In our earlier article titled “HKEX Publishes Consultation Conclusions on Revisions to the Corporate Governance Code”, we discussed the amendments to the Corporate Governance Code (“CG Code”) and related Listing Rules, which will take effect on 1 July 2025.

To assist issuers and directors in better understanding the new corporate governance requirements, on 29 May 2025, The Stock Exchange of Hong Kong Limited published:

• an updated Corporate Governance Guide for Boards and Directors (“New CG Guide”); and
• Updated versions of FAQs – Directors (FAQ 1.1) and FAQs – Corporate Governance Code (FAQ 17.1) (“Updated FAQs”).

The New CG Guide, which should be read alongside the relevant Listing Rules (including the CG Code), provides further guidance and recommendations on several new corporate governance requirements, including:

Lead INED

Regarding the recommended best practice for the appointment of a lead independent non-executive director (“Lead INED”):

• Elaborated on the expected roles and responsibilities of a Lead INED, which is to facilitate and strengthen communication (i) among INEDs, (ii) between INEDs and the rest of the board, and (iii) with shareholders (in particular, minority shareholders) (see New CG Guide, p.10);
• Provided concrete examples on how Lead INED can perform the above functions, and how Lead INED interacts with other roles (e.g. board chair, board committee chairs, and investor relations function) (see New CG Guide, pp.10-12);
• Provided a list of practical considerations for board including the selection of Lead INED, the designation and tenure limit for Lead INED, remuneration of Lead INED and the disclosure requirements (see New CG Guide, p.12);

Board performance evaluation

Regarding the new Code Provision (“CP“) concerning board performance evaluation:

• Provided guidance on how issuers may structure and implement regular board performance reviews that fit their individual circumstances (see New CG Guide, pp.22-23);
• Elaborated on the expected scope and level of detail for disclosure of the board performance review to be conducted at least every two years, including a non-exhaustive list of areas which issuers may consider when determining the criteria for performance review (such as board composition, skills, culture and practices, quality and timeliness of information to the board, compliance and training, risk management and internal controls (“RMIC“), and stakeholder engagements) (see New CG Guide, pp. 24-25);
• Elaborated on the information expected to be disclosed in issuers’ corporate governance reports (“CG Report“), which should include the review scope, mode, methodology and findings of the board performance review. Such information should also include any identified key aspects of the board’s performance which merit improvement (e.g. additional skills to be acquired) and the measures taken or planned to address the findings (see New CG Guide, pp.25);

Board Skills Matrix

Regarding the new CP in relation to the board skill matrix:

• Emphasised that a board skill matrix should display the board’s collective experience, skills, qualifications and expertise (not individual director’s), and connect these with the issuer’s long-term strategy and particular goals, including its diversity targets (see New CG Guide, p.26);
• Explained that there is no specified format for the board skills matrix, as long as issuers make meaningful disclosure which includes: (i) the existing skills mix of the board; (ii) how the combination of skills, experience and diversity of the directors serves the purpose, value, strategy and desired culture of the issuer; and (iii) details and plans of the board to acquire further skills (if any) (see New CG Guide, p.26);
• Provided an example board skills matrix covering areas of strategy, leadership, industry knowledge and experience, financial literacy / business acumen, risk management and compliance, diversity, emerging topics (e.g. artificial intelligence) and qualifications for illustration purposes (see New CG Guide, pp.26-27);

Nomination Committee’s annual assessment of directors’ time commitment and contribution

Regarding the new mandatory disclosure requirement (“MDR“) for the nomination committee’s annual assessment of directors’ time commitment and contribution to the board:

• Provided a list of suggested assessment criteria that a nomination committee may consider when conducting such assessment, including directors’ involvement on the board, familiarity with / knowledge of the issuer and its business and other factors) (see New CG Guide, p.9);
• Provided guidance on the expected level of disclosure in the CG Report, which should, as a minimum: (i) disclose the process that the nomination committee used to conduct its assessment, including the assessment criteria; and (ii) state whether the nomination committee regards the directors’ time commitment and contribution to the board as a whole to be adequate, with supporting reasons (see New CG Guide, p.10);

Annual review of effectiveness of risk management and internal control (“RMIC”) systems

Regarding the upgrade from CP to MDR in relation to the annual review of the effectiveness of the RMIC systems:

• Elaborated on the roles and responsibilities that the board, management and audit committee should take when dealing with RMIC (see New CG Guide, pp.38-39);
• Elaborated on how issuers can identify and assess risk (see New CG Guide, pp.40-41);
• Elaborated on the components of RMIC systems that issuers should consider (see New CG Guide, pp.42-44);
• Emphasised the board’s responsibility in monitoring and reviewing RMIC systems (see New CG Guide, pp.44-45);
• Elaborated on the scope for annual reviews, which includes suggested areas of focus categorised under the following main components: (i) corporate culture / control environment; (ii) risk assessment; (iii) internal controls; (iv) information and communication; (v) monitoring (see New CG Guide pp.46-48); and
• Provided a list of practical considerations when preparing for disclosure on RMIC including the scope and reviews of RMIC system and board’s confirmation of RMIC systems’ effectiveness (see New CG Guide pp.49).

For details, please refer to the New CG Guide and Updated FAQs. If you have any questions regarding the amendments to the CG Code and the relevant Listing Rules or want to have more practical tips and guidance in fulfilling the new corporate governance requirements, please do not hesitate to contact us.