Directors’ independence has been a key focus of the Securities Commission Malaysia (“𝗦𝗖”) and Bursa Malaysia Securities Berhad (“𝗕𝘂𝗿𝘀𝗮”) lately as can be seen from the following amendments or proposed amendments:

𝗥𝗲𝘃𝗶𝘀𝗶𝗼𝗻 𝘁𝗼 𝗠𝗮𝗹𝗮𝘆𝘀𝗶𝗮𝗻 𝗖𝗼𝗱𝗲 𝗼𝗳 𝗖𝗼𝗿𝗽𝗼𝗿𝗮𝘁𝗲 𝗚𝗼𝘃𝗲𝗿𝗻𝗮𝗻𝗰𝗲 (“𝗠𝗖𝗖𝗚”)
The SC issued the revised MCCG on 28 April 2021 which took effect on the same day. The revisions in relation to directors’ independence include:

1. recommending that if the board intends to retain an independent director (“ID”) after 9 years, the board should provide justification and seek annual shareholders’ approval via a 2-tier voting process (previously required after 12 years);

2. discouraging a listed issuer from appointing active politicians as directors;

3. recommending that board committee meeting to be conducted separately from board meeting to enable objective and independent discussion; and

4. recommending that the Audit Committee of a listed company to have a policy that requires a former partner of the external audit firm of the listed company to observe a cooling-off period of at least 3 years before being appointed as an Audit Committee member. This applies to all former partners of the audit firm and affiliate firm (including those providing advisory services, tax consulting etc). Previously, the cooling-off period of at least 2 years applied to former key audit partner.

𝗔𝗺𝗲𝗻𝗱𝗺𝗲𝗻𝘁𝘀 𝘁𝗼 𝗕𝘂𝗿𝘀𝗮 𝗟𝗶𝘀𝘁𝗶𝗻𝗴 𝗥𝗲𝗾𝘂𝗶𝗿𝗲𝗺𝗲𝗻𝘁𝘀 (“𝗟𝗥”)
Bursa enhanced the requirements and eligibility of ID in the LR by:

1. lengthening the cooling-off period from 2 years to 3 years for:
(i) an officer;
(ii) an adviser; or
(iii) a transacting party of prescribed transactions,
of an applicant, listed issuer or any related corporation of the applicant or listed issuer; and

2. extending 3 years cooling-off period to a non-independent non-executive director.

The amendments have been in effect since 1 October 2020.

𝗕𝘂𝗿𝘀𝗮’𝘀 𝗽𝗿𝗼𝗽𝗼𝘀𝗲𝗱 𝗮𝗺𝗲𝗻𝗱𝗺𝗲𝗻𝘁𝘀 𝘁𝗼 𝗟𝗥
Bursa has issued a consultation paper on 21 July 2021 to seek public feedback by 1 September 2021 on, amongst others, the following proposed amendments to the LR in relation to directors’ independence:

1. amendment to the definition of “independent director” under the LR by specifying that an ID is one who has not served as an ID of an applicant, listed issuer or any related corporation of the applicant or listed issuer for a cumulative period of more than 12 years from the date of his first appointment as an ID; and

2. requiring a ID who has served for a cumulative 12 years to observe a cooling-off period of 3 years before he or she may be reappointed as an ID. The appointment is still subject to satisfaction of all the criteria on independence as set out in the LR as well as shareholders’ scrutiny and approval.

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