Corporate Law Updates

Find out all about our firm’s latest Corporate Law Updates below. To learn more about any individual item, please contact us here.

16 Jun 2025

Hong Kong’s Stablecoins Ordinance to Take Effect on 1 August 2025, Welcoming A New Era for Virtual Asset Regulation

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The Hong Kong[1] Government has confirmed that the Stablecoins Ordinance will take effect on 1 August 2025,[2] requiring issuers of fiat-referenced stablecoins in Hong Kong or those pegged to the Hong Kong dollar (“HKD”) to be licensed by the Hong Kong Monetary Authority (“HKMA”).

Overview of the Stablecoins Ordinance

The Stablecoins Ordinance aligns Hong Kong’s virtual assets regulatory framework with international standards under the “same activity, same risks, same regulation” principle.

The Stablecoins Ordinance sets out a regulatory framework for activities relating to “specified stablecoins” (“Specified Stablecoins”). Specified Stablecoins, as a type of virtual assets used as a medium of exchange, maintain a stable value with reference to one or more official currencies, such as the HKD, or a digital representation of value.[3] Issuers of Specified Stablecoins in Hong Kong must obtain a licence from the HKMA and continue to comply with the comprehensive requirements.

Key Provisions of the Licensing Regime

The Stablecoins Ordinance introduces a comprehensive regulatory framework for the issuance, offering, and marketing of Specified Stablecoins. Below are the key provisions: –

Licensing Requirement

Any person engaging in the following activities must obtain a license from the HKMA: –

issuing Specified Stablecoins in Hong Kong in the course of business;
issuing Specified Stablecoins outside Hong Kong that are pegged, wholly or partly, to the HKD; and
carrying out activities designated by the HKMA as “regulated stablecoin activities”.

Requirements of Licensed Issuers

To obtain a licence from the HKMA for issuing Specified Stablecoins, applicants must satisfy, including but not limited to, the following minimum criteria: – [4]

Offering Restrictions The Stablecoins Ordinance regulates not only the issuance of Specified Stablecoins, but also who can offer Specified Stablecoins, including but not limited to: –

Licensees under the Stablecoins Ordinance;
SFC-licensed virtual asset trading platform operators under the Securities and Futures Ordinance (Cap. 571);
SFC-licensed corporations for Type 1 (dealing in securities) activity;
Authorised institutions under the Banking Ordinance (Cap. 155);
Stored value facility (“SVF”) licensees under the Payment Systems and Stored Value Facilities Ordinance (Cap. 584);

Under the new regime, Specified Stablecoins issued by HKMA-licensed issuers can be offered to retail investors; others are restricted to professional investors or exempted persons designated by the HKMA or Financial Secretary. Transitional Arrangements Existing stablecoin issuers (“Issuers”) have a three-month period from 1 August 2025 (“Effective Date”) to apply for a licence, during which they may continue regulated stablecoin activities without immediate penalty. Issuers meeting the following conditions may receive a six-month extension: –

Submitting a license application within three months from the Effective Date;
Receiving written confirmation from the HKMA acknowledging the application;
Providing a written statement confirming they were conducting regulated stablecoin activities in Hong Kong before the Effective Date; and
Providing a written undertaking to comply with regulatory requirements applicable to licensed issuers upon receiving a temporary license.

Issuers failing to apply within three months will enter a one-month wind-down period starting three months after the Effective Date. Issuers whose applications are rejected or withdrawn will enter a one-month wind-down period from the date of rejection or withdrawal, with the option to apply for an extension.AML/CFT Requirements On 26 May 2025, the HKMA released a consultation paper outlining proposed AML/CFT requirements for regulated stablecoin activities. Key proposals include, but are not limited to: –

Customer Due Diligence (“CDD”): Conducting CDD for customers involved in issuance or redemption transactions of HK$8,000 or more, including verifying wallet ownership;
Unhosted Wallets: Implementing enhanced monitoring, transaction limits, and screening for transfers to unhosted wallets to mitigate money laundering and terrorist financing (“ML/TF”) risks;
Ongoing Monitoring: Using blockchain analytics to track transaction histories and detect illicit activities, with mandatory suspicious transaction reporting;
Travel Rule Compliance: Adhering to virtual asset transfer requirements under the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615), ensuring due diligence on custodial wallet providers; and
Secondary Market Monitoring: Proposing measures such as limiting primary distribution to regulated entities, using blockchain analytics, and blacklisting illicit wallet addresses to combat ML/TF risks in peer-to-peer trading.

