• Board independence with periodic refreshment, in particular the appointment of new INEDs, contribute to good corporate governance and help prevent “groupthink”.
• To promote board renewal and diversity of perspectives in the boardroom, the tenure of INEDs is capped at nine years (Cap on INED Tenure). This Cap on INED Tenure is apply in two phases over a transition period:

• The nine-year tenure of an INED is calculated from the issuer’s listing date (where the INED is appointed prior to the issuer’s listing) or the INED’s date of appointment (where the INED is appointed after the issuer’s listing). For further guidance on the calculation of INED tenure, please refer to FAQ1.1-No.12 -16 published by the Exchange. 
• Issuers should conduct comprehensive succession planning to allow sufficient time for the recruitment of suitable replacement INEDs. An orderly phase-out can avoid abrupt changes to board composition and minimize the impact on board continuity and any gaps in experience and governance. 
• Issuers may re-designate a Long Serving INED as a NED to enable them to continue to contribute to the board.
• There should be a fair and open recruitment process to select the most suitable candidate to fill a board vacancy. Where a former Long Serving INED is reappointed as an INED after a three-year cooling-off period, the issuer must ensure that the former Long Serving INED satisfies the independence guidelines set out in Main Board Listing Rule 3.13 (Independence Guidelines).  During the cooling-off period, the former Long Serving INED must not serve as a director of the relevant issuer, its holding company or any of their respective subsidiaries or core connected person of the issuer.

• INEDs should devote sufficient time and attention to the affairs of the issuer(s) to safeguard high quality decision making on the board. Taking on too many directorships (in particular, listed issuer directorships) and/or significant outside commitments may compromise their ability to properly discharge their duties.
• The number of Hong Kong listed issuer directorships that an INED may concurrently hold is capped at six. Compliance with the cap is required by the first AGM held on or after 1 July 2028 by any issuer that an overboarding INED serves. To facilitate succession planning by affected issuers, discussions as to which directorship(s) an overboarding INED should vacate should be held well in advance of the compliance deadline.
• Before accepting any new listed issuer directorship role, directors should consider their pre-existing time commitments and the expected additional time commitment of the new role.  If an INED is invited to join the board of an issuer that has the same financial year-end as the INED’s other issuer(s), that INED should consider whether he / she may be over-burdened during certain periods of the year (e.g. prior to the release of annual and interim reports and during the AGM season). 

Annual nomination committee assessment

• The nomination committee must annually assess and disclose its assessment of each director’s time commitment and contribution to the board, taking into consideration their professional qualifications and work experience, listed issuer directorships, other significant external time commitments and other factors or circumstances relevant to their character, integrity, independence and experience.
• The nomination committee’s assessment is separate from the board performance review, which covers the board as a whole and has a broader scope and different timeframe. Nonetheless, its findings can provide insights that may inform the board performance review.
• The nomination committee should apply a consistent set of assessment criteria to evaluate all directors (including members of the committee) in a holistic manner and ensure that an impartial assessment is conducted. In respect of the assessment of a member of the nomination committee, the relevant member may consider excusing themselves from the discussion or inviting an additional board member to join the assessment.  

• When assessing a director’s contribution to the board, the nomination committee should not simply focus on the number of hours spent by the director on matters related to the issuer. The factors that it considers should cover the essential responsibilities of an effective director. It may also assess individual directors against further criteria, depending on the director’s capacity and/or specific expertise.

Expected disclosure

• While the Exchange does not expect the relevant disclosure in the corporate governance report to be on an individual named basis, issuers should, as a minimum, (i) disclose the process that the nomination committee used to conduct its assessment, including its assessment criteria, and (ii) state whether the nomination committee regards the directors’ time commitment and contribution to the board (as a whole) to be adequate, with supporting reasons. Issuers are also encouraged to provide further information for enhanced transparency, for example, disclosure of the hours contributed by each director on an unnamed basis, and/or disclosure of the average hours / range of hours contributed by EDs, NEDs and INEDs respectively.

