Corporate Governance Practices of the Company
Board determines the nature and extent of risks
The Board has instituted risk tolerance levels to guide Management in the course of operations and achieving its strategic objectives. These tolerance levels were drafted based on the top risks identified by the Enterprise Risk Management (“ERM”) committee. Board approval is required for initiatives involving greater risk exposures that exceed the predetermined levels. The Group’s Investment Guideline Policy sets out the policies and guidelines for investments of more than S$500,000. Pursuant to the Investment Guideline Policy, all investments must be initiated by the Directors and assisted by the Treasury Division of the Finance department and Corporate Legal Manager of the Company. Once a potential investment is identified, the target will be brought to the attention of the Board in writing or during a board meeting. A working group which includes but is not limited to the management, legal counsel, certified public accountants, as well as relevant employees which the directors assign to be in the working group, will be formed. A financial adviser may also be involved for material transactions where appropriate. Upon completion of the due diligence and valuation exercises, the working group will present the final investment proposal to the Board for approval. In accordance with Chapter 10 of the Listing Manual of the SGX-ST, the investment may also be conditional upon the approval of the Company’s shareholders and the SGX-ST. Completed investments will be analysed during the board meetings on a half-yearly basis as part of the enterprise risk management updates.
The ERM Committee comprises the Executive Director and Chief Operating Officer – Mr Huang Ban Chin, department heads and chaired by the Lead Independent Director – Mr Lee Sen Choon who assists the Board on risk management. The key components of the Company’s risk management framework include:
The top 5 risks faced by the Group are identified below:
The CSA programme established provides a framework to obtain feedback on the state of internal controls. The programme requires subsidiaries to review and report annually on the effectiveness of controls and the control environment to HQ and significant findings are reported to the Board. Periodically, internal audit and independent reviews would be conducted to validate the self-assessments.
Based on the system of internal controls established and maintained by the Group, work performed by the internal and external auditors, and reviews performed by Management, various Board Committees, the Board, with the concurrence of the Audit Committee is of the opinion that the Group’s internal controls, addressing financial, operational, compliance and information technology controls and risk management systems were adequate and effective as at 31 December 2023.
The internal controls maintained by the Management provide reasonable but not absolute assurance against material misstatements or loss, and the safeguarding of assets, the maintenance of proper accounting records, the reliability of financial information, compliance with relevant legislation, regulation and best practice and containment of business risk.
Assurance from the Co-Chairman, Group CEO / Managing Director, Senior Group Financial Controller and other key management personnel
The Board has received assurance from (a) the Co-Chairman, Group CEO / Managing Director and the Senior Group Financial Controller that the financial records of the Company have been properly maintained and the financial statements give a true and fair view of the Company’s operations and finances; and (b) the Co-Chairman, Group CEO / Managing Director and other key management personnel who are responsible, regarding the adequacy and effectiveness of the Company’s risk management and internal control systems.
Legal review of China business model
In addition, we have instituted an annual independent legal review of our business model in China in recent years.
Based on the Merits and Tree Update and Dentons Update, the Board is of the view that the risk of the Group’s business model in China being held to be in non-compliance with the direct selling and ChuanXiao laws in China continues to be remote and that the possibility of the Group being penalized by the relevant Chinese regulatory authority in relation to the above remains low.
Corporate Governance Practices of the Company
Duties of AC
The AC assists the Board in discharging its responsibility to safeguard the Company’s assets, maintain adequate accounting records, develop and maintain effective systems of internal control. The duties of the AC are as follows:
External Audit
Internal Audit
Interested Person Transactions ("IPT")
Internal Control
Risk Management
Apart from the above duties, the AC will commission and review the findings of internal investigations into matters where there is suspicion of fraud or irregularity, or failure of internal controls or infringement of any Singapore law or regulation or rules of the SGX-ST or any other regulatory authority in Singapore which has or is likely to have a material impact on the operating results and/or financial position.
In performing its duties, the AC:
The AC noted that there were no non-audit services provided by the external auditors to the Company in FY2023 that may impair the independence or objectivity of the external auditors of the Company. As at 31 December 2023, total fees paid/payable amounted to S$428,300, comprising only of audit fees.
The AC had recommended to the Board that the auditor, Nexia TS Public Accounting Corporation, be nominated for re-appointment as auditor at the forthcoming AGM of the Company.
The auditors, CLA Global TS Public Accounting Corporation, have indicated their willingness to accept reappointment.
