterprises and non-listed companies.
• Implementing laws and regulations to protect whistleblowers in order to encourage reporting of violations of noncompliance.

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4. Official Codes and Guidelines

Indonesia's Code of Good Corporate Governance (October 2006)
In 2004, the Indonesian government transformed the National Committee for Corporate Governance into the National Committee on Governance (NCG), made up of the Public Governance Sub-Committee and the Corporate Governance Sub-Committee. The Corporate Governance Sub-Committee was tasked with reviewing and revising the existing national code of corporate governance, to make it more relevant in today’s corporate world.

The sub-committee, composed of members from the NCG and representatives from related institutions such as Bank Indonesia, State Ministry of Administrative Reform and the Indonesia Chamber of Commerce, released its revised version in October 2006. While it is not mandatory, the government expects businesses to adopt the Code’s basic principles when they formulate codes of best practice for themselves.

The revised Code includes the “needs and relevancy of pre-requisite conducive situation for GCG (good corporate governance)” including “the role of authorities, business community, and public and society at large”, and what is expected at the company level: the general meeting of shareholders, the Board of Commissioners and the Board of Directors. Two new sections that have been added are business ethics and the code of conduct because it was felt that the crisis affecting the Indonesian economy was due in large part to inconsistent implementation of good corporate governance, especially in terms of business ethics.

Amendments to Regulation Of Bank Indonesia Regarding Good Corporate Governance Implementation By Commercial Banks (October 2006)
In October 2006, Bank Indonesia amended the good corporate governance regulation it issued in January. The amendments were mainly to do with the roles and duties of the Board of Commissioners and the Board of Directors.

Bank Indonesia Regulation Concerning Good Corporate Governance Implementation By Commercial Banks(January 2006)
In January 2006, Bank Indonesia issued this regulation, which acknowledged that good corporate governance practices were imperative in today’s banking world to cope with increasing risk complexity, improve the performance of a bank, protect the interests of shareholders, increase compliance of prevailing regulations and the general code of conduct in the banking industry, as well as strengthen the internal conditions of national banks.

The regulations state that good corporate governance implementation in banks should always be based on five main principles:

• transparency
• accountability
• responsibility to maintain the prevailing laws and regulations as well as prudential bank management
• independency from undue influence/pressure from any parties
• fairness in fulfilling the rights of stakeholders arising from agreements and prevailing laws and regulations

Each bank has to perform a regular self-assessment on the adequacy of good corporate governance implementation and prepare a report. Sanction will be imposed on banks that fail to comply with provisions in the regulation.

Indonesian Code for Good Corporate Governance (March 2001)
In May 2000, the National Committee on Corporate Governance (NCCG), a high-level advisory group appointed by the Indonesian government, produced a draft of Indonesia's first code on corporate governance. The content closely followed global standards and the 1999 OECD Principles on corporate governance. In March 2001, NCCG published the final version of the Code.

This is a model code deliberately designed as a "guide to excellence in corporate governance" for Indonesian companies. It is intended to apply eventually to all companies, but in the initial stage only to public companies, state-owned enterprises and companies "utilising" or "managing" public funds.

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Contents

1. Laws
2. Accounting Standards
3. Listing Rules
4. Official Codes and Guidelines

1. Laws

Securities and Exchange Act B.E 2551
The long-awaited amendment to the Securities and Exchange Act was passed by Parliament on December 20, 2007 and became effective on March 5, 2008. These amendments will strengthen corporate governance through such measures as enhancing fiduciary duties of company directors and stipulating sanctions for breaches of those duties, and strengthening the rules governing related party transactions.

Securities and Exchange Act B.E 2535
The Securities and Exchange Act was enacted in 1992 and is enforced by the Ministry of Finance.

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2. Accounting Standards

Thai Accounting Standards
This site only offers a Thai version. Thai Accounting Standards (TAS) are issued by the Federation of Accounting Professions (FAP), which was formed in 2004. Prior to that, standards were issued by the Institute of Certified Accountants and Auditors of Thailand (ICAAT). As of November 2005, according to IAS Plus, there were a total of 57 accounting standards: 31 which were currently in effect, four that were not required by Thai law as yet, and 22 standards that had been superseded.

IAS Plus: www.iasplus.com
IAS Plus, a website maintained by Deloitte, provides up-to-date information about accounting standards in Thailand.

