Are you ready? Upcoming changes to the Hong Kong Corporate Governance Code

What you need to know

The revised Hong Kong Listing Rules (LR) and Corporate Governance Code (CG Code) will take effect on 1 July 2025.  The new rules will apply to corporate governance reports under the CG Code (CG Reports) and annual reports in respect of financial years commencing on or after 1 July 2025.  The changes relating to Overboarding INEDs / Long Serving INEDs (respectively defined in sections A and B under "What the changes are" below) will be subject to a transitional period.  A copy of the LR and CG Code amendments can be found here.

In conjunction with the upcoming changes, the Exchange published a revised Corporate Governance Guide for Boards and Directors (2025 CG Guide) at the end of May 2025.  Although the 2025 CG Guide covers roughly the same topics as the 2021 version, it is notable that many areas have been extensively re-written, based on the revised CG Code, to provide comprehensive guidance to the market. 

The Exchange's Guide on Preparation of Annual Report, FAQ 1.1 and FAQ 17.1 for listed issuers and e-learning on continuing obligations have all been updated to reflect the latest LR and CG Code.

Set out below is a summary of the changes to the LR and CG Code, and a list of matters that issuers may wish to consider when preparing for the upcoming changes. 

What the changes are

Set out below is a summary of the main changes to the LR and CG Code.

What you need to do before 1 July 2025

Content of the nomination committee's terms of reference

Review this document and consider whether to formally incorporate the matters set out below before 1 July 2025.  Under CP B.3.2, the terms of reference should be included on the Exchange's website and the issuer's website. 

• MDR paragraph E(d)(iii) – Nomination committee to annually assess each director’s time commitment and contribution to the board, and the director's ability to discharge its responsibilities effectively.
• CP B.1.4  / CP B.3.1 – Nomination committee to support the issuer's board performance review, and the performance review should be conducted at least once every two years.
• CP B.3.1 – Nomination committee to assist the board in maintaining a board skills matrix.
• CP B.3.5 – Nomination committee to have at least one director of a different gender. 

Diversity policy

If the issuer does not have a policy that covers diversity in its workforce (including senior management), it should ensure one is in place before 1 July 2025, as it is an explicit requirement under the revised LR 13.92 (the existing LR 13.92 only requires the issuer to have a policy covering board diversity).  In particular, ensure the policy includes the requirements set out in MDR paragraph J and Chapter 3 of the 2025 CG Guide (see below).

The board diversity policy should include measurable objectives (e.g. numerical targets and timelines) that it has set for the promotion of gender diversity.  The board should review it annually (even if the issuer has achieved its current diversity objective). 

The workforce diversity policy should include any plans or measurable objectives (e.g. numerical targets and timelines) the issuer has set for achieving gender diversity.

Dividend policy

• Issuers should review their dividend policy (if any) and update it (if necessary) before 1 July 2025.  This is particularly relevant for issuers who intend to announce any dividends on or shortly after 1 July 2025. If they do not have a dividend policy, they should consider adopting one to enhance disclosure to investors.
• MDR paragraph M – If the issuer has a dividend policy, it should review it and, if it is not already covered, include the aim or objective of the policy, and the key factors that the board will take into account when deciding whether to declare, recommend or pay any dividend.   
• The 2025 CG Guide encourages issuers to state if dividend decisions are subject to any regulatory oversight.  It also encourages issuers to go beyond the required disclosure in the LR by providing insight into their wider capital allocation policies and strategics, including their policy on share buy-backs and share cancellations.

What else you need to consider

The following changes introduced by the CG Code are likely to have an impact on issuers' internal policies and processes. Issuers should consider, as soon as possible, whether policies or processes in the following areas need to be updated, in order to align compliance with the revised CG Code, and to capture additional information required for disclosure in CG Reports.  Further guidance can also be found in the 2025 CG Guide and Exchange FAQs.

Director training

• LR 3.09F, 3.09G, 3.09H, MDR B(i), Principle C.1 – Directors are required to attend annual training and certain details are required to be disclosed in the CG Report. The 2025 CG Guide suggests the company secretary may help facilitate training, and recommends issuers to put in place a system to record relevant information to facilitate disclosure.
• The 2025 CG Guide also includes an example of how issuers may disclose the training that directors have attended.
• Refer to FAQ 1.1 for further information about director's training.  Please note watching e-learning videos provided by the Exchange (such as the recently revised e-learning on continuing obligations) would count towards a director's continuous professional development. 