Feedback on these proposals is due by 30 June 2025.Implications for the Virtual Asset Industry Enhanced Investor Confidence: The stringent licensing requirements, including reserve asset segregation and AML/CFT compliance, provide greater assurance to investors, reducing the risk of fraud and financial instability.

Attracting Global Players: The Stablecoins Ordinance’s alignment with international standards and its pragmatic approach make Hong Kong an attractive destination for both traditional financial institutions and fintech startups.
Compliance Challenges: Smaller issuers may face significant costs in meeting the HKMA’s high regulatory standards, particularly in areas like reserve management, ongoing auditing, and AML/CFT compliance.

Conclusion The Stablecoins Ordinance, set to take effect on 1 August 2025, represents a significant step forward in Hong Kong’s digital finance journey. By balancing innovation with robust regulation, the Stablecoins Ordinance enhances market integrity, protects consumers, and positions Hong Kong as a competitive player in the global virtual asset landscape. Collaboration between regulators, issuers, and industry stakeholders will be essential to ensure a smooth transition and sustainable growth in Hong Kong’s stablecoin ecosystem.For issuers, compliance with the Stablecoins Ordinance will require significant investment in legal, operational, and financial systems, especially regarding reserve asset management and AML/CFT controls. While this may raise barriers to entry for smaller or less well-capitalised firms, it is expected to enhance overall market credibility and attract established financial institutions and global fintech companies to the Hong Kong market.For investors and users, the new licensing and supervisory requirements are designed to boost confidence in the safety and reliability of stablecoins available in Hong Kong, particularly for retail users who will have access only to products issued by HKMA-licensed entities.Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.This news update is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.[1] In this article, “Hong Kong” means the “Hong Kong Special Administrative Region of the People’s Republic of China”.[2] On 21 May 2025, the Legislative Council of Hong Kong passed the Stablecoins Bill; “Stablecoins laws effective Aug 1”.[3] Section 4 of the Stablecoins Ordinance [4] Schedule 2 Part 2 of the Stablecoins Ordinance

Requirement	Details
Corporate Structure	The applicant must be a company, or an authorized institution incorporated outside Hong Kong.
Financial Resources	The applicant must have a minimum paid-up share capital of HK$ 25 million or its equivalent, and adequate liquid assets.
Reserve Assets	The applicant must establish an effective stabilisation mechanism for its Specified Stablecoins, maintaining a pool of reserve assets at least equal to the par value of the stablecoins in circulation, which is segregated from any other pool of reserve assets, ensuring high quality and liquidity, and allowing timely redemptions at par value without excessive fees.
Redemption	Process redemption requests of the Specified Stablecoins by holders at par value without undue delay and without having to face burdensome conditions and fees.
AML/CFT Compliance	Implement effective anti-money laundering and counter-terrorist financing (“AML/CFT”) systems and controls.
Disclosure and Auditing	Provide sufficient and timely disclosures to the public regarding reserve asset management policies, risk assessments, composition, and market value, and undergo regular independent verification and audits.
Fitness and Propriety	Ensure key personnel, including controllers, chief executives, directors, and stablecoin managers, meet the HKMA’s fitness and propriety standards.
Local Presence	Maintain a physical presence in Hong Kong for regulatory oversight.

Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.

This news update is for information purposes only. Its content does not constitute legal advice and should not be treated as such. Stevenson, Wong & Co. will not be liable to you in respect of any special, indirect or consequential loss or damage arising from or in connection with any decision made, action or inaction taken in reliance on the information set out herein.