• A Lead INED can instill investors with greater confidence in the governance of an issuer by fostering a more proactive independent voice on the board and enabling stakeholders to better understand INEDs’ contributions.
• Where the board chair is not an INED, issuers are strongly encouraged to designate one INED as a Lead INED.

Roles and responsibilities of the Lead INED

• The primary responsibility of the Lead INED is to facilitate and strengthen communication: among INEDs; between INEDs and the rest of the board; and with shareholders (in particular, minority shareholders). Examples of how the Lead INED can perform this function are set out below:

  Communication among INEDs

  • Arrange meetings among INEDs without the presence of the chair and the other directors and provide their feedback to the board and/or the chair as appropriate.

  Communication between INEDs and the rest of the board

  • Ensure active INED participation in board deliberations and activities.
  • Act as a moderator between INEDs and other board members on board-level issues.

  Communication with shareholders

  • Provide shareholders with independent insight on matters such as governance, board effectiveness, corporate strategy and capital management; and how the INEDs have discharged their responsibilities (e.g. the scrutiny of loans granted by the issuer to external parties and connected transactions).

  • As they are not responsible for day-to-day management, investors should not expect to discuss the issuer’s results or operational matters with the Lead INED. However, for example, in a proposed privatization, where the details of the proposal are already set out in the issuer’s shareholder circular, investors may wish the Lead INED to shed light on the board deliberation process (e.g. why the proposed privatization was structured in a particular manner and what other financing alternatives the board had considered). 
  • Be available to shareholders if they have concerns that their contact through normal communication channels (with the chair or management) has failed to resolve, or for which such contact is inappropriate or inadequate.
  • Develop a balanced understanding of key stakeholder views and concerns and convey the same to the board.

• Issuers may choose to define additional functions for the Lead INED, for example:
  
  • To act as a sounding board for the chair, including on matters such as board dynamics and stakeholder concerns, and support the chair in the delivery of their objectives. 
  • To provide leadership in situations where the chair is conflicted (e.g. evaluate the chair’s performance and work with the nomination committee on the chair’s orderly succession). 
  • To oversee the division of responsibility between the chair and the chief executive, where the two roles are separate. 
  • To liaise with the chair and other directors / shareholders to resolve significant issues during challenging times for the board / issuer (e.g. where there is a dispute between the chair and the chief executive, or decisions are being made without the approval of the full board). 

• Issuers should brief and prepare the Lead INED for their role. Topics that should be covered include the Lead INED’s roles and responsibilities, the issuer’s expectations for the Lead INED and guidelines on the disclosure of price sensitive / inside information. The Lead INED should be equipped through training or provided with appropriate support to enable them to engage meaningfully with shareholders and investors without disclosing material, non-public information.   
• The Lead INED designation is not intended to create a hierarchy among INEDs, nor does the Lead INED have a separate or higher level of liability relative to other INEDs. While a Lead INED may have specific roles and functions, they (as with all other directors) are subject to the same fiduciary duties in respect of the issuer and its shareholders. 

Interaction between the Lead INED, board chair, board committee chairs and IR function

• The Lead INED should not duplicate other roles, and should instead complement and co-exist with, the roles of other board members and shareholder communication channels.  
• The board chair has overall responsibility for ensuring the effective functioning of the board and constructive shareholder communication. The Lead INED supports this by strengthening the effectiveness of the INEDs and facilitating a two-way dialogue with investors. The Lead INED also serves as the independent contact point for sensitive issues to be raised on the board.
• Each board committee chair oversees the work of their committee. The Lead INED may liaise with the chairs to understand how each committee has discharged its responsibilities. Each board committee chair and the Lead INED should attend the issuer’s AGM to answer queries from shareholders.
• While day-to-day investor communications will remain with the investor relations (IR) function, the Lead INED can address a more specific “ask” from investors by providing independent insight into the workings of the board. The IR function may provide guidance on the type of information that the Lead INED can disclose and accompany the Lead INED in his / her engagements.