Hong Kong Stock Exchange Proposes To Enhance Corporate Governance Code.

(1) 

New Code Provision (CP) – To require an issuer’s board to align the company’s culture with its purpose, value and strategy.

(2) 

New CP – To require establishment of anti-corruption policy.

(3) 

Upgrading Recommended Best Practice (RBP) to CP – To require establishment of a whistleblowing policy.

(1)

New CP – To require disclosure of a policy to ensure independent views and input are available to the board, and an annual review of the implementation and effectiveness of such policy. 

(2)

Revised CP – To require re-election of an INED serving more than nine years (Long Serving INED) to be subject to independent shareholders’ approval (Note); and additional disclosure on the factors considered, the process and the board or nomination committee’s discussion in arriving at the determination in the explanation on why such INED is still independent and should be re-elected. 

Note:

The consultation paper does not elaborate on the meaning of independent shareholders’ approval. Presumably, “independent shareholders” would bear the same meaning as set out in the note to Rule 13.39, i.e. any shareholders other than controlling shareholders of the issuer and their associates or, where there are no controlling shareholders, any shareholders other than directors (excluding INEDs) and the chief executive of the issuer and their respective associates, except that in this context the Long Serving INED in question would not be considered as an independent shareholder.

(3)

New CP – To require issuers whose INEDs are all Long Serving INEDs to appoint a new INED at the forthcoming annual general meeting and disclose the length of the tenure of the Long Serving INEDs on the board on a named basis in the shareholders’ circular.

(4)

New RBP – An issuer generally should not grant to INEDs equity-based remuneration (e.g. share options or grants) with performance-related elements.

(1) 

Revised note to a Rule – To highlight that diversity is not considered to be achieved by a single gender board.

(2) 

New Mandatory Disclosure Requirement (MDR) – To require all listed issuers to set numerical targets and timelines for achieving gender diversity at both: (i) board level; and (ii) across the workforce (including senior management).

(3) 

New CP – To require the board to review the implementation and effectiveness of its board diversity policy annually.

(4) 

The Exchange intends to display board diversity related information (including director’s age, gender and directorships) on the HKEX website.

If the proposals are implemented, existing issuers with single gender boards will be allowed a three year transition period to appoint at least a director of the absent gender on their boards, while IPO applicants are not expected to have single gender boards.

(1) 

New Rule – To require disclosure of directors’ attendance at general meetings in the poll results announcements.

(2) 

Deletion of CP that requires issuers to appoint non-executive directors for a specific term (given that directors are already subject to retirement by rotation and shareholders’ approval for re-election).

(3) 

The Exchange will prepare a new guidance letter to provide more comprehensive guidance in assisting issuers’ compliance with the CG requirements.