The Stock Exchange of Hong Kong Limited (the "Exchange") recently published two consultation papers proposing changes to:
- the Corporate Governance Code (the "Code") and Corporate Governance Report as well as related amendments to its Listing Rules; and
- documentary requirements relating to listed issuers and other minor Rule amendments.
As the title suggests, the Exchange’s proposals covered diverse areas ranging from corporate governance, documentary requirements relating to structured products, to house keeping amendments. In this article, we concentrate on proposals relating to directors and board committees only, which, for the purpose of simplicity, are presented in tabulated form and reference is made to the Main Board Listing Rules (the "Rules").
Non-Executive Directors (INEDs)—Independence Criteria
Rule 3.13 sets out a detailed but non-exhaustive list of factors that the Exchange takes into account when assessing the independence of INEDs. No additional factors but amendment to strengthen the criteria are proposed.
Over-boarding and INED’s Time Commitment
No cap on multiple directorship but the board must explain if an INED holds seven or more.
Diversity policy is upgraded from a Code Provision (i.e., subject to ‘comply or explain’) to become a Rule requirement.
Other Changes Relating to INEDs
Removal of the Directors’ Declaration and Undertaking (the Form B, Form H and Form I, Together the “DU Forms”) and Consequential Changes
Dividend Policy be disclosed in the Annual Report
Nomination Policy be disclosed in the Corporate Governance Report
Mandatory Disclosure Requirements (MDR) L.(d)(ii) of Appendix 14 currently requires disclosure of the summary of work performed by the nomination committee during the year in the Corporate Governance Report. It is now proposed that the policy itself should be disclosed.