The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of  Hong Kong Exchanges and Clearing Limited (HKEx), today (Friday) published its Consultation Conclusions on Risk Management and Internal Control: Review of the Corporate Governance Code and Corporate Governance Report.

The Exchange published a consultation paper in June 2014 to seek comments on its proposed amendments to the Corporate Governance Code and Corporate Governance Report (the Code) relating to internal controls. The consultation period closed on 31 August 2014. For this consultation, the Exchange received a total of 57 submissions from issuers, market practitioners, professional bodies, institutional investors and individuals. The consultation found there is strong support for the Exchange’s proposals.

In summary, the main changes to the Code include:

• incorporating risk management into the Code where appropriate;
   
• defining the roles and responsibilities of the board and management;
   
• clarifying that the board has an ongoing responsibility to oversee the issuer’s risk management and internal control systems;
   
• upgrading to Code Provisions (CPs, i.e. subject to “comply or explain”) the recommendations (i.e. voluntary) in relation to the annual review of the effectiveness of the issuer’s risk management and internal control systems, and disclosures in the Corporate Governance Report; and
   
• upgrading to a CP the recommendation that issuers should have an internal audit function, and those without to review the need for one on an annual basis.

The consultation paper and consultation conclusions are available on the HKEx website along with copies of respondents' submissions.

The amendments to the Code will apply to accounting periods beginning on or after 1 January 2016.  Frequently Asked Questions can be downloaded from the "Rules & Regulations - Rules and Guidance on Listing Matters – Interpretation and Guidance" section of the HKEx website.

"We welcome the overwhelming market support for the Exchange to update and enhance the Code in relation to internal controls.  The amendments will help to improve the overall corporate governance standards of our issuers and will bring our Code in this area more in line with international best practices," said David Graham, HKEx’s Chief Regulatory Officer and Head of Listing.

Ends