HKEX Conclusions on Review of Corporate Governance Code

The Stock Exchange of Hong Kong published the Consultation Paper on Review of Corporate Governance Code and Related Listing Rules. Enhanced requirements on board effectiveness, gender diversity, risk management and dividend policy are introduced to the 2,600 Hong Kong-listed companies, together with relevant additional disclosure obligations. Most will apply to financial years commencing on or after 1 July 2025.

Lead independent non-executive directors (INEDs). Where the chairman of the board is not an INED, the listed company is encouraged to designate an INED as the “lead INED” to serve as an intermediary for the other directors and shareholders, and act as an alternative communication channel in case of inadequate communication with the chairman or management.

Disclosure on shareholder engagement. Each company must enhance disclosures on the board’s engagement with shareholders in its corporate governance report (CG Report), such as the nature and frequency of engagement, the shareholders and company’s representatives involved, and follow-up approaches.

Mandatory director training. Directors must receive mandatory continuing professional development annually on specified topics (including directors’ responsibilities and issuers’ obligations, corporate governance, ESG, risk management and internal controls, and industry-specific updates). First-time directors and those individuals who have not served as directors of Hong Kong-listed companies for the three years before appointment must complete at least 24 hours of training within 18 months of appointment. At least 12 hours of training are required for first-time directors who have served as directors of companies listed in other jurisdictions within the three years before the appointment. Certain information on the training received by directors (e.g. hours, format, topic and training provider) must be disclosed in the CG Report.

Board performance review. Each company must conduct a formal evaluation of the performance of the entire board (but not individual directors) at least once every two years, with specific disclosures to be made in the CG Report.
Board skills matrix. A listed company must disclose in its CG Report: (1) the board’s existing skills, (2) how the combination of skills, experience and diversity of directors serves the company’s purposes, values, strategy and desired culture, and (3) details and plans to acquire further skills. The current practice of simply listing out the directors’ qualifications and experience will no longer be sufficient.

Overboarding INEDs and directors’ time commitment. Each INED can only serve as a director of up to six Hong Kong listed companies concurrently – this hard cap will apply to … READ FULL ARTICLE

By: Rossana Chu and Dennis Yeung at YYC Legal LLP

Note: This material has been prepared for general informational purposes only and is not intended to be relied upon as professional advice. Please contact us for specific advice.

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