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3. Listing Rules

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4. Official Codes and Guidelines

Revised Code of Corporate Governance (March 2006)
In March 2006, the Stock Exchange of Thailand (SET) issued a revised code of corporate governance as an update to its previous 2002 code. The new document follows closely the five key OECD corporate governance principles and adopts recommendations made by the World Bank.

While still voluntary, the new code takes a "comply or explain" approach to corporate governance (thus following UK practice). Companies are required to disclose the extent of their compliance with the code's principles in their 2007 annual statements (Form 56-1) and annual reports. In practical terms, this means that the first reports will not be seen until March and April 2008.

One of the most interesting aspects of the new code concerns the conduct of shareholder meetings. In an effort to encourage companies to adopt clear procedures for allowing minority shareholders to propose agenda items for annual meetings, the code lays down a detailed "best practices guideline" on the subject.

Code for Directors of Listed Companies (October 1999)
In October 1999, The Stock Exchange of Thailand (SET) reissued its voluntary "Code of Best Practice for Directors of Listed Companies". The code covers seven areas: board composition; roles and responsibilities of directors; appointments to the board; holding a director's position; director remuneration; board and shareholder meetings; and company reports. Although brief, the code was quite advanced for its time in Asia. It advocates that the chairman of the board should be an independent director; that directors should not accept too many directorships; and that the compensation of directors "should be fully disclosed" in the annual report. A copy of the code is attached.

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Contents

• Laws
• Accounting Standards
• Listing Rules
• Official Codes and Guidelines

1. Laws

The Malaysian Companies Act
Enacted in 1965, the Act was revised in 1973 and incorporates the latest amendment in 2001. The Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia or SSM) is responsible for the administration and enforcement of this Act.

Companies (Amendment) Bill 2007
On 23 May 2007, the Companies (Amendment) Bill 2007, intended to enhance the country’s corporate-governance framework, was passed by parliament. It came into effect on August 15, 2007. Some of its key amendments include:

• Allowing companies to use more than one venue for their shareholder meetings, so as to enable all members a reasonable opportunity to participate. Companies may also utilise any technology to conduct their meetings.
• Requiring AGM notices to be sent out at least 21 days before meetings (the current rule is 14 days).
• Obliging an auditor of a public company to report to the Registrar of Companies any serious offence involving fraud or dishonesty that he/she believes has been committed by any officer or employee against the firm.
• Protecting any officer of a company who exposes breaches of the Companies Act from discrimination by their employer.

This is the only amendment to the Companies Act that has occurred since the the Companies Commission of Malaysia (CCM) established the Corporate Law Reform Committee to undertake a comprehensive review of the Companies Act 1965 and make it relevant in today’s corporate environment.

Capital Market Services Act 2007
The Act, implemented in September 2007, is a consolidation of the securities, futures and fundraising laws into a single legislation for the capital market.

Securities Commission Act 1993
The Act, which came into effect in 1993, has undergone a number of amendments, the latest of which was in 2006.

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2. Accounting Standards

Financial Reporting Standards (FRS)
The new/revised Financial Reporting Standards (FRS), which are generally consistent with International Financial Reporting Standards (IFRSs), came into effect on January 1, 2006. However, on February 23, 2006, the Malaysian Accounting Standards Board announced that the new FRSs were optional for "private entities". In effect, there are two sets of accounting standards in Malaysia:

• FRSs, which must be used by companies that are required to prepare or lodge financial statements under any law administered by the Securities Commission or the Bank Negara Malaysia, and by subsidiaries, associates, or companies jointly controlled by them.
• Private Entity Reporting Standards (PERSs), which may be used by all other companies.

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3. Listing Rules

Listing Requirements for Main Board & Second Board
The listing requirements that apply to both the Main Board and the Second Board took effect on June 1, 2001, prior to which there were two distinct requirements for both Boards. Amendments have been ongoing, the latest ones having occurred on May, 2006.

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4. Official Codes and Guidelines

Malaysian Code on Corporate Governance (Revised 2007)
The Securities Commission together with other government agencies and the industry revised the Code to bring the country's corporate governance framework more in line with current globally accepted best practices. The Code came into effect on October 1, 2007.

The key amendments are aimed at strengthening the roles and responsibilities of the boards of directors and audit committees, and ensuring they discharge their duties effectively. The eligibility criteria for the appointment of directors, the composition of the board of directors and the role of the nominating committee are now clearly outlined.

