In June 2024, the HKEX released a consultation paper proposing amendments to the Listing Rules aimed at enhancing corporate governance for listed companies. 1 These amendments seek to improve board effectiveness and independence, promote diversity, and strengthen risk and capital management.
The new rules are set to take effect on 1 January 2025, and will apply to corporate governance reports for financial years starting on or after this date. The proposals concerning long-serving and over-boarded independent non-executive directors (INED(s)) will have a three-year transition period ending on 31 December 2027.
A significant aspect of the proposal is the gradual removal of long-serving INEDs who have been in their roles for nine years or more. If adopted, this change will impact many companies, as approximately 31% of issuers had long-serving INEDs on their boards as of 31 December 2023.
The proposed amendment is designed to enhance board effectiveness, ensure directors' time commitment and phase out over-boarding INEDs. This change will transform corporate governance in Hong Kong, leading to more effective, diverse and independent boards, and setting a higher standard for corporate accountability. Listed companies should be aware of the proposed amendments and make adjustments accordingly.
Acknowledgements to Trainee Solicitor Elaine Ng and Karen Lee for research and contribution to this article.
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