INEDs

Role on the Board

An issuer must appoint INEDs representing at least one-third of the Board. Due to their independence and valuable professional expertise, INEDs are expected to serve on board committees, including the audit, remuneration, nomination and other governance committees.

While not part of the issuer’s management or the day-to-day operations, INEDs should contribute to the development of the issuer’s strategy and policies through independent, constructive and informed comments. In addition, INEDs play a key role in the Board’s oversight of risk management and internal controls.

Time Commitment

INEDs should ensure they can devote sufficient time and attention to the issuer’s affairs to discharge their responsibilities effectively. Both legislation and the Rules on directors’ duties have been strengthened to require INEDs to be fully engaged with the issuer’s affairs both inside and outside the boardroom.

Issuers should explain their analysis on why a proposed INED holding seven (or more) concurrent listed issuer directorship would still be able to devote sufficient time to the Board.

Board Tenure

Ensuring a strong independent element on the Board is key to an effective board. The Board’s constitution should be assessed in line with the evolving business. Periodic Board refreshment can prevent entrenchment and attract new ideas and perspectives and ultimately contribute to Board diversity.

The Rules require separate shareholders’ resolution and enhanced disclosures for re-appointment of an INED who has served more than nine years on the Board.

To promote Board refreshment and succession planning, where all the INEDs of an issuer have served more than nine years on the board, the issuer should:

Disclose their length of tenure on a named basis in the papers for the annual general meeting.
Appoint a new INED on the board at the forthcoming annual general meeting.

Role in Risk Management & Internal Controls

Oversight of an issuer’s risk management and internal controls is the responsibility of the whole Board. INEDs, as independent members of the Board, play an important role in ensuring that risks are properly managed and relevant internal controls maintained and periodically reviewed and updated.

In order to fulfil their supervisory role in risk management and internal controls, INEDs have to obtain sufficient information from the Board and the management to properly assess the effectiveness of the issuer’s risk management and internal control systems.

To learn more on effective risk management and internal controls, please visit our topic page.

Our Guidance Materials

The Exchange has developed training and published comprehensive guidance materials on directors’ duties including those of INEDs. External resources provide additional guidance on these subjects.

Publication and Training
External Resources