Malaysian Code on Corporate Governance (March 2000)
In March 2000, the Finance Committee on Corporate Governance, a government-appointed group comprising public officials and private participants, released the final draft of The Malaysian Code on Corporate Governance. The code was developed by a working group of representatives from the private sector, the Securities Commission and the Kuala Lumpur Stock Exchange, among others.

Closely modelled on the 1998 UK Combined Code, as developed by the Hampel Committee, and influenced by rules in the US and Canada, the Malaysian Code goes further than many other national codes in Asia in promoting international standards of corporate governance.

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Contents

1. Laws
2. Regulations
3. Accounting Standards
4. Listing Rules
5. Official Codes and Guidelines

1. Laws

Companies Act*
The Companies Act is administered by the Accounting & Corporate Regulatory Authority (ACRA), which was formed in 2004 when the Registry of Companies and Businesses (RCB) and the Public Accountants Board (PAB) merged.

The Companies Act was first enacted in 1967 and subsequently amended a number of times until December 1999, when the Company Legislation and Regulatory Framework Committee was formed and given the task of modernising Singapore's company and business regulatory framework. The Committee delivered its final report in early October 2002, and all the recommendations were accepted.

The Act was last amended in June 2005.

*Note: Once you are on the government's statutes online website, input 50 in the box next to "Go to Cap. No." at the top of the page and press enter, you will be taken to the Companies Act link.

Securities and Futures Act*
This Act is administered by the Monetary Authority of Singapore. The Act was first enacted in 2001 and subsequently amended on 25 January, 2005 (Amendment Act), adopting the majority of recommendations made by the Company Legislation and Regulatory Framework Committee. The amendments came into effect on July 1, 2005.

*Note: Once you are on the government's statutes online website, input 289 in the box next to "Go to Cap. No." at the top of the page and press enter, you will be taken to the Securities and Futures Act link.

Note: The two links above take users to an online website run by the Singapore government and download times can vary and sometimes be very slow.

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2. Regulations

Banking Act (Chapter 19): Banking (Corporate Governance) Regulations 2005
These regulations came into operation on September 8, 2005. Parts II and III, which relate to requirements for banks and requirements for relevant financial holding companies respectively, only applied immediately for entities established on or after September 8, 2005. Entities conducting business before that date did not have to comply with the regulations until their annual general meeting in 2007.

While these regulations followed the revised Code of Corporate Governance for listed companies that the government issued in July 2005, they are more stringent. Unlike listed companies, the independence of board directors is contingent on them being independent of both management and substantial shareholders, those who have 5% or more voting shares. Unlike the Code, the regulations are enforceable under law and failure to comply with any of them will result in a fine upon conviction.

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3. Accounting Standards

Financial Reporting Standards (FRSs) (2004)
The standards are available on the Council on Corporate Disclosure and Governance (CCDG) website. The icon for Accounting Standards is on the top page and when you pass your mouse over it, it highlights a vertical menu, which will give you the choice of FRSs, Interpretation of FRSs, Exposure Draft or Process for Prescribing FRSs.

As of May 2006, Singapore's Financial Reporting Standards are almost identical to the International Financial Reporting Standards (IFRSs), except for a few differences. They include:

• Under the Singapore FRS 16 Property, Plant and Equipment, one-off revaluations of such assets that took place between 1984 and 1996 are permitted without requiring ongoing use of the revaluation model.
• Singapore FRS 17 removes the words in paragraph 14 and 15 of IAS 17, which indicates that land normally has an indefinite economic life and, if title is not expected to pass to the lessee by the end of the lease term, the lessee does not receive substantially all of the risks and rewards incident to ownership.
• Singapore FRS 25 Accounting for Investments is retained until FRS 40 is effective.
• There is no equivalent to IAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions. IAS 30 will be superseded when IFRS 7 Financial Instruments: Disclosures is effective.
• Some differences exist in the requirements to present consolidated financial statements and in accounting for associates and joint ventures as compared to IASs 27, 28, and 31.
• Singapore FRS 39 has different transitional provisions as the standard was not previously required to be adopted.
• Differences in effective dates.
• The following have not yet been adopted:
  • IFRIC 2 Members' Shares in Co-operative Entities and Similar Instruments.
  • IFRIC 9 Reassessment of Embedded Derivatives.