Posted by Editor

29 May 2025

Hong Kong Introduces Company Re-domiciliation Regime with Passage of Companies (Amendment) (No. 2) Bill 2024

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On 14 May 2025, the Legislative Council of Hong Kong passed the Companies (Amendment) (No. 2) Bill 2024, introducing the re-domiciliation regime (“Re-domiciliation Regime”), effective from 23 May 2025. Governed by the Companies (Amendment) (No. 2) Ordinance 2025, the Re-domiciliation Regime enables non-Hong Kong incorporated companies to transfer their place of incorporation to Hong Kong while preserving their legal identity and ensuring uninterrupted business operations.

The Re-domiciliation Regime enables eligible non-Hong Kong companies to register as “re-domiciled companies” in Hong Kong under section 820C(1) of the Companies Ordinance (Cap. 622) (“CO”). Re-domiciliation ensures that companies retain their existing property, rights, obligations, and ongoing contractual and legal processes without disruption. Notably, the Re-domiciliation Regime does not impose an economic substance test, making it accessible to businesses of varying sizes and sectors.

Key Eligibility Criteria

The following table summarizes the key eligibility criteria for the applicants of the Re-domiciliation Regime (“Applicants”): –

Criteria

Details

Type of Company

(section 820C(1) of the CO)

Eligible company types include:

· Private companies limited by shares;

· Public companies limited by shares;

· Private unlimited companies with share capital; or

· Public unlimited companies with share capital.

The company type in the original jurisdiction will be the same or substantially similar to the proposed type in Hong Kong.

Compliance with Original Jurisdiction Laws

(Section 4(1) (c) of

Schedule 6A to the CO)

The law of the Applicant’s place of incorporation must permit re-domiciliation to another jurisdiction.

Solvency

(Sections 2(1)(f)(ix) to (xii) and 2(2)(c) to (g) & (o) of Schedule 6C to the

CO)

The Applicant must provide a certificate signed by a director confirming that the Applicant:

· is not in liquidation;

· has no ongoing or pending proceedings for liquidation against the Applicant;

· is able to pay its debts due within 12 months beginning on the application date; and

· has not resolved to wind itself up or liquidate.

Good Faith

(Section 2(2)(n) of Schedule 6C to the

CO)

The Applicant must not intend to defraud its existing creditors or engage in unlawful activities or purposes contrary to public interest.

Shareholder Approval

(Sections 4(1)(d) to 4(1)(f) and 4(3) to 4(4) of Schedule 6A and sections 1(3), 1(4) and 2(1)(f)(viii) of Schedule 6C to the CO)

Consent of the Applicant’s members is required for the re-domiciliation to Hong Kong.

Application Documents and Fees

Applicants must submit, including but not limited to, the following documents to the Registrar of Companies: –

a completed Re-domiciliation Form (Form NNC6);
proposed articles of association of the Applicant;
certified copies of incorporation and constitutional documents;
shareholder resolutions approving the re-domiciliation;
financial accounts (audited or non-audited, not older than 12 months);
legal opinions confirming compliance with eligibility criteria and solvency; and
a completed Notice to Business Registration Office (Form IRBR5).

The application fee will be HK$1,030 for electronic submissions and HK$1,145 for paper submissions, while the fees for registering as a re-domiciled company are HK$5,020 for electronic forms and HK$5,580 for paper forms.

Post-Re-domiciliation Obligations

Once re-domiciled, companies must fulfil, including but not limited to, the following obligations to maintain compliance: –

Return on Share Capital (Form NSC21): Submitted within 15 days of re-domiciliation, including a statement of share capital as of the re-domiciliation date, pursuant to section 201 of the CO;
Deregistration in Original Jurisdiction: Completed within 120 days of re-domiciliation, with evidence provided to the Hong Kong Companies Registrar. Extensions may be granted if necessary.

