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.
