Brunei code

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Corporate
Governance
in Brunei
Corporate Governance Masterclass

What is Corporate Governance?
Corporate Governance is defined as the structures
and processes by which companies are directed and
controlled.

What is Corporate Governance?
It refers to the system of rules, practices and
processes by which a company is managed and
directed to attain its objectives.

Purpose of Corporate Governance
To facilitate effective, entrepreneurial
and prudent management that can
deliver the long term success of the
company

Why is it important for Brunei?
Companies that are managed better, perform better.
Better processes add value to the business, help it
build its reputation and ensure its long-term
continuity and success.

Why is it important for Brunei?
To encourage a business climate that is “pro-
business” and “pro-investment”, corporate
governance will promote investor confidence which
will be important for companies when developing
new sources of finance for expansion and growth.

The Code of Corporate Governance
The Code of Corporate Governance is a guide to a
number of key components of effective board
practice.

The Code of Corporate Governance
The underlying principles of all good governance:
• Accountability
• Transparency
• Honesty
• Focus on the sustainable success of the company
over the longer term

Is the Code legally binding?
It is not legally binding, but it is strongly
recommended for companies in Brunei Darussalam

Is the Code legally binding?
It is not legally binding, but it is strongly
recommended for companies in Brunei Darussalam
as improved corporate governance has the potential
to significantly boost productivity growth and create
jobs.

How will it help companies?
Most of the companies in Brunei Darussalam are
unlisted private companies and controlled by single
individuals or families.

How will it help companies?
Good corporate governance will promote and
encourage:
• Establishing a framework for a compamy
processes and attitudes that add value to the
business
• The company to build its reputation
• Long term continuity and success
• Awareness towards compliance

Who is the Code for?
The development of Corporate Governance and its
principles/guidelines is intended for:
• locally incorporated Private Limited Companies,
• Public Companies and
• branches of Foreign Companies

Brunei Code of
Corporate
Governance
Corporate Governance Masterclass

Principles for all companies
1. Shareholders should establish an appropriate
constitutional framework for the company

Practical application
• This can be established through the articles of
association of a company, which bind the way in
which directors exercise power over the company.
• The articles can establish company rules for
matters such as shares, dividends, powers, role,
conduct of board and shareholders meetings.

2. The company should establish an effective
board to lead and control the company. The
board is collectively responsible for the long
term success of the company. The board works
with management to achieve this objective and
management remains accountable to the board.

• The board’s role is to provide leadership of the
company.
• The board’s role is to set strategic objectives,
ensuring that it has the necessary financial and
human resources for the company to meet its
objectives.
• All directors must objectively discharge their duties
and responsibilities at all times as fiduciaries in the
interest of the company.

3. The size and composition of the board should
reflect the scale and complexity of the
company’s activities

• The board should not be too large. The balance of
skills and experience should be appropriate for the
requirement of the business.
• The board should aim to maintain an appropriate
balance of skills and experience within the
company and on the board.
• The board should comprise people with different
perspectives, backgrounds and experience to
secure new ideas.

4. The board should meet regularly to discharge
its duties, and be supplied appropriate
information in a timely manner.

• The board should receive accurate, timely and
clear information.
• Written minutes of board meetings should be
taken.
• All decisions should be recorded.
• Board meetings should monitor progress against
approved plans and budgets, and ensure full
coverage of matters reserved for the board.

5. The board is responsible for risk oversight and
should maintain a sound system of internal
control to safeguard shareholder’s investment
and company’s asset.

• The board should try to identify the main risks
facing the company.
• The board must attempt to ensure that all material
risks are being appropriately managed.

• As the company grows in size and complexity, it
will be necessary to move towards a more
professional system of internal control. Strong
financial control will become a significant
requirement if the company wishes to obtain
external sources of finance.

6. Companies should actively engage their
shareholders and put in place an investor
relations policy to promote regular, effective
and fair communication with shareholders.

• The key duty of the board is to endure that the
activities of the company remain fully aligned with
the interests of shareholders.
• The relationship with the shareholders should be
viewed as the continuous process and not limited
to an annual formal meeting.

7. Family-owned companies should establish
family governance mechanisms that promote
coordination and mutual understanding
amongst family members, as well as organise
the relationships between family governance
and corporate governance.