Tax and Legal Implications

Section 820D(4) of the CO clarifies that re-domiciliation does not constitute a transfer of assets or alter the beneficial ownership of assets, ensuring no impact on tax obligations in the original jurisdiction or Hong Kong. Re-domiciled companies will be subjected to profits tax on Hong Kong-sourced profits from local business activities.

Additionally, the Re-domiciliation Regime addresses the following tax and legal considerations to facilitate a smooth transition: –

Tax Credits: Sections 12 to 14 of Schedule 17L of the Inland Revenue Ordinance (Cap. 112) provide unilateral tax credits to mitigate double taxation. Companies can claim credits for taxes paid in their original jurisdiction that are similar to Hong Kong’s profits tax; and
Legal Treatment: Under sections 2(5A) and 820D of the CO, re-domiciled companies are treated as Hong Kong-incorporated entities, retaining all pre-existing contracts, rights, and liabilities without creating a new legal identity.

Conclusion

The Re-domiciliation Regime, effective 23 May 2025, strengthens Hong Kong’s position as a global business and financial hub. By offering tax credits, seamless business continuity, and robust regulatory support, the regime provides an attractive framework for companies seeking to establish or expand their presence in Asia.

Companies considering re-domiciliation should, however, carefully assess the implications on their tax residency, regulatory licensing, and contractual arrangements. While the new framework ensures legal continuity, practical considerations such as stakeholder communications, regulatory approvals, and exit requirements from the original jurisdiction may require careful planning and execution.

Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.

Posted by Editor

9 May 2025

SFC and HKEX Jointly Launch Technology Enterprises Channel to Support Listings of Specialist Technology Companies and Biotech Companies

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On 6 May 2025, the Securities and Futures Commission (“SFC”) and The Stock Exchange of Hong Kong Limited (“the Exchange”), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (“HKEX”), jointly announced the launch of the Technology Enterprises Channel (“TECH”).[1] TECH facilitates new listing applications from Specialist Technology Companies (as defined under Chapter 18C of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”)) and Biotech Companies (as defined under Chapter 18A of the Listing Rules). The initiative provides enhanced support, a confidential filing option, and streamlined pathways for companies with weighted voting rights (“WVR”) structures.

The Technology Enterprises Channel

TECH is tailored to support Specialist Technology Companies and Biotech Companies, which are often early-stage or pre-revenue entities with unique operational and regulatory challenges. To streamline the listing process, the Exchange has introduced the following support measures: –

Dedicated Support Team: A specialised team with expertise in Chapters 18C and 18A of the Listing Rules will assist applicants in understanding and complying with the Listing Rules as well as the regulatory requirements;
Early Engagement: Companies may engage with the Exchange during preparatory stages to assess alignment with regulatory requirements, ensuring greater clarity and confidence;
Eligibility Guidance: TECH offers comprehensive guidance on key criteria, including requirements for Core Products (as defined under Chapter 18A of the Listing Rules), acceptance of biotech products or clinical trials under various regulatory authorities, qualifications and independence of “sophisticated investors”, and acceptable sectors for Specialist Technology Industries (as defined in Chapter 2.5 of the Guide for New Listing Applicants (the “Guide”));
Preliminary Case-Specific Guidance: Prospective applicants can seek preliminary guidance on specific issues arising under the Listing Rules, addressing potential challenges before formal submission.

These measures enhance efficiency and transparency, particularly for innovative-sector companies navigating complex regulatory hurdles.

Confidential Filing Option

Recognising the heightened risks associated with premature disclosure of sensitive information, such as operational strategies or proprietary technologies, the Exchange has introduced a confidential filing option for Specialist Technology Companies and Biotech Companies.

Under this option, companies listing under Chapters 18C and 18A of the Listing Rules may submit their application proofs confidentially, as outlined in Chapter 6.4 of the Guide. This measure is particularly significant for early-stage companies that have not yet commercially launched their products, as it helps mitigate risks of competitive harm and reduces market speculation during the listing process. The confidential filing option has been available for applications filed since 6 May 2025.