Assessment of directors' time commitment / contribution and board performance

• Issuers and their nomination committees should review and update their policies or processes, and ensure the relevant information is captured for disclosure purposes.
• MDR paragraph E(d)(iii) relates to the nomination committee's annual assessment of each director’s time commitment and contribution to the board, and the director's ability to discharge its responsibilities effectively.  This assessment is separate from the board performance review, and the Exchange does not expect the disclosure in the CG Report to be on an individual named basis.  The 2025 CG Guide provides further guidance on how the assessment should be conducted, including factors the nomination committee may consider taking into account and expected areas of disclosure. 
• CP B.1.4 relates to the reporting on the results of any board performance review.  The 2025 CG Guide provides guidance on the frequency and scope of the review, and whether the review should be conducted internally or by an external reviewer, and assessment criteria.
• CP B.1.5 relates to the reporting on the board skills matrix and other related information. The 2025 CG Guide provides a sample board skills matrix, which issuers may wish to refer to.

Board succession

• Although a transitional period applies, Overboarding INEDs and Long Serving INEDs will be phased out eventually.  Even if issuers do not currently have these types of INEDs on their boards, they should still conduct comprehensive succession planning to allow sufficient time for the recruitment of suitable replacement INEDs. In addition, succession planning will also have to take into account the number of directors of a different gender on the board and nomination committee. The nomination committee's role will have to play a key role in considering succession planning.
• Issuers with existing Overboarding INEDs and Long Serving INEDs should also refer to the 2025 CG Guide and FAQ 1.1 for additional guidance. 

Monthly financial reporting to directors

CP D.1.2 has been amended to clarify that issuers should provide monthly updates to the directors (including monthly management accounts and management updates).  Issuers may need to enhance their internal reporting processes to update their directors in a timely manner.  Revised FAQ 17.1 provides that the issuer's management should respond in a timely fashion if directors request further information. 

Lead INED

• RBP C.1.8 – Issuers should consider appointing one INED as the Lead INED if the board chair is not an INED.  The 2025 CG Guide elaborates on the roles and responsibilities of the Lead INED, and how the Lead INED interacts with other roles (e.g. board chair, board committee chairs, investor relations function).
• The 2025 CG Guide also sets out a number of areas boards should think about before implementing the Lead INED role.  Please also refer to FAQ 1.1 for further guidance. 

Documenting shareholder engagements conducted throughout the year 

• MDR paragraph L(d) and CP F.1.1 – Details of shareholder engagement should be captured, including the nature, number, frequency, parties involved and the issuer's approach to following up on the outcomes of these engagements. Issuers should review their policies or processes to record this information for disclosure purposes. 
• The 2025 CG Guide encourages issuers to disclose the major areas of interest for investors and the issuer’s strategy or key areas of focus in relation to the management of key stakeholder relationships during the reporting period.  The disclosure may be included in the issuer’s annual report, website and announcements.
• The 2025 CG Guide also sets out topics that shareholders may be particularly interested in.

RMIC Systems

• The revised Principle D.2 emphasises the board's responsibility for RMIC, and to ensure that RMIC systems are reviewed at least annually.  The revised MDR paragraph H enhances disclosure requirements relating to RMIC (which cover both the issuer and its subsidiaries).
• The 2025 CG Guide elaborates on (i) the role the board, management and audit committee should take when dealing with RMIC; (ii) how issuers can identify and assess risk; and (iii) components of RMIC systems that issuers should consider; (iv) monitoring and reviewing RMIC systems; (v) defining the scope for the annual review of RMIC systems; and (vi) disclosure considerations.
• Issuers should review and update their policies or processes, and ensure the relevant information is captured for disclosure purposes. 

Diversity matters 

Issuers should review and update their policies or processes, and ensure the relevant information for the following is captured for disclosure purposes.

• MDR paragraph J(a) – Annual review of the board diversity policy is required (upgrade from a CP to MDR).
• CP B.1.5 – Reporting on the board skills matrix (which includes diversity of directors).
• MDR paragraph J(c) – Requires separate disclosure of the gender ratio of: (i) senior management and (ii) the workforce (excluding senior management).