• A clear distinction must be made for family
institution and the formal governance structures of
the company.
• Family businesses can improve their odds of
survival by setting the right governance structures
in place and by starting the educational process of
the subsequent generations as soon as possible.

Principles for public companies
8. The board should establish appropriate board
committees in order to allow a more effective
discharge of its duties.

• The board should define in writing the terms of
reference of the various committees, explaining
their role and the advisory authority delegated to
them by the board. These terms of reference
should be reviewed by the board on the periodic
basis.

• For larger companies, the board should consider
the creation of an audit committee. The audit
committee plays an important role in monitoring
and oversight of the company.

9. The board should undertake a periodic
appraisal of its own performance and that of
each individual director.

• Group appraisal should examine how the board
operates as a collective decision-making body.
• Individual appraisal should aim to show whether
each director continues to contribute effectively
and to demonstrate commitment to the role
(including commitment of time).

10. The board should present a balanced and
understandable assessment of the company’s
position and prospects for external
shareholders, and establish a suitable
programme of shareholders engagement.

• The board should publish an annual report that is
tailored to the needs of its shareholders and its
other stakeholders.
• The board should introduce a strong disclosure
regime that promotes transparency to the
shareholders.

• Direct communication between directors and
employees ensure that everyone is on the ‘same
page’.

Independence
Companies Act (Chapter 39)
Companies (Corporate Governance)
(Public Companies) Rules 2016

Independence
These rules apply to every public company
incorporated and registered in Brunei Darussalam,
irrespective of the place or places where the
business of such company may be carried on.

Independence
6. A company shall have a board of directors
comprising at least a majority of independent
directors.

Independence
7. Where a board of directors of a public company
has delegated any of its powers for the oversight
of the company to a committee, Rule 6 shall apply.

Independence
8. The Minister may, with the approval of His Majesty
the Sultan and Yang Di-Pertuan may exempt a
public company from these rules.

Independence
Independent director means a director who:
• Is independent from any management and
business relationship with the company or of any
related corporation, and
• Is independent from any substantial shareholder of
the public company or any related corporation.

Not independent
Employed by the company or any of its subsidiaries,
or has been so employed at any time during the
current financial year or any of the preceding three
financial years of the company or any of its
subsidiaries

Not independent
Any member of his immediate family:
I. Is employed by the company or any of its
subsidiaries as an executive officer whose
compensation is determined by the company or
any of its subsidiaries; or

Not independent
II. Has been so employed at any time during the
current financial year or any of the preceding
three financial years or any of its subsidiaries; or

Not independent
III. He is accustomed or under an obligation,
whether formal or informal, to act in accordance
with the directions, instructions or wishes of the
management of the company or any of its
subsidiaries.

Not independent
A director shall not be considered to be independent
from business relationships with a public company or
any of its subsidiaries if:
• He is a director, a substantial shareholder or an
executive officer of any organisation where such
organisation has done business for profit with the
company in the current or immediately preceding
financial year; or

Not independent
• He is receiving or has received any compensation
from the company or from any of the subsidiaries
of the company, other than compensation received
for his services as a director or as an employee, at
any times during the current or immediately
preceding financial year of the company.

Substantial shareholders
A director of a public company which is the
immediate subsidiary of another company shall, if he
is not a substantial shareholder of the public
company or the parent company and is not
connected to such, be treated as if he were
independent from the substantial shareholder of the
pubic company.

A person is connected to an individual substantial
shareholder if he is:
• a member of the immediate family of the
substantial shareholder;
• employed by the substantial shareholder;
• employed by an affiliate of the substantial
shareholder;

• an executive director of an affiliate of the
• a non-executive director of an affiliate of the
• a partner of a firm or a limited liability partnership
of which the substantial shareholder is also a
partner; or

• accustomed or under an obligation, whether formal
or informal, to act in accordance with the
directions, instructions or wishes of the substantial
shareholder.

A person is connected to an corporate substantial
shareholder if he is:
• employed by the substantial shareholder;
• employed by an affiliate of the substantial
shareholder;
• a director of the substantial shareholder;

• an executive director of an affiliate of the
• a non-executive director of an affiliate of the
a partner of a firm or a limited liability partnership
of which the substantial shareholder is also a
partner; or

Your trainer
Richard Winfield
Founder & Principal Consultant
Brefi Group, UK
www.richardwinfield.com

Brunei code

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