What Is Corporate Governance & How Does the Singapore Code Impact Your Business

Whether you’re a solo entrepreneur dipping your toes in Singapore’s developed business landscape or a seasoned veteran expanding your business into Singapore, you’ll hear this term often – corporate governance. But what is corporate governance, and why does it matter so much in Singapore’s business environment? In this guide, we’ll simplify the corporate governance definition, explore the corporate governance code in Singapore, and share actionable insights to help your business establish a solid and scalable governance foundation from the very first day of business.

What Is Corporate Governance?

Corporate governance refers to the rules, systems, and processes by which companies are directed and controlled. Simply defined – it governs the relationship between a business’s leadership – its board of directors, management, and shareholders – and specifies how decisions are made, risks are managed, and responsibilities are shared. Good governance lays the foundation for a successful business, with accountability, transparency, and fairness in a company’s operations as its three key pillars. It is the framework that keeps businesses agile, resilient, investor-friendly, and future-proof.

Corporate Governance Meaning for Startups and SMEs

While large corporations may have formal boards and detailed corporate governance frameworks, startups and small to medium-sized enterprises (SMES) typically operate on a leaner setup. But that doesn’t mean their governance is any less important. It’s even more critical. Startups with good corporate governance:

• Attract investors with greater ease.
• Navigate compliance and regulations confidently.
• Scale sustainably and reduce internal risks of fraud, conflict, or non-compliance.

For example, establishing clear roles, conflict resolution policies, and transparent decision-making processes from the start helps avoid disputes and aligns your team with the founder’s long-term vision.

Overview of the Corporate Governance Code in Singapore

Singapore is renowned as a premier business destination, and its corporate governance standards play a pivotal role in maintaining this reputation. The Singapore Code of Corporate Governance promotes high standards of corporate governance among listed companies, but its principles are widely applicable to all businesses. Key pillars of the corporate governance code include:

• Board independence: A clear division of responsibilities between leadership roles, with at least one-third of the Board being independent non-executive Directors.
• Fair Remuneration Policies: The importance of Transparent and Fair Remuneration Policies is paramount. These policies should attract, retain, and motivate key management personnel.
• Accountability and transparency: Reliable financial reporting, robust internal controls, and risk management systems.
• Shareholder rights and responsibilities: Recognising the interests of shareholders, and their right to participate in and vote at the Annual General Meeting (AGM).

The Evolution of Corporate Governance in Singapore

Singapore’s first corporate governance Code was introduced in March 2001. With revisions in 2005, 2012, and 2018, the corporate governance code has kept pace with global best practices, including stricter independence criteria for directors and better risk oversight structures. In 2023, the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (ACRA) introduced new guidelines to enhance Environmental, Social, and Governance (ESG) reporting and digital governance—a timely move for startups navigating climate concerns and digital innovation.

Corporate Governance Best Practices Every Business Should Follow

Implementing corporate governance best practices may sound challenging and intimidating, but businesses can start with simple moves and evolve as their company grows. Here are five key practices every startup and SME should adopt:

• Establish a transparent decision-making chain
  Define who’s responsible for what. Even in a two-person startup, it’s essential to clarify roles to prevent misunderstandings.
• Create a formal board or advisory panel.
  A corporate governance board helps provide oversight and valuable external perspectives. For early-stage businesses, startups, and SMEs, an informal advisory board is a good starting point.
• Maintain proper documentation
  To comply with governance practices, meeting minutes, contracts, financial records, and policies should be stored and updated regularly.
• Implement conflict of interest policies.
  These should apply to founders, staff, and advisors to ensure decisions are made in the company’s best interest.
• Review and audit regularly
  Annual audits and periodic reviews ensure your operations are accountable and compliant, particularly if you plan to raise funds or expand internationally.

Understanding Corporate Governance Procedures

Once you understand the fundamentals, the next step is grasping the corporate governance procedures that bring your policies to life.

Procedures for Policy Creation

Governance policies should cover areas such as risk management, data protection, employee conduct, and decision escalation. To create effective policies:

• Identify your risks and regulatory obligations (e.g. under ACRA and MAS)
• Align policies with your business size and industry.
• Document policies clearly and train your team on them.

Example: A startup handling user data should establish a data governance policy in compliance with Singapore’s PDPA and ensure it’s updated regularly.

Compliance Reporting and Audit Trails

Documentation is your best defence against any risk of compliance. Keep a proper record of:

• Board meetings and decisions
• Shareholder communications
• Financial reporting
• Regulatory filings

Using software to maintain audit trails makes it easier to manage reporting, especially during due diligence or ACRA inspections.

How Startups Can Implement Corporate Governance Early

It’s never too early, or even too late, to build good governance habits. However, the earlier you start, the easier it is to scale.

Governance Frameworks for Early-Stage Businesses

An ideal governance framework for a startup includes:

• Founders’ agreement with clearly defined roles
• Decision-making protocols for major business choices
• Shareholding transparency
• Advisory Board or mentor check-ins for strategic guidance

Digital tools, such as equity management platforms and compliance dashboards, make this process more manageable.

Governance Mistakes to Avoid for Singapore Startups

Here are common pitfalls for startups to avoid when trying to get governance right:

• No formal policies: Operating solely on verbal agreements is a risky approach.
• Lack of board oversight: Even a small advisory board or a group of independent Directors add credibility and structure.
• Inadequate records: Poor documentation can derail investor funding rounds or partnerships.
• Ignoring regulatory updates: Stay informed about changes from ACRA and the Monetary Authority of Singapore (MAS).

Pro tip: Partner with a trusted corporate services provider, such as Lanturn, to stay compliant.

Need Help With Corporate Governance?

Startups don’t need to go it alone when navigating corporate governance standards in Singapore. Partnering with experts who understand the local landscape can save you time, stress, and money.

Partner with Lanturn for your Business Growth

So, what is corporate governance? It’s not just a compliance box to tick – it’s the operating system for your business. A strong governance structure not only ensures your company remains compliant with the law but also enhances credibility, fosters investor confidence, and builds long-term value. With Singapore’s well-defined corporate governance code, a robust regulatory framework provided by ACRA, and progressive business services like those offered by Lanturn, there is no better place to set the standard for a more sustainable, successful tomorrow. Book a call and let us build a foundation for your success.