• MKT 9.2 MKT 9.2 Corporate Governance Principles

    • Application

      • MKT 9.2.1

        This section applies to a Reporting Entity in respect of Shares, and the Board of Directors ("the Board") of such a Reporting Entity.

    • Corporate Governance Principles

      • MKT 9.2.2 MKT 9.2.2

        Pursuant to section 73 of the FSMR, the principles in Rules 9.2.3 to 9.2.9 are hereby prescribed as "the Corporate Governance Principles".

        • Guidance

          1. The Corporate Governance Principles in this section apply to Reporting Entities as mandatory high level requirements. APP 4 sets out best practice standards that may be adopted by a Reporting Entity to achieve compliance with these principles.
          2. The best practice standards in APP 4 are designed to provide a degree of flexibility so that a Reporting Entity can achieve outcomes intended by the Corporate Governance Principles whilst taking into account the nature, scale and complexity of its business.
          3. Generally, if a Reporting Entity does not adopt the best practice standards set out in APP 4, or adopts them only partially, the Regulator would expect the reasons for doing so and any alternative measures adopted to achieve the outcomes intended by the Corporate Governance Principles to be disclosed in the Prospectus and thereafter pursuant to the disclosure required under Rule 9.2.10. Any inaccurate or false representations would lead to the imposition of civil liability in accordance with section 70 of the FSMR.

    • Principle 1 — Board of Directors

      • MKT 9.2.3

        Every Reporting Entity must have an effective Board which is collectively accountable for ensuring that the Reporting Entity's business is managed prudently and soundly.

    • Principle 2 — Division of responsibilities

      • MKT 9.2.4

        The Board must ensure that there is a clear division between the Board's responsibility for setting the strategic aims and undertaking the oversight of the Reporting Entity and the Senior Management's responsibility for managing the Reporting Entity's business in accordance with the strategic aims and risk parameters set by the Board.

    • Principle 3 — Board composition and resources

      • MKT 9.2.5

        The Board, and its committees, must have an appropriate balance of skills, experience, independence and knowledge of the Reporting Entity's business, and adequate resources, including access to expertise as required and timely and comprehensive information relating to the affairs of the Reporting Entity.

    • Principle 4 — Risk management and internal control systems

      • MKT 9.2.6

        The Board must ensure that the Reporting Entity has an adequate, effective, well-defined and well-integrated risk management, internal control and compliance framework.

    • Principle 5 — Shareholder rights and effective dialogue

      • MKT 9.2.7

        The Board must ensure that the rights of Shareholders are properly safeguarded through appropriate measures that enable the Shareholders to exercise their rights effectively, promote effective dialogue with Shareholders and other key stakeholders as appropriate, and prevent any abuse or oppression of minority Shareholders.

    • Principle 6 — Position and prospects

      • MKT 9.2.8

        The Board must ensure that the Reporting Entity's financial and other reports present an accurate, balanced and understandable assessment of the Reporting Entity's financial position and prospects by ensuring that there are effective internal risk control and reporting requirements.

    • Principle 7 — Remuneration

      • MKT 9.2.9

        The Board must ensure that the Reporting Entity has remuneration structures and strategies that are well aligned with the long-term interests of the entity.

    • Annual reporting on compliance

      • MKT 9.2.10 MKT 9.2.10

        The annual financial report of a Reporting Entity to which this section applies must:

        (1) state whether the best practice standards specified in APP 4 (the "Corporate Governance Principles") have been adopted by the Reporting Entity;
        (2) if the best practice standards in APP 4 have not been fully adopted or have been only partially adopted explain:
        (a) why the best practice standards were not adopted fully or adopted only partially, as is relevant; and
        (b) what actions, if any, have been taken by the Reporting Entity to achieve compliance with the Corporate Governance Principles to the extent the relevant best practice standards were not adopted, or were only partially adopted; and
        (3) include a statement by Directors whether or not, in their opinion, the Corporate Governance framework of the Reporting Entity is effective in promoting compliance with the Corporate Governance Principles, with supporting information and assumptions, and qualifications if necessary.

        • Guidance

          1. Rule 9.2.10 reflects the "comply or explain" approach adopted by the Regulator in respect of the Corporate Governance Principles.
          2. With regard to the opinion required under Rule 9.2.10(3), adequate information relating to the Corporate Governance framework of the Reporting Entity should be included to support the opinion, such as the identity of its chair, any committees of the Board and their role and membership, the Chief Executive and persons undertaking key control functions such as the head of compliance, risk control and internal audit and how their independence is achieved. See also the disclosure of information required under APP 2.
          3. Note that Reporting Entities are also required to produce an annual report in accordance with Rule 10.1.4.