HKEx Publishes Consultation Paper on Review of Corporate Governance Code and Related Listing Rules
On 16 April 2021, The Stock Exchange of Hong Kong Limited (HKEx) published a consultation paper (Consultation Paper) outlining proposed enhancements to the CG Code, as well as related amendments to the Listing Rules.
The proposals include new measures aimed at further enhancing corporate governance standards among listed issuers in Hong Kong, specifically in areas of corporate culture, director independence, diversity, and in ESG disclosure and standards.
Key proposals are as follow:
Corporate culture –
- Align company’s culture with its purpose, values and strategy; and
- Require listed issuers to have anti-corruption and whistleblowing policies (New CG Code Provisions (CP), subject to a “comply or explain” basis).
Board independence, refreshment and succession planning –
- Require listed issuers to have a policy to ensure independent views are available to the board, and annual review of its effectiveness (New CP).
- Require independent shareholders’ approval for re-election of an independent non-executive director (INED) serving more than nine years (Long Serving INED) and additional disclosure (Revised CP).
- If all INEDs on the board are Long Serving INEDs, require appointment of a new INED at the forthcoming AGM, and disclose the length of tenure of the Long Serving INEDs on a named basis (New CP).
- Mandatory Nomination Committee, chaired by an INED and comprising a majority of INEDs (Upgraded to a Listing Rule).
Diversity –
- Single gender board is not considered to be a diverse board.
- Mandatory numerical targets and timelines for achieving gender diversity at both board level and across the workforce (New Mandatory Disclosure Requirement (MDR) under the CG Code).
- Requirements for boards to review progress of diversity policy annually (New CP). After the revised Rules take effect, existing issuers with single gender boards will be allowed a three-year transition period to appoint at least one director of the absent gender on their boards. IPO applicants are not expected to have single gender boards.
Communication with shareholders –
- Mandatory disclosure on shareholders communication policy, and annual review of its effectiveness (Upgraded to MDR).
ESG –
- Align publication timeframe of ESG reports with annual reports (Revised Rule and ESG Guide).
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