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4. Listing Rules

SGX-ST Listing Manual
This document reflects amendments issued up to September 1, 2006.

SGX announces quarterly reporting (December 2002)
On December 19, 2002, the Singapore Stock Exchange (SGX) announced that it would introduce quarterly reporting and make various other changes to its Listing Rules, effective from January 3, 2003. This followed two consultation papers released in August and October 2002 (see below).

3a) Consultations on Amendments to the Listing Rules

Consultation Paper on Proposed Amendments to the Listing Rules: Trading Halt, Suspension of Trading and Cash Companies (May 2007)
This paper was issued by the Singapore Exchange on May 10, 2007. The proposed amendments:

1. reflect changes arising from the Companies (Amendment) Act 2005;
2. enhance transparency and accountability in relation to the grant of share options;
3. enhance clarifications and amendments made in relation to a trading halt.

Consultation on proposed amendments to the Listing Rules: Enhance Standards of Governance and Listings (May 2005)
These proposals were issued on May 30, 2005 to raise corporate governance standards and promote good regulatory practices. They focus on two key areas: enhancing corporate governance and extending the role of intermediaries. They include:

• Strengthening board composition by requiring the provision of two independent directors on a continuous basis, and not just at listing.
• Increasing the participation of resident directors in foreign listed companies. The Board must have at least two independent resident directors on a continuing basis; and one of the following:
  • a qualified person in Singapore to advise the issuer on Singapore laws and assist directors with company information; or
  • another director resident in Singapore (in addition to the two independent resident directors); or
  • an officer in executive capacity resident in Singapore.
• Require, for interim results, a "negative assurance" confirmation from the Board that, to the best of their knowledge, nothing has come to the attention of the Board of directors, that may render the financial results to be false or misleading.

SGX second paper on Listing Rules (October 2002)
On October 25, 2002, the Singapore Stock Exchange (SGX) released a supplementary consultation paper on amending its Listing Rules. This paper proposed that quarterly reporting be made mandatory for all listed companies in Singapore and that larger companies start doing so from the beginning of 2003. (See below for the first paper.)

SGX consultation paper on Listing Rules (August 2002)
In late August 2002, the Singapore Stock Exchange (SGX) released a consultation paper on proposed amendments to its Listing Rules. Designed to strengthen financial disclosure and auditing practices, the amendments were based on recommendations made in September 2001 by a government-appointed committee, the Disclosure and Accounting Standards Committee.

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5. Official Codes and Guidelines

Improving the Implementation of Corporate Governance Practices in Singapore (June 2007)
MAS and SGX recently announced, in June 2007, the results of a review of the corporate governance practices of listed companies. Undertaken by Mak Yuen Teen, Associate Professor, National University of Singapore, the study analysed the annual reports of 659 companies to see how well they disclosed and implemented the best practices in Singapore's “comply-or-explain” Code of Corporate Governance.

The report makes a series of recommendations as to how companies could strengthen their internal governance standards. And it places a large part of the burden for this on the shoulders of retail and institutional investors, suggesting they could be doing more to hold companies accountable. MAS and SGX, meanwhile, will initiate two projects flowing from the study: one is a review of how to enhance director training in Singapore, while the second will be the production of practical guidance manuals for companies on audit committees and so on.

Revised Code of Corporate Governance (July 2005)
The Singapore Government issued a press release in mid-July stating that it had accepted most of the recommendations from the Council on Corporate Disclosure and Governance (CCDG) in its recent review of the Code of Corporate Governance (the “Code"), which will come into effect from AGMs held on or after January 1 2007. Amongst the recommendations accepted were:

• that companies shall avoid imposing a limit on the number of proxies for nominee companies (this will allow institutional investors whose shares are held in “omnibus accounts” to attend AGMs);
• to expand the duties of the Audit Committee (AC) to include reviewing and ensuring the integrity of the financial statements of the company, reviewing the effectiveness of the company’s internal audit function and making recommendations to the board on engaging the external auditor;
• a whistle-blowing provision; the AC shall ensure that staff have the means to raise concerns about possible improprieties in matters of financial reporting or other matters in confidence, and that there is independent investigation and appropriate follow-up action; and
• the “bundling” of resolutions should only occur in very specific circumstances, and the company must make its reasons known for doing so, as well as the implications of each of its components.

