GUIDELINES ON CONDUCT OF
DIRECTORS OF LISTEDCORPORATIONS AND THEIRSUBSIDIARIESSC-GL/4-2020

1st Issued: 30 July 2020
Revised: 12 April 2021

1GUIDELINES ON CONDUCT OF DIRECTORS OF LISTED CORPORATIONSAND THEIR SUBSIDIARIES

Effective Date upon 1stIssuance:

30 July 2020 except for Chapter 5 which
will take effect on 1 January 2021

List of Revision
Revision
Series
1st revision

Revision Date
12 April 2021

Effective Date ofRevision
12 April 2021

2Series Number
SC-GL/4-2020 (R1-2021)

CONTENTSPageChapter 1INTRODUCTION

1Chapter 2DEFINITIONS

2Chapter 3
CONDUCT REQUIREMENTS FOR DIRECTORS

4Chapter 4
MAINTAINING PROPER RECORDS AND ACCOUNTS

6Chapter 5
GROUP GOVERNANCE

7Appendix A
GUIDANCE ON GROUP GOVERNANCE

83

Chapter 1
INTRODUCTION
1.01

The Guidelines on Conduct of Directors of Listed Corporations and Their Subsidiaries(Guidelines) are issued pursuant to section 158 and subsection 15(1)(q) of theSecurities Commission Malaysia Act 1993 (SCMA).

1.02

These Guidelines apply to directors of a listed corporation and directors of subsidiariesof a listed corporation whether incorporated in Malaysia or otherwise.

1.03

These Guidelines are in addition to and not in derogation of the requirements under
the securities laws or other written law, guidelines issued by the Securities Commission
Malaysia (SC) imposed by the stock exchange.

1.04

To assist with the interpretation of the requirements under these Guidelines and theirapplication, Guidance have been provided, where appropriate. Any action or conduct
which departs from the Guidance will be taken into account by the SC in determining
compliance with these Guidelines.

1Chapter 2
DEFINITIONS
2.01

Unless otherwise defined, all words used in these Guidelines have the same meaning
as defined in the Capital Markets and Services Act 2007 (CMSA) or SCMA. In theseGuidelines, unless the context otherwise requires–approved accounting
standards

has the meaning assigned to it in the Financial
Reporting Act 1997;

corporationmeans–(a) a listed corporation; or(b) a subsidiary of a listed corporation;

director

has the meaning assigned to it in the Companies Act
2016 and includes–(a) the chief executive, the chief financial officer andany other person primarily responsible for theoperations or financial management of acorporation, by whatever name called; and(b) in the case of a corporation formed orincorporated or existing outside Malaysia–(i)a member of the corporation’s board ofdirectors or governing body; or(ii)a person occupying or acting in theposition of a member of the corporation’sboard, by whatever name called andwhether or not validly appointed tooccupy, or duly authorised to act in, theposition;group

means a listed corporation and its subsidiaries;

third partymeans a person other than the listed corporation, a
subsidiary of the listed corporation or associatedbody corporate of the listed corporation;2

SCmeans Securities Commission Malaysia; andsubsidiary

has the meaning assigned to it in section 4 of theCompanies Act 2016 and shall include all otherentities whose financial statements are consolidated
into the financial statements of the listed corporation.

3

Chapter 3
CONDUCT REQUIREMENTS FOR DIRECTORS
Conduct of directors
3.01

A director of a corporation must exercise his powers for a proper purpose and in goodfaith in the best interest of the corporation in which he sits as a board member.

3.02

A director who is appointed by virtue of his position as a representative of ashareholder, must act in the best interest of the corporation in which he sits as a board
member. In the event of any conflict between his duty to act in the best interest of
the corporation and his duty to his nominator, he must not subordinate his duty to act
in the best interest of the corporation to his nominator.

3.03

In directing or managing the business and affairs of the corporation, a director must
exercise reasonable care, skill and diligence by–

3.04

(a)

applying the knowledge, skill and experience which may reasonably beexpected of a director having the same responsibilities; and(b)applying any additional knowledge, skill and experience which the director has.

