Charter

Syarikat Pembinaan Setia Sdn Bhd was incorporated in Malaysia as a private company limited by shares on 8 August 1974. It was subsequently converted to a public company limited by shares on 2 September 1992 and changed its name to Syarikat Pembinaan Setia Berhad. On 19 January 1996, it assumed its current name S P Setia Berhad (“S P Setia” or “the Company”). The Company was listed on the Second Board of Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad (“Bursa Securities”)) on 12 April 1993 and migrated to the Main Board (now known as Main Market) of Bursa Securities on 4 June 1996.

The Board of Directors of S P Setia (“the Board”) is fully committed to maintaining a high standard of corporate governance and ethical behaviour throughout the S P Setia Group for long-term sustainable business growth and the protection and enhancement of shareholders’ value.

This Charter sets out the standard and principles governing the Board processes and outlines the roles, functions and responsibilities of the Board in accordance with the authority conferred by the Constitution of the Company along with the provisions of the Companies Act 2016 (“Act”), Bursa Securities Main Market Listing Requirements (“Listing Requirements”), the principles set out in the Malaysian Code on Corporate Governance (“MCCG”) and the Securities Commission (“SC”)’s Guidelines on Conduct of Directors of Listed Corporations and their Subsidiaries (“SC’s Guidelines”).

The Charter was first adopted by the Board on 12 December 2013. This Charter was last updated in December 2023. The Board shall review and enhance the Board Charter from time to time as it deems appropriate.

All Directors must have the necessary qualities, competencies, experience that will allow them to perform the duties and carry out the responsibilities required of the position in the most effective manner [2]. A Director must exercise his powers for a proper purpose and in good faith in the best interest of the Company [3]. and must abide to the provisions of the Company’s Code of Conduct and Business Ethics.

A Director who is appointed by virtue of his position as a representative of a shareholder must act in the best interest of the Company. In the event of any conflict between his duty to act in the best interest of the Company and his duty to his nominator, he must not subordinate his duty to act in the best interest of the Company to his nominator [4].

A Director shall immediately upon his knowledge of such fact, disclose to the Audit Committee of the Company of any actual or potential conflict of interest including the nature and extent thereof, that he may have with the Group.

In directing or managing the business and affairs of the Company, a Director must exercise reasonable care, skill and diligence by:
(a) applying the knowledge, skill and experience which may reasonably be expected of a director having the same responsibilities; and
(b) applying any additional knowledge, skill and experience which the director has [5].

A Director is required to among others:.
(a) maintain a sound understanding of the business, and keep abreast of relevant developments to ensure he is able to discharge his duties and responsibilities effectively;
(b) prepare for board meetings, contribute constructively to board discussions and decision-making, and conduct due inquiry before approving a matter;
(c) ensure key transactions or critical decisions are deliberated and decided on by the board in a meeting; and
(d) ensure his decisions and the basis for those decisions, including any dissenting views are made known and properly minuted.

[1] Paragraph 3.01 to 3.04 of the SC’s Guidelines
[2] Pursuant to the Company’s Fit and Proper Policy
[3] Section 213 (1) of the Act
[4] Section 217 of the Act
[5] Section 213(2) of the Act

The Company is governed by the Board which assumes overall responsibility for the following:-

• defining and determining the strategic direction including
  sustainability strategies, priorities and targets;
• directing future expansion;
• implementing corporate governance;
• identifying principal risks and ensure the implementation of
  appropriate systems to manage these risks;
• human resource planning and development;
• reviewing investments made by the Company;
• overseeing the proper conduct of business;
• reviewing the adequacy and the integrity of the Company’s
  internal control systems and management information systems;
• approving corporate structure; and
• banking facilities; and
• reviewing policies related to the Company such as branding,
  investor relations and shareholders communication programme.

The board governance model of S P Setia Group is as follows:

While the respective boards of directors of the significant projects or investments will continue to monitor execution of projects in a timely manner, strategic and policy matters of the Company will be decided by the Board.