In recommending the re-appointment of the auditors, the AC considered and reviewed various factors including the adequacy of resources, the experience of the auditing firm and the audit engagement partner, the firm’s other audit engagements, the number and experience of supervisory and professional staff to be assigned to the audit, the size and complexity of the Group and its businesses and operations. Accordingly, the AC has recommended the re-appointment of CLA Global TS Public Accounting Corporation as external auditors at the AGM of the Company.
The Company has in place a whistle-blowing policy to empower employees with avenues to report suspected fraud, corruption, dishonest practices and other acts of misconduct. The policy is available on the company website and includes contacts of the HQ compliance team and members of the AC. Independence is ensured as matters relating to subsidiaries can be referred to the HQ compliance team and matters relating to HQ can be referred to the AC. An independent team reporting directly to the ERM committee or the AC will be established according to the severity of the incident to follow up on the report. All information received will be kept confidential to protect the identity (if available) and the interest of all whistle blowers. Those found to have taken reprisal actions or victimized the whistle blower shall face disciplinary action, including the possibility of dismissal. All disclosures made through the whistle blowing channel are recorded and reported to the AC on a half-yearly basis, together with the findings and follow-up actions taken. There were no significant matters raised through the whistle blowing channel in FY2023.
Summary of AC’s activities in FY2023
Financial Reporting Matters
In the review of the financial statements for FY2023, the following significant matters impacting the financial statements and its disclosures were reviewed by the Audit Committee and discussed with Management and the external auditors.
| Significant Matter | Comments by the Audit Committee |
|---|---|
| Business model in China |
The Audit Committee notes that management instituted a recurring annual legal review of the business model in China (Provision 9.3) Additionally, the external auditor also performed work to understand the business model, reviewed the updated legal opinions, performed independent searches for legal and compliance issues relating to the Group, considered provisions of relevant accounting standards and the adequacy of disclosures in the financial statements. The Audit Committee is satisfied that sufficient work has been done to monitor this area of concern. |
| Revenue recognition |
The Audit Committee discussed the key audit matter with the external auditors and is satisfied with the audit procedures performed by the external auditors over revenue recognition. |
| Valuation of put and call option |
The Audit Committee was apprised of the work done by the external auditor in assessing the independence and competency of the valuer engaged by management, the appropriateness of the valuation methodologies used, the reasonableness of assumptions and also consider the adequacy of the disclosures in the financial statements. The Audit Committee considers the valuation approach, estimates and assumptions adopted and disclosures in the financial statements to be appropriate. |
The Board and AC have reviewed the appointment of different auditors for some of its subsidiaries and significant associated companies and were satisfied that such appointment would not compromise the standard and effectiveness of the audit of the Group and that Rule 716 of the Listing Manual has been complied with. Refer to Note 16 Investment in subsidiary corporations of the Notes to the Consolidated Financial Statements for the subsidiaries audited by different auditors.
In appointing the audit firms for the Company, its subsidiaries and significant associated companies, the Audit Committee and the Board are satisfied that the Group has complied with Listing Rules 712, 715 and 716.
Composition of AC
The AC, regulated by a set of written terms of reference, comprises three NEIDs, all of whom are non-executive, and the majority of whom, including the AC Chairman, are independent.
The AC Chairman, Lee Sen Choon, has more than 30 years of experience in accounting, auditing, taxation and corporate secretarial work. The other members of the AC possess experience in finance, legal, business management and are exposed to regular updates from the relevant regulators. They are considered to be well qualified by the Board to discharge their duties in the AC.
The AC members take measures to keep abreast of the changes to accounting standards and issues which have a direct impact on financial statements through periodic meetings with the external auditors, briefings provided by professionals or external consultants as necessary.
AC does not comprise former partners or directors of the Company’s auditing firm
None of the AC members were previous partners or directors of the Company’s existing auditing firm or auditing corporation within a period of two years commencing on the date of their ceasing to be a partner of the auditing firm or director of the auditing corporation and none of the AC members hold any financial interest in the auditing firm or auditing corporation.
Primary reporting line of the internal audit function is AC; internal audit function has unfettered access to Company’s documents, records, properties and personnel
The internal audit function of the Company is outsourced to an external consulting firm – BDO LLP, who has unfettered access to all the Company’s documents, records, properties and personnel, including access to the AC. The Internal Audit methodology adopted by the internal auditors is consistent with the requirements of The Institute of Internal Auditors.