Support for Weighted Voting Rights Structures

The announcement includes updates to the Guide that benefit companies seeking to list with a WVR structure, which allows certain shareholders to hold shares with enhanced voting power.[2]

Specialist Technology Companies and Biotech Companies that fully meet the requirements under Chapters 18C and 18A of the Listing Rules, respectively, are presumed to have satisfied the innovative company requirements and the external validation requirement for listing with a WVR structure under Chapter 8A of the Listing Rules.[3] This presumption, detailed in Chapters 2.2, 2.3, and 2.5 of the Guide, simplifies the listing process for these companies, enabling these companies to maintain control while accessing public capital markets. However, these companies remain subject to all other applicable requirements under Chapter 8A of the Listing Rules.

Conclusion

The launch of TECH on 6 May 2025 marks a pivotal step in Hong Kong’s strategy to solidify its position as a premier hub for technology and biotech listings. By offering tailored guidance, confidential filing options, and simplified requirements for WVR structures, HKEX and the SFC have created a more accessible and supportive environment for innovative companies. This initiative not only facilitates the growth of the technology and biotech sectors but also enhances the diversity, competitiveness, and resilience of Hong Kong’s capital market, benefiting both issuers and investors. As global demand for public listings in these sectors grows, TECH positions Hong Kong as a forward-thinking hub for emerging enterprises.

Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.

[1] “Joint Announcement on Launch of Technology Enterprises Channel” by HKEX dated 6 May 2025.

[2] Please refer to Chapter 8A of the Listing Rules for more details on WVR structures.

[3] Please refer to HKEX Guidance Letter HKEX-GL93-18 for more details on the requirements for listing with a WVR structure.

Posted by Editor

28 Mar 2025

Stevenson, Wong & Co. advises as issuer’s international counsel on Weifang Guokong Development Group Co., Ltd.’s successful further issuance of CNY185,000,000 6.9% bonds due 2027

In addition to assisting in the successful issuance of bonds in an aggregate principal amount of approximately CNY629,280,600 by Weifang Guokong Development Group Co., Ltd. (Weifang GuoKong), Stevenson, Wong & Co. acted as international counsel to the issuer in connection with Weifang Guokong’s successful further issue of CNY185,000,000 6.9% bonds due 2027, which were consolidated and formed a single series with the CNY481,000,000 6.9% bonds due 2027 issued by Weifang GuoKong on 7 March 2025.. These bonds are listed on the Chongwa (Macao) Financial Asset Exchange Co., Ltd.

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Posted by Editor

26 Mar 2025

Stevenson, Wong & Co. in association with AllBright Law (Hong Kong) Offices LLP advised Nanshan Aluminium International Holdings Limited (2610.HK) on its Successful Listing on the Hong Kong Stock Exchange

Stevenson, Wong & Co. in association with AllBright Law (Hong Kong) Offices LLP acted as the Hong Kong legal advisers to Nanshan Aluminium International Holdings Limited (2610.HK) (“Nanshan Aluminium International”) in its successful listing on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The shares of Nanshan Aluminium International were listed on the Stock Exchange on 25 March 2025. Nanshan Aluminium International initially offered a total of 88,235,300 shares, among which 8,823,600 shares were offered under the Hong Kong public offering and 79,411,700 shares were offered under the international placing. The offer price was HK$26.60 per offer share, and the gross proceeds from the global offering amounted to approximately HK$2,347.1 million.

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Nanshan Aluminium International and its subsidiaries (the “Group”) are a leading alumina manufacturer in Southeast Asia, committed to continually strengthening its market position in the region. Since its inception, the Group’s primary focus has been on tapping into Indonesia’s abundant bauxite and coal reserves, utilising these resources to fuel its operations. The Group’s strategic position within the Special Economic Zone amplifies its logistical and economic efficiencies, enables the Group to forge a highly efficient and technologically advanced alumina production base.

The listing of Nanshan Aluminium International constitutes a spin-off of the Group by its controlling shareholder, Shandong Nanshan Aluminium Co., Ltd., the shares of which are listed on the Shanghai Stock Exchange (600219.SH).