A subsidiary of the Company and its directors must provide the Company with any information requested by it to enable the Board to oversee the performance of its subsidiaries effectively, including assessing non-financial performance of S P Setia Group [5].

[5] Paragraph 5.03 of the SC’s Guidelines

The Company and the Board must cause to be kept the accounting records and other records to:
(a) sufficiently explain the business, transactions and financial position of the S P Setia Group;
(b) enable the preparation of true and fair financial statements;
(c) enable the accounting and other records of S P Setia Group to be conveniently and properly audited.

[6] Paragraph 4.01 of the SC’s Guidelines and Section 245 of the Act

There is a schedule of matters reserved specifically for the Board’s decision and approval which includes:-

• annual business plans and budgets;
• strategic plans;
• material acquisitions and disposals of assets not in the ordinary course of business;
• investment in projects requiring major capital investment;
• financial results and financial statements;
• dividend recommendations including solvency tests;
• changes to the composition of the Board and Board Committees;
• changes relating to the share capital;
• appointment of external auditors and their fees;
• banking facilities; and
• establishment of long-term or share incentive plans.

The Company has in place the Discretionary Authority Limits to guide the Board and Management on applicable thresholds for relevant approving authorities.

The Company’s Constitution provides for a minimum of two (2) and maximum of fifteen (15) Directors[7].

The Company must ensure that at least two (2) directors or one third (1/3) of the Board, whichever is higher, shall be Independent Non-Executive Directors (“INEDs”)[8].

Members of the Board are appointed based on objective criteria, merit and with due regard for diversity. Diversity is considered from various areas including gender, age, ethnicity, cultural background, academic and professional qualification, experience and skills[9]. The Board shall undertake an annual review of its composition to ensure effective functioning of the Board to meet the needs of the Company from time to time. A Board Diversity Policy for Non-Executive Directors of the Company was formalised and approved in 2020 to facilitate an orderly transition and succession of the Non-Executive Directors that is necessary for the Board to continue its effective governance and stewardship of S P Setia Group. The policy may be reviewed by the Nomination and Remuneration Committee (“NRC”) and Board from time to time to ensure that the policy remains updated and relevant.

The Board comprises highly qualified and experienced individuals who have distinguished themselves in the legal, financial, engineering, accounting, banking and public service arenas. Their combined expertise and business experience provides much insight and a diversity of perspectives to lead and guide S P Setia Group in an increasingly complex and competitive business environment.

[7] Clause 88 of the Constitution
[8] Paragraph 15.02(1) of the Listing Requirements
[9] Practice 5.5 of the MCCG and Paragraph 5.02 of the SC’s Guidelines

Where necessary, the Board may comprise a majority of INEDs to ensure sufficient diversity and independence in the decision-making process[4].

The tenure of an INED should not exceed a cumulative term of nine (9) years from the date of first appointment as Director[5].

A candidate for appointment as an INED must first provide to the Nomination and Remuneration Committee (“NRC”) a declaration and confirmation on his/her independence for the NRC’s consideration in his/her appointment.

There must be clear segregation of roles and responsibilities between the Chairman and the President/Chief Executive Officer (CEO) to ensure a balance of power and authority. The position of Chairman and President/CEO are separated and clearly defined. The Board may identify a Senior INED of the Board who serves as the designated contact to whom concerns may be conveyed.

Chairman

The Chairman provides leadership, leads the creation and monitoring of good governance practices in the Group and ensures that the Board fulfils its obligations and responsibilities effectively and in the best interest of the Company. The Chairman should promote open communication and create effective working relationship, both inside and outside the boardroom, and between the Board and the Management.

The Chairman shall approve the agenda of board meetings, and ensure that the Board meets as needed to discuss all key issues in a timely manner. The Chairman is responsible for conducting the Board meetings and ensuring that all Directors are properly briefed during Board discussions and adequate time is available for discussion of the agenda items. The Chairman will act as facilitator at meetings of the Board to ensure that no Board member, whether executive or non-executive, dominates the discussion, and that healthy debate takes place.