The AC has reviewed the adequacy and effectiveness of the internal audit function and is satisfied that the internal audit function is independent, effective and adequately resourced, has unfettered access to all the Group’s documents, records, properties and personnel, including the AC, and has appropriate standing within the Company. The AC is satisfied that the internal audit function is adequately resourced and is independent of the activities it audits.
The AC approves the hiring, removal, evaluation and compensation of the internal audit function. Based on risk assessments performed, greater emphasis and appropriate internal reviews are planned for high risk areas and material internal controls, including compliance with the Group’s policies, procedures and regulatory responsibilities. The internal audit plans are reviewed and approved by the AC annually.
AC meets with the auditors without the presence of Management annually
Annually, the AC meets (physically or via teleconference) separately with the internal and external auditors without the presence of Management.
Corporate Governance Practices of the Company
Company provides shareholders with the opportunity to participate effectively and vote at general meetings
The upcoming Annual General Meeting of the Company (the “AGM”) will be held in a purely physically manner. Please refer to the important notes on the Notice of Annual General Meeting for details on how to participate at the AGM.
Management supports the Code’s principle to encourage shareholder participation. Shareholders are encouraged to attend the AGM to ensure a high level of accountability and to stay informed of the Company’s strategy and goals. Notice of the general meeting is dispatched to shareholders, together with explanatory notes or a circular on items of special business (if necessary), at least 14 days or 21 days, as the case may be, before the general meeting. The Board welcomes questions from shareholders who have an opportunity to raise issues either informally or formally before or at the general meeting.
In general meetings, shareholders are given the opportunity to communicate their views and direct questions to directors and Management regarding the Company. The Chairpersons of Board Committees are present at the AGM and other general meetings of shareholders, to assist the Board in addressing shareholders’ questions.
Shareholders are also given the opportunity to participate effectively and vote at general meetings of the Company, where relevant rules and procedures governing such meetings are clearly communicated to attendees.
In accordance with Rule 730A(2) of the Listing Manual and to have greater transparency in the voting process, the Company has conducted the voting of all its resolutions by poll at all of its general meetings. The detailed voting results of each of the resolutions tabled are announced on the same day after the meetings. The total numbers of votes cast for or against the resolutions are also announced after the meetings via SGXNet.
Separate resolution on each substantially separate issue
Resolutions to be passed at general meetings are always separate and distinct in terms of issue and are consistent with the Code’s recommendation that companies avoid ‘bundling’ resolutions unless the resolutions are interdependent and linked so as to form one significant proposal.
All Directors attend general meetings
All directors will be in attendance at the Company’s AGM to address shareholders’ questions relating to the work of the Board and Board Committees.
The Company’s external auditors, CLA Global TS Public Accounting Corporation, have also been invited to attend the AGM and will be available to assist the directors in addressing any relevant queries by the shareholders relating to the conduct of the audit and the preparation and content of the auditor’s report. All directors attended the Company’s last AGM in FY2022 via electronic means on 27 April 2023.
Company’s Constitution for absentia voting of shareholders
Provision 11.4 of the Code recommends that the Company’s Constitution allow for absentia voting at general meetings of shareholders. The Company’s Constitution allows for absentia voting at general meetings of shareholders, including but not limited to voting by mail, electronic mail or facsimile. As the authentication of shareholder identity and other related security and integrity issues still remains a concern, the Company has decided for the time being, not to implement absentia voting methods such as voting by mail, electronic mail or facsimile. Notwithstanding variation from Provision 11.4 of the Code, the Company is of the view that the intent of Principle 11 is still met as the existing arrangement whereby shareholders have the right to appoint proxies to attend general meetings and vote on their behalf enables shareholders to exercise their rights and have the opportunity to vote even if they are unable to attend in person.
Minutes of general meeting are published on the Company’s corporate website
In accordance with Guidance 6 of the Practice Note 7.5 General Meetings of the SGX Listing Manual, the Minutes of AGM will be published within one month after the AGM on SGXNET. Minutes of the AGM shall be published on (i) the SGX-ST’s website at the URL https://www.sgx.com/securities/company-announcements and (ii) the Company’s corporate website at the URL https://bestworld.listedcompany.com/newsroom.html. The minutes will include the responses to substantial and relevant questions received from shareholders which are addressed during the AGM.
Dividend policy
In view of the Group’s short and medium term commitment which include but are not limited to, working capital requirements and corporate actions capital needs, as well as taking into consideration the uncertain business climate, no dividends have been declared/recommended by the Board for the financial year ended 31 December 2023.