However, the Government chose to reject two key CCDG recommendations:

• to tighten the definition of independent director to exclude directors who are, or directly associated with, substantial shareholders, those who hold 5% or more of a company’s shares; and
• have companies disclose the exact remuneration of directors.

The Government’s decision not to tighten the definition of independence means that the definition of independent non-executive director still does not include independence from controlling shareholders.

Singapore Code of Corporate Governance (March 2001)
On March 21, 2001, the Corporate Governance Committee, one of three governance-related committees set up by the Singapore government in late 1999, issued its report and a broad corporate governance code.

While the Code is not mandatory, it is nevertheless having an effect on boardroom practice: companies are required to give a detailed description of their governance practices and to explain any deviation from the code in their annual reports for AGMs taking place after January 1, 2003 (or earlier, if possible).

The Committee called this a "balanced" solution--neither wholly prescriptive nor non-prescriptive--and acknowledged the influence of regulatory thinking in Britain and Canada on its deliberations.

5a) Consultations on Amendments to Code of Corporate Governance

ACGA submission to CCDG on the Singapore revised Code of Corporate Governance (February 2005)
In February 2005, ACGA submitted this commentary on Singapore's revised Code of corporate Governance to the Council on Corporate Disclosure and Governance (CCDG). Our submission covered a range of issues, including:

• Proposal 2: Proportion of independent directors: The revised Code proposed retaining the current one-third requirement for independent directors. ACGA recommended that the number of independent directors on a company's board should be based on its needs, with one-third as the practical minimum and one-half as possibly necessary depending on the size and structure of its board, and a company being required to explain in its annual report how the number of independent directors it has was sufficient for it.
• Proposal 13: Proxy attendance at AGMs: The consultation paper proposed that companies amended their Articles to avoid imposing a limit on the number of proxies that the nominee companies of custodian banks can appoint to a company AGM. ACGA strongly endorsed this proposal.
• Proposal 16: Institutional investors: The paper proposed that it would not follow the UK Combined Code model and include a section in the Singapore Code on the role of institutional investors. ACGA recommended that the proposal be reconsidered stating that while the Code is intended for listed companies and not for institutional investors, it gave the government and the regulatory authorities a good opportunity to underscore the importance of investors in the corporate governance process.

Proposed revisions to the Singapore Code (Dec 2004)
On December 1, 2004, Singapore released a consultation paper on proposed revisions to its Code of Corporate Governance, first published in 2001 (see item below). Produced by the Council on Corporate Governance and Disclosure (CCDG) -- Singapore's peak body on corporate governance and set up by the Ministry of Finance in 2002 but which was disbanded in 2007 -- the paper suggests some important revisions or additions to the Code while leaving it fundamentally intact. A new "commentaries" section is also included that elaborates on the principles and guidance notes in the Code.

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Contents

1. Laws
2. Accounting Standards
3. Official Codes and Guidelines
4. Private Codes and Guidelines

1. Laws

Financial Instruments and Exchange Law (September 2007)
The Financial Instruments and Exchange Law (FIEL), which replaces the Securities and Exchange Law, was approved in the ordinary Diet session in June 2006. It came into effect in September 2007. The Financial Futures Trading Law, the Law Concerning Foreign Securities Firms, the Law Concerning the Regulation of Investment Advisory Services Relating to Securities and the Law Concerning the Regulation of Mortgage Business have all been abolished and consolidated into FIEL. Eighty-nine laws in total were amended, some of which were consolidated into the new law. The new law has broadened the scope of instruments covered under the law, and claims to protect investors by enhancing disclosure by listed companies, through introduction of statutory quarterly reporting and enhancing internal control over financial reporting. While the law came into effect in September 2007, parts of it will only become operational in stages over the next year.

Commercial Code Revision on Boards (April 2003)
In 2002, Japan amended its company law, the Commercial Code, to introduce the “Company with Committees” system. This gave companies the choice of either continuing with a statutory auditor system or adopting a modern “US-style” governance structure with independent directors, three board committees (for audit, remuneration and nomination) and “executive officers” (a new Japanese term for corporate managers, who have duties distinct those of directors). The new rules came into effect on April 1, 2003. A concise presentation from the Ministry of Justice is available.