A director is required to among others–(a)maintain a sound understanding of the business, and keep abreast of relevant
developments to ensure he is able to discharge his duties and responsibilities
effectively;(b)

prepare for board meetings, contribute constructively to board discussions anddecision-making, and conduct due inquiry before approving a matter;(c)ensure key transactions or critical decisions are deliberated and decided on by
the board in a meeting; and(d)ensure his decisions and the basis for those decisions, including any dissenting
views are made known and properly minuted.

4Managing conflict of interest
3.05

3.06

A listed corporation and its directors must establish policies and procedures to manage
potential conflict of interest situations including potential conflict of interest
between–(a)any director and the corporation; and(b)the listed corporation and its subsidiaries.

A director of a corporation must not accept a benefit from or provide a benefit to athird party by reason only of–(a)him being a director; or(b)him doing something or refraining from doing anything as a director;

unless he is permitted to do so by the corporation’s constitution or the corporation’scode of conduct and it is not contrary to any written law.

5

Chapter 4
MAINTAINING PROPER RECORDS AND ACCOUNTS
4.01

4.02

A listed corporation and its directors must cause to be kept the accounting records andother records to–(a)

sufficiently explain the business, transactions and financial position of the listed
corporation and its subsidiaries;(b)enable the preparation of true and fair financial statements; and(c)enable the accounting and other records of the listed corporation and its
subsidiaries to be conveniently and properly audited.

A subsidiary of a listed corporation and its directors must cause to be kept theaccounting and other records to–(a)

sufficiently explain its business, transactions and financial position;(b)enable the preparation of true and fair financial statements; and(c)enable the accounting and other records to be conveniently and properly
audited.

4.03

Where the financial statements of a subsidiary are required to be consolidated into thefinancial statements of a listed corporation, the subsidiary and its directors must
provide the listed corporation with all information and record necessary to enable thepreparation of the consolidated financial statements in accordance with the approved
accounting standards.

4.04

A corporation must ensure that it retains all records referred to in paragraph 4.01 andparagraph 4.02 above for not less than seven years from the completion of thetransactions or operations to which the entries or records relate.

4.05

If any accounting and other records referred to in paragraph 4.01 and paragraph 4.02
above are kept at a place outside Malaysia, the SC may direct the directors of acorporation to produce any of those records at a place in Malaysia and how thoserecords are to be kept in Malaysia. The directors of a corporation must comply withthe direction issued under this paragraph.

6Chapter 5
GROUP GOVERNANCE
5.01

A listed corporation and its directors must ensure there is an adequate group wideframework for co-operation and communication between the listed corporation and its
subsidiaries to enable it to discharge its responsibilities including oversight of groupfinancial and non-financial performance, business strategy and priorities, risk
management including material sustainability risks, and corporate governance policies
and practices.

5.02

A listed corporation and its directors must establish and ensure the group wide
framework on corporate governance include a code of conduct and ethics, policies andprocedures on anti-corruption, whistleblowing, managing conflict of interest, managing
material sustainability risks, and board diversity including gender diversity.

5.03

A subsidiary of a listed corporation and its directors must provide the listed corporation
with any information requested by the listed corporation to enable the board of thelisted corporation to oversee the performance of its subsidiaries effectively, including
assessing non-financial performance of the group.

7

Appendix A
GUIDANCE ON GROUP GOVERNANCE
NOTE: This Guidance serves as a guide for a listed corporation, its subsidiaries and theirdirectors in establishing a group governance framework. This Guidance highlights salientfeatures of the group governance framework such as setting the tone for leadership,alignment of strategies and establishing policies and procedures of the group. The
information provided in this Guidance is not exhaustive and corporations are reminded toensure that all aspect of group governance have been taken into consideration in developing
the framework and in making disclosure.

A.

Introduction

1.

