MCCG Updates By The SC
On 28 April 2021, the Securities Commission Malaysia (“SC”) issued an update on the Malaysian Code on Corporate Governance (“Updated MCCG”) to strengthen the corporate governance culture of public listed companies (“PLC”). The following updates were introduced:
Chairman of the board of directors (“Board”) should not be a member of the Audit, Nomination or Remuneration Committees
The Malaysian Code on Corporate Governance 2017 (“2017 MCCG”) states that the Chairman of the Audit Committee and the Chairman of the Board should not be the same person.
The Updated MCCG further stipulates that the Chairman of the Board of a Malaysian PLC should not be a member of the Audit, Nomination or Remuneration Committees as well.
Two-tier voting process for re-appointment of independent directors with tenures of more than 9 years
The two-tier voting process was first introduced under the 2017 MCCG for re-appointment of independent directors with tenures of more than 12 years.
Under the two-tier voting process, shareholders’ votes will be cast during the shareholders meeting, whereby only the large shareholders of the company will vote under Tier 1, while the rest of the shareholders will vote under Tier 2. The decision for any resolutions to be passed will be determined based on simple majority votes of Tier 1 and Tier 2. The resolution is deemed successful only if both Tier 1 and Tier 2 votes support such resolution.
To encourage periodic refresh of Board composition, the Updated MCCG suggests that the two-tier voting process be implemented for re-appointment of independent directors with tenures of more than 9 years instead.
No ‘active politician’ on Board
The Updated MCCG discourages the appointment of ‘active politician’ as a director of a PLC to allow the exercise of objective and independent judgment which are in line with global best practices.
Pursuant to the Updated MCCG, a person is considered ‘politically active’ if he is a Member of Parliament, State Assemblyman, or holds a position at the Supreme Council, or division level in a political party.
Board to have at least 30% women directors
Under the 2017 MCCG, only large companies are required to have at least 30% of women directors on their Board.
However, the 2021 MCCG recommends for all PLC to have at least 30% of women directors on their Board to support the participation of women.
Cooling off period of at least 3 years before being appointed as a member of an Audit Committee
The 2017 MCCG required a former key audit partner to observe a cooling-off period of at least 2 years before being appointed as a member of the Audit Committee.
However, the Updated MCCG recommends for a former partner of an external audit firm of a PLC to observe a cooling-off period of at least 3 years before being appointed as a member of the Audit Committee.
May 19, 2021
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