Commercial Code Revision on Statutory Auditors and Directors (May 2002)
In late 2001, Japan amended its company law, the Commercial Code, to strengthen the position and independence of statutory auditors, who have the job of supervising directors and ensuring they act lawfully and in the interests of the company. Confidence in this system has never been high, not least because auditors are traditionally appointed by directors. Paradoxically, the new rules, which came into effect on May 1, 2002, also reduced the liability of directors and statutory auditors in relation to shareholder lawsuits--a reaction to rising litigation over the 1990s. Here are some of the highlights of the new rules as they relate to statutory auditors.

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2. Accounting Standards

Accounting Standards
The Financial Accounting Standards Foundation was established in 2001, within which the Accounting Standards Board of Japan (ASBJ) is responsible for developing accounting standards and the convergence of these with international accounting standards.

ASBJ continues to talk to the International Accounting Standards Board (IASB) to achieve convergence between Japanese Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRSs).

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3. Official Codes and Guidelines

Tokyo Stock Exchange Principles (March 2004)
In March 2004, the Listed Company Corporate Governance Committee, established by the Tokyo Stock Exchange in December 2002, published the "Principles of Corporate Governance for Listed Companies". The Committee began its consultations at the request of the late Masaaki Tsuchida, former President and CEO of the Tokyo Stock Exchange, who envisioned the Stock Exchange being more actively involved in enhancing corporate governance. The document states that the list set forth is not a requirement for listed companies to adopt, or a criterion of the best or minimum standard of model policies for corporate governance. What it purports to be is a tool that provides a “common base for recognition” of corporate governance, and a basis for listed companies to enhance governance by paying attention to the rights of shareholders; equitable treatment of shareholders; relationship with stakeholders in corporate governance; disclosure and transparency; and responsibilities of the Board of Directors, Auditors, Board of Corporate Auditors, and other relevant groups.

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4. Private Codes and Guidelines

JCGF Principles (Revised), 2001
In October 2001, the Japan Corporate Governance Forum (JCGF), a private-sector association comprising members from business, academia and journalism, published an updated version of its 1998 code (see story below). Titled simply "Revised Corporate Governance Principles”, this new code covers similar ground as before but outlines its principles in more detail. It adds a couple of new principles (eg, litigation committee, executive management committee), drops some earlier ones (eg, on the statutory auditor) and provides considerably more commentary. However, some principles are less clear-cut than before (eg, the role of board leader), perhaps intentionally so; while the distinction drawn between “outside director” and “independent director” is somewhat confusing. And unlike JCGF’s earlier reports, this one does not advocate quarterly reporting.

On the other hand, this document does raise the issue of fair disclosure and brings much greater clarity to board committees, internal audit and investor relations, among other things. In a cultural aside, it also notes how changing attitudes in Japan are influencing CEO pay. Whereas once CEOs, like the fabled samurai, put “honor and pride above all else” (meaning: status within a company compensated for low remuneration), today “samurai flourish only in Kurosawa films”!

JCGF Principles (Final Report), 1998
In May 1998, the Japan Corporate Governance Forum (JCGF) followed up its Interim Report (see story below) with its “Corporate Governance Principles—A Japanese View (Final Report)”. This document, which took into account comments from domestic and overseas organisations, contains the same basic principles as the previous report, but expands upon them, provides more specificity and offers additional commentary.

Like its earlier iteration, this report is particularly interesting when discussing the flaws in the conventional system of Japanese governance. In essence, it wants to give back to the board of directors the powers it should have had all along: “It is questionable whether the Japanese board of directors actually complies with the Commercial Code’s stipulation that it functions as the body which decides on corporate will and exercises corporate oversight…It is in order to rejuvenate and strengthen the board of directors that these proposals have been made.” This is an excerpt from the report.

JCGF Principles (Interim Report), 1997
In October 1997, the Japan Corporate Governance Forum (JCGF), a private-sector association comprising businessmen and academics, published Japan’s first corporate governance code. Titled, Corporate Governance Principles—A Japanese View (Interim Report)”, the document offers 17 ideas for modernising the governance of Japanese corporations so that they become more competitive in the global market. A primary objective of these principles is to rejuvenate the board-of-director structure within the Japanese corporation and firmly establish it as the guardian of corporate governance.

