The Hong Kong Stock Exchange (HKEX) published conclusions to a consultation exercise on Review of Corporate Governance Code and Related Listing Rules on 19 December 2024 – with modified amendments now coming into effect on 1 July 2025. This is later than the original implementation date of 1 January 2025 as proposed in the consultation paper.
(Refer to our earlier update on proposed major amendments here: “Hong Kong: HKEX proposes amendments to listing rules to strengthen corporate governance for listed companies“).
The original proposals received majority support, although to strike a balance between advancing its governance regime as well as retaining flexibility for issuers, the HKEX modified requirements.
The following table highlights requirements modified from the initial proposals:
| Area |
Proposed amendment |
Requirement coming into effect on 1 July 2025 |
| Board effectiveness |
- New Code Provision (CP) of the Corporate Governance Code (CGC) (which requires the “comply or explain” threshold to be met): Issuers without an independent board chair to designate a lead INED.
|
- New Recommended Best Practice under the CGC (RBP): Designation of a lead INED has been modified to an RBP, which is voluntary in nature.
- New CP and new Mandatory Disclosure Requirement under the CGC (MDR): Issuers subject to enhanced disclosures in the Corporate Governance Report regarding shareholder engagement, which includes:
- nature/number/frequency of engagements;
- the group(s) of shareholders and representatives of the issuer involved; and
- the issuer’s approach to following up.
|
- New Listing Rule (LR): Requiring directors to receive training annually on specified topics and directors who are (a) appointed as a director for the first time, or (b) have not served as a director of an issuer listed on the HKEX within three years prior to their appointment (both First-time Directors) to complete a minimum of 24 hours of training within 18 months of their appointment.
|
- New LR (modified): First-time Directors’ minimum required training is reduced to 12 hours if they have directorship experience on other exchanges within three years prior to their appointment.
- New LR (modified): Removal of the “reset” mechanism for a First-time Director who ceases to be a director of an issuer prior to their completion of the minimum training hours.
|
| Overboarding INED and directors’ time commitment |
- New LR: An INED must not concurrently hold more than six listed issuer directorships (i.e. an Overboarding INED), with a three-year transition period.
|
- New LR (specified):
- Issuers: There is a three-year transition period (compliance required by the first AGM held on or after 1 July 2028 by any issuer currently with an Overboarding INED);
- IPO applicants: They are not permitted to have Overboarding INEDs on their board upon listing.
|
INED
independence |
- New LR: An issuer’s board must not include an INED who has served more than nine years (Long Serving INED), with a two-year cooling-off period and a three-year transition period.
|
- New LR (modified): The hard cap of nine years tenure for INEDs has been adopted with a phased implementation over a transition period of six years:
- Phase One (compliance by the first AGM held on or after 1 July 2028): The majority of INEDs on an issuer’s board must not be Long Serving INEDs;
- Phase Two (compliance by the first AGM held on or after 1 July 2031): An issuer must not have any Long Serving INED on their board.
|
The HKEX will publish updated guidance in the first half of 2025 to assist compliance with the new requirements.
Key takeaways
- There will be enhanced disclosure requirements regarding the board’s engagement with shareholders during the reporting period. Issuers should note the specific information required for such disclosures and take necessary steps to comply.
- Although the hard cap on the tenure of INEDs will be implemented over a transition period, issuers should plan ahead to ensure timely compliance. Preparations may include searching for suitable candidates who may satisfy the INED requirements to replace its Long Serving INEDs.
