Actualidad Dominican Republic

Corporate Governance Legislation

Proposal on the amendment of the Corporate Governance Regulations

Proposal on the amendment of the Corporate Governance Regulations, made by the banking supervisor, Superintendencia de Bancos de República Dominicana. Resolution Six, 30th October 2014.

The initiative to review the prevailing Corporate Governance Regulations, approved by the Monetary Board under Resolution Two, 19th April 2007, recognised the continued evolution of best international practices in this area. The banking supervisor wanted all stakeholders to have a say on the proposal, and published it with the stated aim of bringing the regulations into line with the Basel Committee for Banking Supervision’s Principles to enhance Corporate Governance, October 2010, and use them to add stability and robustness to the regulatory system.

The proposal, which is now in its public consultation period, contains several changes to the earlier regulations. These include the following:

  • Inclusion of the fundamental principles of Corporate Governance, which provide guidelines for establishing best practices. Henceforth, companies’ internal regulation must expressly incorporate issues such as the protection of shareholder rights; independence, transparency and objectivity of board of directors proceedings; procedures for managing and dealing with potential conflicts of interest; management oversight; succession planning, etc.
  • Incorporation of new definitions (Senior Management, the Assets & Liabilities Committee (ALCO), Interested Parties), and the classification and definition of different types of directorships, distinguishing between external directors –whether independent or proprietary– and internal directors (executive members).
  • Addition of powers for the members of the board of directors: to approve the Internal Board Regulations, approve the strategy plan and policies of the entity, enforce good corporate governance, management and risk control, outsourcing of functions, etc.
  • A longer interim before a Board Member can be considered independent. Two years must now elapse after the termination of labour or business relations with the company, rather than the earlier 6 months.
  • Requirement to provide Board Members with a minimum of 20 hours a year specialist training.
  • Obligation for the Board of Directors and Senior Management to carry out a self-assessment.
  • The attribution of duties to the various committees assisting the Board, determining that all of them must be chaired by independent external directors. Also the inclusion, for the first time, of an Integrated Risk Management Committee and a description of its duties.

There are some proposals that catch the eye. For example, the mention of an upper age limit for directors. More recent trends in Europe and in international companies try not to restrict the age of directors, giving prevalence to the contribution each can bring to the entity with their experience and knowledge. (See Código de buen Gobierno Corporativo para las Sociedades Peruanas, Peru 2013; Código de Mejores Prácticas Corporativas (Country Code), Colombia 2014; Comisión de Expertos en materia de Gobierno Corporativo, Spain 2013; EU Corporate Governance Framework, EU Green Book 2011).

It no longer requires that the Board of Directors contain a minimum proportion of independent members, as stipulated in the 2007 regulations.

The proposal would require a significant additional workload for banks and financial institutions, which will have scarcely 90 days after the Regulations are published to comply with them