Hong Kong Stock Exchange proposes enhancements to corporate governance requirements for listed issuers

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On 14 June 2024, The Stock Exchange of Hong Kong Limited (Exchange) published a consultation paper outlining proposed enhancements to the Corporate Governance Code (CG Code) and the related Rules Governing the Listing of Securities on the Exchange (Listing Rules).

The proposed enhancements include:

• to improve board effectiveness through (i) the designation of a “lead” independent non-executive director (INED); (ii) mandatory director training, (iii) regular board performance reviews and disclosure of a board skills matrix; (iv) a holistic annual assessment by the nomination committee of directors’ time commitment and contribution to the board; and (v) phasing out of INEDs who hold seven or more listed issuer directorships (Overboarding INEDs);

• to strengthen board independence by phasing out INEDs who have served for more than nine years (Long Serving INEDs);

• to further promote board and workforce diversity of issuers, by actions including requiring the nomination committee to comprise directors of different genders;

• to enhance the risk management and internal control sections of the CG Code; and

• to promote better capital management by enhancing disclosures regarding issuers’ dividend policy and the board’s dividend decisions.

Summary of the key proposals

Proposed implementation timeline

The Exchange proposes that:

• the proposed amendments to the CG Code and the related Listing Rules (other than those relating to Overboarding INEDs and Long Serving INEDs) will come into effect on 1 January 2025, and will apply to CG reports and annual reports in respect of financial years commencing on or after 1 January 2025;

• in respect of the proposed amendments relating to Overboarding INEDs and Long Serving INEDs, there will be a three-year transition period, i.e. the relevant rules will apply from 1 January 2028 onwards, with compliance required by the conclusion of the annual general meeting following 31 December 2027 at the latest; and

• for IPO applicants, if their listing applications are filed on or after 1 January 2025, they may not have any Overboarding INED.

Consultation period will end on 16 August 2024.

Key Contacts

Ronny Chow

Partner | Corporate Finance

Email or call +852 2825 9435

Alexander Que (Alex)

Partner | Corporate Finance

Email or call +852 2825 9770

Rhoda Yung

Partner | Corporate Finance

Email or call +852 2825 9624

Gary Wong

Partner | Corporate Finance

Email or call +852 2825 9798

Maynard Leung

Partner | Corporate Finance

Email or call +852 2825 9415

Canny Lau

Partner | Corporate Finance

Email or call +852 2826 5346