The Chairman also serves as Chair of all shareholders meeting of the Company and act as a spokesperson for the Board.

President/CEO and Executive Director

The President/CEO is responsible for the overall management of S P Setia Group, ensuring that strategies, policies and matters set by the Board are effectively implemented. The President/CEO will regularly review the performance of the heads of divisions and departments who are responsible for all functions contributing to the success of S P Setia Group.

With the support of the Management team, the President/CEO develops and proposes business strategies in pursuit of S P Setia Group’s objectives for the Board’s consideration.

The President/CEO also acts as a liaison between the Management and the Board and ensuring that key developments and/or issues are communicated to the Board accordingly.

Senior Independent Non-Executive Director

The principal role of the Senior INED is to provide a sounding board for the Chairman and to serve as an intermediary for the other INEDs where necessary.

The Senior INED also serves as a designated contact to whom concerns pertaining to S P Setia Group may be conveyed by shareholders and other stakeholders particularly for complaints relating to other Directors in accordance with the Group’s Whistleblowing Policy. The identity and contact of the Senior INED shall be disclosed in the annual report of the Company.

Independent Non-Executive Directors

The INEDs bring impartiality and scrutiny to Board deliberations and decision making to ensure that business and investment proposals presented by Management are fully deliberated and examined. They perform a key role by providing unbiased and independent views, advice and judgment, which take into account the interests of S P Setia Group and all its stakeholders including shareholders, employees, customers, business associates and the community as a whole.

The NRC is empowered to identify and recommend new appointments of Executive and Non-Executive Directors to the Board and Board Committees. In discharging this duty, the NRC will assess the suitability of an individual to be appointed to the Board and Board Committees by taking into account the individual’s skills, knowledge, expertise and experience, professionalism and integrity.

When determining new appointments or re-election/re-appointment of retiring Non-Executive Directors pursuant to the Company’s Constitution, the Board should consider diverse range of qualified candidates with no conscious or unconscious biasness against the candidate so as to ensure that a fair assessment is conducted to decide on the suitability of the qualified candidate in the best interest of S P Setia Group.

In identifying candidates for appointment as Directors, the Board does not solely rely on recommendations from existing Directors, management or major shareholders. The Board utilises independent sources to identify suitably qualified candidates where appropriate[13].

In accordance with the Constitution, all Directors who are appointed by the Board shall retire from office at least once every three (3) years but shall be eligible for re-election at the next Annual General Meeting (“AGM”). The Directors to retire in each year are those who have been longest in office since their last election or appointment[14].

The Directors shall have powers at any time and from time to time to appoint any person to be a Director either to fill a casual vacancy or as an additional Director, but so that the total number of Directors shall not at any time exceed the maximum number fixed by the Constitution. Any Director so appointed shall hold office only until the next AGM and shall then be eligible for re-election, but shall not be taken into account in determining the number of Directors who are to retire by rotation at such meeting[15]

A Director must not hold more than five (5) directorships in listed issuers[16].

Before a Director accepts any appointment as director of another organisation or office bearer in another organisation, he/she shall submit to the Nomination and Remuneration Committee for its review and if deemed fit, onward recommendation to the Board for approval. This is to ensure the appropriateness of such new appointment in order to avoid or manage any actual or potential conflicts of interest arising therefrom as well as to ensure that the Director is able to continue to commit time required to effectively discharge his duty and responsibilities as a Director of the Company.

[13] Practice 5.6 of the MCCG
[14] Clause 103 of the Constitution
[15] Clause 107 of the Constitution
[16] Paragraph 15.06(1) of the Listing Requirements

Board meetings are scheduled in advance at the end of the prior calendar year to enable the Board members to plan their schedules accordingly.

A minimum of four (4) meetings a year shall be planned and additional meetings will be called at any time, as and when required.