The Guidelines on Conduct of Directors of Listed Issuers and Their Subsidiaries(Guidelines) was issued to strengthen board governance and oversight in listed
corporations and their subsidiaries. Based on the SC’s review, a significant number ofcorporations listed on Bursa Malaysia are investment holding corporations, whosebusiness activities are undertaken by their subsidiaries. Given the significance of such
subsidiaries to the long-term performance of listed corporations, it is critical that theboard of a listed corporation have line of sight of the financial and non-financial
performance of its subsidiaries, including the adoption of good corporate governancepractices.

2.

A proactive approach to the governance of the group (a listed corporation and its
subsidiaries) is needed to promote the adoption of good corporate governance culture
and to minimise the risk of governance failures in any of the entities within the group,
which can potentially cause significant financial and reputational harm to the entire
group. The board of a listed corporation must establish a group governance frameworkthat is appropriate to the nature, size and complexity of the group, and is implemented
consistently throughout the group.

3.

The establishment of a group governance framework, however, does not advocate alisted corporation ‘micro managing’ or ‘micro governing’ subsidiaries, which can be
impractical given the complexity of company groups, and may undermine the separate
legal entity status of the subsidiaries. The board of a listed corporation should be mindful
to respect the roles and boundaries of a subsidiary and its directors.

4.

The board of a listed corporation should also formulate its approach to group
governance with consideration of the nature of its subsidiaries, which may vary basedon their ownership structure, business activity, financial significance as well as risk
profile. For example, the approach may differ based on whether the subsidiary is wholly
owned or not. In the latter, engagements with other shareholders may be required toset expectations and agreement on the corporate governance policies and practices.
8B.

Elements of a group governance framework

5.

A group governance framework should among others–(a)

Set the tone for leadership and culture of the group . The group’s values

and expectations in relation to behaviour and conduct should be communicatedthrough a group-wide Code of Ethics and Conduct (Code). For example, the tone
and direction set by the listed corporation in relation to the potential risk ofcorruption by refusing the payment of facilitation fees can go a long way towards
establishing the required values and culture throughout the group.

(b)

Align the strategy and priorities across the group. This will require(c)

Set out the group governance structure as w ell as policies andprocesses . This will include setting out the roles and responsibilities of key

discussions between the listed corporation and its subsidiaries, the board of thelisted corporation regularly reviewing the business plans and budgets of its
subsidiaries as well as monitoring the performance of the entire group;

persons in implementing the policies on group governance for example the group
Chief Executive Officer (CEO), the CEO of subsidiaries, and the company
secretaries of the group as well as the subsidiaries.

The group governance policies and processes should also address board related
matters such as diversity, selection and nomination of directors, board and director
performance evaluations, and tenure of directors. Attention should also be given
to policies and processes applicable group-wide for example conduct, risk
management, anti-corruption, whistleblowing and sustainability.
(d)6.

Identify the authority and decision lim its w ithin the group. This includes

identifying matters that may need to be reserved for the approval of the listed
corporation. Matters that the listed corporation wishes to reserve for its decisionmaking (shareholder-reserved matters) should be clearly set out in the subsidiary’s
constitutive documents. The shareholder-reserved matters should be limited towhat is reasonably necessary, considering the balance of interests required.

The formulation and implementation of the group governance framework should beguided by the Bursa Malaysia Listing Requirements as well as the corporate governanceprinciples and best practices recommended in the Malaysian Code on Corporate
Governance.

9C.

Disclosure of information

7.

The group governance framework should include clear policies and processes on thedisclosure of information internally within the group, to ensure the appropriate flow ofinformation, including reports from the subsidiaries to the listed corporation on theirperformance. The policies and processes should also address the handling of pricesensitive information, particularly where any of the subsidiaries of the listed corporationis also listed and is subject to strict regulation. This is of particular importance insituations where information flow has to be strictly controlled and confidentiality
maintained to limit the risk of insider trading.

8.

Conflicts may also arise when a director on the board of a listed corporation is also
serving as a director on one or more boards of the listed corporation’s subsidiaries. Such
director would have access or possess information that other directors on the board may
not have. Policies and processes should be in place to manage the handling of
information in such situations. Directors should also exercise due care in handlinginformation, mindful of their duty to act in the best interest of the corporation in which
he sits as a board member.

10