Nanshan Aluminium International has four cornerstone investors, Glencore International AG, Hongkong Topway Trading Co., Limited (a subsidiary of Xiamen Xiangyu Co., Ltd. (600057.SH)), Reijong International Industrial Equipment (HK) Limited and PT Indika Energy Tbk (INDY.IDX) which subscribed for a total of around 35.14 million offer shares amounted to approximately HK$934.63 million.

The sole sponsor of the listing was Huatai Financial Holdings (Hong Kong) Limited. The joint global coordinators were Huatai Financial Holdings (Hong Kong) Limited, CMB International Capital Limited, China Galaxy International Securities (Hong Kong) Co., Limited, China International Capital Corporation Hong Kong Securities Limited, CLSA Limited, Daiwa Capital Markets Hong Kong Limited, DBS Asia Capital Limited, ICBC International Securities Limited, and UOB Kay Hian (Hong Kong) Limited.

Our team was led by our partner Mr. Rodney Teoh, supported by team members including Mr. Davis Lam (senior associate), Ms. Angela Lau (associate), Mr. Austin Kot (associate) and Mr. Jay Lee (legal manager (corporate finance)).

Please contact our Mr. Rodney Teoh for any enquiries or further information.

Posted by Editor

21 Mar 2025

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

The Stock Exchange of Hong Kong Limited (“Exchange”) published the Consultation Conclusions (“Consultation Conclusions”) on the Review of Corporate Governance Code (“CG Code”) and Related Listing Rules on 19 December 2024. The Exchange received more than 260 responses from a wide variety of stakeholders, including listed issuers and market participants.

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While the majority supported the proposals outlined in the June 2024 Consultation Paper on Corporate Governance Code (“Consultation Paper”),[1] notable divergences were observed regarding the appointment of a lead independent non-executive director (“INED”) and the limit on INED’s tenure.

Following a review of the feedback, the Exchange has set the implementation date for the suggested modifications as 1 July 2025. Transitional arrangements will apply to certain rules regarding “overboarding” and tenures of INEDs. The latest guidelines will be provided by the Exchange in the first half of 2025 to facilitate the listed companies in complying with the most updated requirements.

A. Major Revisions to the CG Code and Related Listing Rules

The following table presents the primary focuses on the fundamental changes in the CG Code and the relevant Listing Rules, namely (i) Board Effectiveness; (ii) INED’s Independence; (iii) Board and Workforce Diversity; (iv) Risk Management and Internal Controls; and (v) Dividends.