The notice containing the agenda of the meeting and the relevant board papers shall be circulated by the Company Secretary to every member of the Board a week prior to the meeting.

A Director must not hold more than five (5) directorships in listed issuers[8].

The quorum for each meeting shall be a majority of the Directors for the time being[9].

In the absence of a meeting, issues shall be resolved by way of circular resolutions, signed by majority of Directors present in Malaysia[10].

The Management team are responsible to furnish the requisite reports containing all necessary and essential information for the purpose of the meeting for the compilation and circulation by the Company Secretary prior to the meeting.

The appropriate key Senior Management personnel of the Company or its subsidiaries and external advisers shall attend such meeting based on invitation basis where their presence is considered appropriate as determined by the Chairman or the Executive Directors.

Minutes of all proceedings of the Board meetings signed by the Chairman of the meeting at which the proceedings were held or by the Chairman of the next succeeding meeting shall be evidence of the proceedings to which it relates.

Where a potential conflict of interest arises, the Director concerned shall declare his or her interest and abstain from the decision making process.

[16] Clause 111 of the Constitution
[17] Clause 118 of the Constitution

The Board delegates certain responsibilities to the Board Committees, all of which operate within defined terms of reference to assist the Board in the execution of its duties and responsibilities.

The respective Committees report to the Board on matters discussed and deliberated and/or makes recommendations to the Board for final decisions, except to the extent where certain matters are delegated by the Board to the Committees.

The Chairman of the respective Committees report to the Board and the minutes of Committee meetings are tabled to the Board for notation.

Board Committee meetings are scheduled in advance at the end of the prior calendar year to enable the Board Committee members to plan their schedules accordingly.

The Board Committees comprise the following:-
(1) Audit Committee (“AC”)
The AC assists the Board in the effective discharge of its fiduciary responsibilities forcorporate governance, timely and accurate financial reporting and development of sound internal controls.
(2) Tender and Projects Committee(“TPC”)
The TPC assists the Board in areas relating to among others approving award of contracts, project budgets and undertaking of projects.
The role of Non-Executive Directors in the EXCO is to provide check and balance to Management’s decision making process in respect of project implementation.
(3) Finance and Investment Committee (“FIC”)
The FIC assists the Board in the effective discharge of its fiduciary responsibilities in relation to S P Setia Group’s financial investments, funding requirements and corporate strategies.
(4) NRC
The NRC assists the Board in proposing new nominees for the Board and Board Committees, developing and establishing competitive remuneration policies and packages, assessing the Directors on an ongoing basis, as well as to administer S P Setia Group Employees’ Long Term Incentive Plan (“LTIP”) in such manner as it shall in its discretion deem fit within such powers and duties as are conferred upon it by the Board as defined in the By-Laws of the LTIP. The NRC also assists the Board in developing a Board succession plan and overseeing the Management succession plan to promote progressive refreshing at the Board and robust pipeline of talents at the Management level.
(5) Risk Management Committee (“RMC”)
The RMC assists the Board in overseeing the risk management process within S P Setia Group, leading the Group’s strategic direction in the management of the Group’s business risks, establishing and implementing a risk management framework and reviewing the effectiveness of the risk management framework. The RMC also oversees the establishment and matters relating to the Integrity and Governance Unit.

(6) Sustainablity Committee (“SC”)
The SC assists the Board in overseeing the Group’s Sustainability or Environmental, Social and Governance related framework, strategy, priorities, targets, policies and practices as well as production of the Company’s Annual Report.

The Board shall carry out the Board Effectiveness Evaluation (“BEE”) exercise annually to assess the performance and effectiveness of the Board as a whole, Board Committees and individual Directors. The Board engages independent experts at least every three years to facilitate objective and candid board evaluations[18].

The NRC is responsible to develop a set of criteria with target areas of focus to assist the Board in evaluating the performance and effectiveness of the Board, Board Committees and individual Directors.

