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Consultation Paper on
Review of the Corporate Governance Code and
Related Listing Rules

Written by: Ms. Winsome Tam – Senior Risk Consultant

The Stock Exchange of Hong Kong Limited (the “Exchange”) has published a consultation paper on the review of the Corporate Governance (“CG”) Code and Related Listing Rules in November 2017. The consultation paper aims to:

  • Improve transparency and accountability of the nomination and election process of directors including Independent Non Executive Directors (“INED”)’
  • Enhance transparency of INED’s relationship with issuers;
  • Strengthen the independence criteria in assessing potential INED candidates;
  • Promote board diversity; and
  • Require greater transparency of dividend policy.

Here is summary of the key proposals in the CG consultation paper:

Overboarding and INED’s time commitment
The Exchange is proposing to amend the CP so that if the proposed INED will be holding his seventh (or more) listed company directorship, reasons should be given in the circular to shareholders if the person would still be able to devote sufficient time to the board.

Board diversity

The Exchange proposes to upgrade a Code Provision (“CP”) to a Rule and make consequential amendments to Mandatory Disclosure Requirement, requiring issuers to have a diversity policy and to disclose the policy or a summary of it in their CG reports. In addition, the Exchange suggests revising the relevant CP so that the board should state its diversity consideration in the circular to shareholders accompanying the resolution to elect the director, including the process used for identifying the nominee, the perspectives, skills and experience the person is expected to bring to the board and how he would contribute to diversity of the board.

The current system does not mandatorily require the listed issuers to make excess applicatioent or compensatory arrangement for unsubscribed shares. Without the two ta entit

Factors affecting INED’s independence
The Exchange is proposing to tighten the requirements for assessing the independence of INEDs. For former professional advisers, it is proposed to extend the “cooling-off” period during which such person will not be considered independent from one year to three years. Similarly, the Exchange proposes to introduce a one year cooling-off period for persons who have had a material interest in any principal activity of the listed issuer. There will also be a consequential amendment to extend the cooling off period for a former partner of the listed issuer’s audit firm from one year to three years for the appointment to the audit committee.  Additionally, the Exchange is proposing that the position of an INED’s immediate family members (as defined in the Listing Rules) should be taken into account in assessing a director’s independence.

Nomination policy

It is proposed that the nomination policy is required to be disclosed as part of the mandatory disclosure requirements in the CG report.

Directors’ attendance at meetings

It is proposed to revise CP to require that INEDs should meet at least annually with the chairman even if the chairman is not an INED. There should be a forum for the chairman to meet with INEDs even if he is not an INED as the presence of the chairman encourages INEDs’ attendance and this is to address the concern that NEDs are often family members connected to management who could unduly influence the meeting. The CG consultation paper also proposes amending the existing CP which expects NED attendance at general meetings to clarify that non-attendance by any directors will not be seen as a deviation from compliance.

Dividend Policy

It is proposed that disclosing its dividend policy in the issuer’s annual report is required.

Electronic dissemination of corporate communications by implied consent
The Exchange is taking the opportunity to seek opinions from the market on whether the Rules should be amended to allow shareholders’ consent to be implied for electronic dissemination of corporate communications by issuers.


The consultation paper has been closed in December 2017. Consultation conclusion will be discussed upon finalized.


Consultation Paper: Review of the Corporate Governance Code and Related Listing Rules

If there are any aspects which we may assist, please do not hesitate to contact:

Principal - Ms. Gloria So
gloria.so@shinewing.hk (Tel. 3583 8517)

SHINEWING Risk Services Limited

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T. (852) 3583 8000

F. (852) 3583 8532

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E. risk@shinewing.hk


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