This report is significant because while it seeks to blend global best practices with Japanese business traditions (“the company as a community”), it does not pull any punches with regard to the flawed nature of the conventional Japanese governance model (that is, the dual structure of a weak board of directors and an weaker board of statutory auditors). Yet while quite radical in content and aspiration (“independent, non-executive directors should comprise a majority on the board”), it is also pragmatic in approach. It suggests, for example, that audit committees be formed within boards over the medium term, but recommends that the statutory auditor system be improved over the short term. JCGF began working on this code in December 1996--before the Asian crisis.

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Contents

• Laws
• Accounting Standards
• Official Codes and Guidelines

1. Laws

Commercial Act
The Act was enacted on January 20, 1962 and came into effect on January 1, 1963. Divided into five parts, such as General Provisions, Commerical Activities, Companies, Insurance and Maritime Commerce, it is administered by the Ministry of Justice. It has gone through eleven amendments, the latest one on December 29, 2001, to get to its present form.

Securities and Exchange Act
Administered by the Financial Supervisory Commission, the Act was wholly amended on December 22, 1976, and has consequently been amended 24 times, with the latest one occurring on July 29, 2005.

New securities class-action law (January 2005)
On January 1, 2005, Korea's new class-action law came into effect. The law applies to publicly traded companies whose total asset base as of December 31, 2004 was more than Won 2 trillion (US$1.98 billion). For those companies with assets below that amount, the new law takes effect on January 1, 2007. However, the law applies to any publicly traded company that is found guilty of insider trading and manipulating the market.

A class-action suit can be filed against a company listed and traded in the KSE or KOSDAQ for these reasons:

1. False disclosure in the company’s prospectuses, or its quarterly, semi-annual or annual reports;
2. Insider trading & market manipulation;
3. Negligent external audit.

In order to discourage frivolous class-action suits, lead plaintiffs or plaintiff attorneys who have been in three class-action suits over a three-year period are in principle barred from another class-action suit unless the court determines otherwise.

A primer from the Financial Supervisory Service answers basic questions about the law.

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2. Accounting Standards

Statements of Korea Accounting Standards
The Korea Accounting Institute has been the institution responsible for the standard-setting, revision and interpretation of Korea Accounting Standards (KASs) since July 2000. In turn, the Korea Accounting Standards Board (KASB) is the standards-setting body of the KAI, which issues new Statements of Korea Accounting Standards (SKASs) or revises existing Korea Accounting Standards (KASs).

As of January 2006, non-Korean listed companies on the Korea Exchange are allowed to use either International Financial Reporting Standards (IFRSs) or US Generally Accepted Accounting Principles (GAAP) rather than Korea Accounting Standards for financial reporting.

IASPlus: www.iasplus.com
IAS Plus, a website run by Deloitte, provides the latest news on accounting standards in Korea.

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3. Official Codes and Guidelines

First Korea Corporate Governance Code, 1999
In September 1999, Korea released its first "Code of Best Practice for Corporate Governance". The product of a mixed group of academics, businessmen and securities officials, the Code states that its aim is to "maximize corporate value by enhancing the transparency and efficiency of corporations for the future". It draws heavily on global standards of corporate governance, but also tries to take into account the "special managerial circumstances that Korean corporations face" (eg, in their labour and social relations).

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Contents

1. Laws
2. Accounting Standards
3. Official Codes and Guidelines

1. Laws

Securities Regulation Code
The Securities Regulations Code (SRC) was enacted on December 1, 2000 and is implemented by the Securities and Exchange Commission. Amendments to Rules 68 and 68.1 of the SRC came into effect November, 2005.

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2. Accounting Standards

Philippine Financial Reporting Standards
The Philippine Institute of Certified Public Accountants established the Accounting Standards Council (ASC) in 1981, which is responsible for setting accounting standards in the country.

Philippines has so far adopted all the International Financial Reporting Standards without modification as of 2005 for all entities with public accountability. Non-publicly accountable entities have been given a two-year deferral (until 2007) and are permitted to use Philippines accounting standards that were in effect in 2004.

This site while giving all the standards does not offer links to explain what the standards encompass.

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3. Official Codes and Guidelines

Philippine Guidelines on Independent Directors (November 2002)
In late November 2002, the Philippines Securities and Exchange Commission (SEC) published a set of guidelines on the nomination and election of independent directors (SEC Memorandum Circular No. 16, 2002).

Philippines Code of Corporate Governance (April 2002)

In early April, 2002 the Philippines Securities and Exchange Commission (SEC) released its first "Code of Corporate Governance" (SEC Memorandum Circular No. 2, 2002).

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