Latest Review of the Corporate Governance Code and Related Listing Rules by HKEx

Key takeaways

• HKEx prescribes enhanced corporate governance standards and disclosure requirements with effect from 1 July 2025.
• Highlight of the new rules:
  • require mandatory directors training. First-time directors need to complete 24 hours of training within 18 months of the date of their appointment.
  • impose a 9-year term limit for independent non-executive directors, to be implemented by phases within the 6-year transition period.
  • phase out overboarding independent non-executive directors by the first AGM held on or after 1 July 2028.
  • require issuers to appoint at least one director of a different gender on the nomination committee.

Introduction

In June 2024, The Stock Exchange of Hong Kong Limited (“HKEx”) published a consultation paper seeking views and comments from the public on its proposed changes to the Corporate Governance Code under the HKEx’s Listing Rules. The proposed changes touch upon various aspects of corporate governance concerning existing issuers and IPO applicants, requiring higher standards and enhanced disclosure on areas ranging from board effectiveness to independence of independent non-executive directors (“INEDs”), diversity, risk management and internal controls and dividends policy.

After receiving extensive market feedback, HKEx published its consultation conclusions in December 2024 (the “Consultation Conclusions”), adopting all of its proposals with certain modifications. The changes to the Corporate Governance Code and related amendments to the Listing Rules will come into effect on 1 July 2025 (while the implementation of certain proposals will be carried out in phases), applying to the Corporate Governance Reports (the “CG Report(s)”) and annual reports for financial years commencing on or after 1 July 2025.

Key changes

The following table provides a summary of the key changes which will affect issuers’ day-to-day corporate governance compliance and preparation of their CG Reports and annual reports. Issuers are particularly reminded to take note of the implementation dates of the relevant proposals.

There are also certain minor amendments to the HKEx Listing rules that will be in effect from 1 July 2025, covering areas including:

• Codification of the requirement on setting a record date.
• Codification of disclosure in the annual report of issuers’ modified auditors’ opinions.
• Clarification of HKEx’s expectation on the provision of monthly updates to the board. The information provided should (where available) include monthly management accounts and management updates. Where directors consider that they have not been provided with sufficient information by management, they should be able to request further information.23
• Alignment of the requirements for the nomination committee, audit committee and remuneration committee on establishing written terms of reference and the arrangements during temporary deviations from requirements.

Further Guidance by HKEx

In its Consultation Conclusions, HKEx promises that, in the first half of 2025, HKEx will add to its Corporate Governance Practices portal a new guidance (the “Further Guidance”) for boards and directors to assist issuers’ compliance with the new Corporate Governance requirements and address the public’s requests for guidance by providing further guidance on the required disclosure of specific topics in the CG Reports and annual reports. HKEx has not yet published the Further Guidance as of the date of this Update. We will provide updates once the Further Guidance is available.