As part of the BEE process, all INEDs of the Company are required to provide to the Board a yearly declaration and confirmation of their independence in compliance with the criteria set out in the Listing Requirements to facilitate the annual assessment of the INEDs by the Board.

The Directors are required to disclose the trainings they have attended during a financial year in the Company’s Annual Report.

[18] Practice 6.1 of MCCG

The Company’s remuneration policy for Directors is designed to enable the Company to attract and retain experienced and knowledgeable individuals of the caliber needed to support the Company’s ambitious expansion plans in line with its overall objective of delivering long-term value to its shareholders. The remuneration packages are structured to incentivise and encourage creativity and innovation appropriate for a property, infrastructure and construction company of its size and complexity.

The NRC recommends to the Board the remuneration package for the Executive Director(s). The remuneration package for Executive Director(s) is structured on the basis of linking rewards to corporate and individual performance. Performance is measured against the results achieved by S P Setia Group and individual achievement against targets set at the beginning of each year.

For Non-Executive Directors, the fee and allowance payable is determined based on the experience, level of expertise, responsibilities undertaken and time demanded of the Non-Executive Directors concerned. The Non-Executive Directors’ remuneration framework is reviewed periodically and benchmarked against market practices so as to ensure that it is competitive and able to attract and retain Directors with the right calibre to lead and direct S P Setia Group.

The remuneration framework for the Non-Executive Directors adopted by the Board as set out below:-

The fees and allowances/benefits payable to the Directors shall be subject to annual shareholders’ approval at the AGM of the Company[19].

[19] Clause 63 of the Constitution, Section 230 of the Act and Paragraph 7.24 of the Listing Requirements

In addition to the Mandatory Accreditation Programme as required by Bursa Securities, the Directors are encouraged to attend various training programmes conducted by competent professionals and which are relevant to the Company’s operations and business.

The Company will, on an on-going basis, make available to the Directors, at the Company’s cost, professionally conducted programs to ensure Directors are acquainted with the latest development to equip themselves with the relevant knowledge and ideas to discharge their duties and sustain active participation during Board deliberations.

The Company also organises orientation programme for all newly appointed Directors to familiarise him/her with S P Setia Group’s business and governance process.

The Directors are required to disclose the trainings they have attended during a financial year in the Company’s Annual Report[20].

[20] Paragraph 15.08(3) of the Listing Requirements

The Directors (Executive and Non-Executive) shall have the same unrestricted right of access to all information relating to the business, operations and governance of S P Setia Group in a timely manner whether as a full Board or in their individual capacity, in furtherance of their duties.

All Directors have direct and unrestricted access to the advice and services of the Company Secretary and Senior Management and the Directors may collectively or individually seek external or independent professional advice and/or assistance from relevant experts, if required, in furtherance of their duties, at the Company’s expense.

S P Setia is committed to upholding the highest ethical standards in the workplace and in all business dealings and relationships wherever the Group operates. S P Setia Group conducts its business operations and activities in full compliance with the applicable anti-bribery and corruption laws of all countries in which the Group conducts its business.

In furtherance thereto, the Board has formalised and approved the following policies which are applicable to Directors and employees of S P Setia Group to serve as a roadmap to help guide actions and behaviours while working for and/or dealing with the Company so as to maintain high standards of business ethics and encourage performance with integrity:
(1) Anti-Bribery and Corruption Policy (formalised in 2019);

(2) Code of Conduct and Business Ethics (formalised since 2008 and last updated in 2023);

(3) Donations and Sponsorship Policy (formalised in 2020); and

(4) Third Party Engagement Policy (formalised in 2020).

S P Setia Group’s Whistleblowing Policy was approved in 2015 and last updated in 2019. The Policy is aimed at protecting the integrity, transparency, impartiality and accountability where S P Setia Group conducts its business operations. The Whistleblowing Policy provides a structured reporting channel and guidance to all employees and external parties to whistleblow without the fear of victimisation.