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Exchange seeks views on a review of the Corporate Governance Code and related Rules, and proposed changes to documentary requirements and other minor Rule amendments

03 Nov 2017
  • Exchange publishes two consultation papers with proposed Listing Rule changes
  • Exchange seeks views on enhancing its Corporate Governance requirements
  • Deadline for submissions is 8 December 2017


The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published two consultation papers to seek public views and comments on:

  1. proposed changes to the Corporate Governance Code and Corporate Governance Report (the Code), as well as related amendments to its Listing Rules (the Rules); and
  2. proposed changes to documentary requirements relating to listed issuers and other minor Rule amendments.

Review of the Code and Related Rules

“This consultation is part of our ongoing initiative to raise the overall standard of corporate governance amongst issuers and directors.  Proposed changes are aimed at addressing a number of corporate governance concerns such as the independence (or the lack thereof) of independent non-executive directors (INEDs), overboarding by some INEDs, the responsibility of the nomination committee and board diversity.” said David Graham, HKEX’s Chief Regulatory Officer and Head of Listing.

Since a comprehensive revamp in 2012, the Code has undergone some important changes, including the introduction of a board diversity code provision (CP, subject to “comply or explain”) in 2013 and strengthened requirements in the risk management and internal control section of the Code in 2016.

Some of the Exchange’s proposals are highlighted in the following summaries.


Overboarding and INED’s time commitment

Revise a current CP so that the issuer explains why it considers the proposed INED holding a seventh (or more) directorships can still devote sufficient time for the new appointment, and issue guidance on factors affecting an INED’s time commitments.

Identification and nomination

Revise a CP to require the disclosure of the process used for identifying the proposed INED, as well as the selection process for the proposed INED and reasons for nomination.

Factors affecting independence

(i)  Revise the relevant Rule to extend the cooling off periods of former professional advisors and individuals with material interests in the issuer’s business activities. 
(ii)  Introduce new note to the relevant Rule to encourage inclusion of an INED’s immediate family members in the assessment of the director’s independence. 
(iii)  Introduce a new Recommended Best Practice to encourage disclosure of INEDs’ cross-directorships or significant links with other directors.
(iv)  Revise the relevant CP to recommend INEDs meet with the chairman in the absence of other directors at least annually. 

Board Diversity

Board diversity policy

Upgrade from a current CP on board diversity policy to a Rule requiring the issuer to have a board diversity policy and to disclose the policy or provide a summary, and issue guidance on the factors to be included in the board diversity policy.

Proposed INED’s contribution to board diversity

Revise a CP to require the disclosure of how a proposed INED may contribute to the board in terms of perspectives, skills and experience and also to board diversity.

Proposed changes to documentary requirements relating to listed issuers and other minor Rule amendments

The Rules require listed issuers to submit documents to the Exchange from time to time.  The Exchange proposes to simplify and streamline the administrative procedures involved in the submission and collection of documents to enhance procedural efficiency.  The consultation paper also sets out other proposed minor Rule amendments and a number of housekeeping Rule amendments that involve no change in policy direction.

The deadline for responding to both consultation papers is 8 December 2017.

The consultation paper and questionnaire on Review of the Corporate Governance Code and Related Listing Rules, and consultation paper and questionnaire on Proposed Changes to Documentary Requirements relating to Listed Issuers and Other Minor Rule Amendments can be downloaded from the HKEX website.  Interested parties are encouraged to respond by completing and submitting the questionnaires.



Updated 03 Nov 2017