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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Conceptual Framework of Corporate Governance

Rohan Steels Ltd is considering a new voluntary governance code that goes beyond what law requires, while also being subject to mandatory statutory governance provisions under company law and listing regulations. Which statement correctly describes how these layers interact?

Mandatory statutory and listing requirements must always be complied with, and a voluntary code may only add higher standards on top of them. A voluntary code cannot dilute or replace legal obligations, and listing regulations apply regardless of whether the code is adopted.

  1. AVoluntary code provisions override mandatory statutory provisions if they are stricter or more recent
  2. BStatutory and listing requirements must be met in all cases; a voluntary code can add higher standards but cannot dilute themCorrect
  3. CBecause the code is voluntary, the company may ignore any overlapping statutory provision
  4. DListing regulations apply only if the voluntary code is adopted

Explanation

Mandatory law sets the minimum, which cannot be relaxed. Voluntary codes can raise the bar above it. Voluntary status gives no licence to ignore statute, and listing obligations apply independently of any code adoption.

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