Corporate Governance and ICM Standards
This domain covers governance expectations for listed companies and the Shariah governance framework for Islamic capital market (ICM) products. It tests whether you can apply the Malaysian Code on Corporate Governance (MCCG) and the role of the Shariah Advisory Council (SAC).
Core rules
- The MCCG 2021 uses an apply-or-explain approach: companies apply the practices and explain departures. It is best practice, not a substitute for statutory duties.
- Board composition, independence, audit committee competence, risk management and sustainability oversight are core practices.
- Bursa Listing Requirements require disclosure of governance arrangements and sustainability reporting.
- The SAC of the SC issues rulings on Shariah matters for ICM. Its rulings are binding on the SC, and issuers seek rulings for novel structures.
- Shariah governance requires a Shariah committee or adviser, screening, purification and annual review. Sukuk assets and contracts must be Shariah-compliant.
Worked example
A company plans a sukuk based on ijarah. The underlying asset must be Shariah-compliant and owned by the issuer, and the lease and purchase terms must avoid prohibited elements. If the structure is novel, the issuer should obtain an SAC ruling. A conventional loan wrapped in an Islamic label is not sufficient.
Traps
Treating MCCG as legally binding in every respect; assuming an independent director is independent merely because titled so; issuing sukuk without Shariah review; forgetting purification of impermissible income.