Proposals	Final Amendments
Board Effectiveness
Designation of a lead INED (“Lead INED”)	· The functional role of a Lead INED is to facilitate discussions among the INEDs on the board and provide stakeholders with greater insight into the roles and contributions of the INEDs. · The newly introduced Recommended Best Practice C.1.8 recommends appointing a Lead INED in listed companies where the chairman is not an INED. This arrangement enables the Lead INED to act as an intermediary for the board members and shareholders, as well as providing an alternative communication channel when standard communication with the chairman or management proves insufficient. · The Exchange clarifies that the designation of an INED is not essential if the board chair is an INED and does not fall under the categories that necessitate an announcement in accordance with Main Board Listing Rules 13.51(2). Any alterations in the appointment of a Lead INED shall be promptly published via an updated list of directors and their roles and functions on both the Exchange’s and listed companies’ websites. · The listed companies are mandated to disclose the board’s interaction with the shareholders in the Corporate Governance Report (“CG Report”). · The latest Mandatory Disclosure Requirements section L(d) and Code Provision F.1.1 provide that the following details must be included in the disclosure: – The nature and number or frequency of such engagements; – The group(s) of shareholders and representatives of the issuer involved; and – The issuer’s approach to following up on the outcomes of these engagements
Mandatory director training	· The Exchange emphasises the importance of maintaining director competence and expertise by mandating compulsory training, particularly for First-time Directors (“First-time Directors”). · The First-time Directors refer to individuals who (1) do not have previous experiences in being appointed as a director of a listed company on the Exchange; or (2) not being designated as a director of a listed company on the Exchange for a minimum of three years preceding their appointment. They are required to undergo a minimum of 24 hours of training within a period of 18 months following their appointment. · For the First-time Directors who possess experience serving as directors of a listed company on the exchanges in foreign jurisdictions within the past three years before their designation, a total of 12 training hours are necessary within the initial three years of appointment. · A confirmation listing the details of the directors taking part in the continuous professional development is specified under the Mandatory Disclosure Requirements section B(i), which includes: (i) the total hours of continuous professional development accomplished; (ii) the format or mode of continuous professional development engaged in, specifying whether an external or internal provider was utilised or if the development resulted from self-study; and (iii) the total number of hours completed, the training subjects addressed, and a description of the relevant training provider(s) for each mode of continuous professional development undertaken. Note: For the First-time Directors, a confirmation statement indicating that they have fulfilled the basic training requirement is compulsory pursuant to new Main Board Listing Rules 3.09H and GEM Listing Rules 5.02H.
Board performance review	· The proposal will be implemented accordingly as Code Provision B.1.4, which mandates the issuer to perform an official review of the board’s performance a minimum of every two years. · The Exchange clarifies that the emphasis of the review is predominantly based on the holistic performance of the board, such as whether it corresponds with the company’s overall business objectives and strategies, instead of an individual assessment of each director. · Additional guidance in the New Corporate Governance Guide (“New CG Guide”) regarding the anticipated scope and level of details required for the related disclosure will be provided.
Board skills matrix	· Code Provision B.1.5. will be implemented, which will require the issuer to maintain and disclose a board skills matrix in the CG Report, including details such as the combination of skills possessed by the board at present. · The New CG Guide will include guidance on the recommended format and requisite level of detail for the maintenance of a board skills matrix and enhancement of disclosure.
Overboarding INED and director’s time commitment	· The revised Main Board Listing Rules 3.12A and GEM Listing Rules 5.07A provide that an INED must not simultaneously hold more than six directorships of listed companies listed on the Main Board or GEM. · Listed companies with overboarding INEDs will be given a three-year transition period starting from 1 July 2025, with compliance required by the first Annual General Meeting (“AGM”) held on or after 1 July 2028. IPO applicants are obliged to ensure their INEDs adhere to the respective cap on the simultaneous directorships effective from 1 July 2025. · The nomination committee is required to adopt consistent assessment requirements to evaluate the director’s time commitment and board contribution alongside his or her capacity to fulfill obligations in an effective manner on an annual basis as stipulated in the Mandatory Disclosure Requirements section E(d)(iii). · Factors such as the directorships of the listed issuers on the Exchange and other significant external time commitments will also be taken into consideration.
INED’s Independence
Cap on INED’s tenure	· An INED of the issuer’s board is not allowed to serve for over nine years (“Long Serving INED”), which will be implemented in two phases over a six-year transition period to encourage board renewal, as elucidated in the revised Main Board Listing Rules 3.13A and GEM Listing Rules 5.09A. Phase 1 Requirement: A listed company on the Exchange shall not comprise Long Serving INEDs constituting the majority of INEDs on the board. With the three-year transition period commencing from 1 July 2025, adherence to the requirement must be completed by the first AGM carried out on or after 1 July 2028. Phase 2 Requirement: A listed company shall not include any Long Serving INEDs on the board. With the six-year transition period commencing from 1 July 2025, adherence to the requirement must be completed by the first AGM carried out on or after 1 July 2031.
Disclosure on INED’s tenure	· The duration of the tenure and the current appointment period of each director is required to be disclosed in the CG Report as provided in the updated Mandatory Disclosure Requirements section B(a).
Board and Workforce Diversity
Composition of the nomination committee	· Code Provision B.3.5 will be introduced to require listed companies to designate a minimum of one director of a different gender to be part of the nomination committee to foster great diversity within the board.
Workforce diversity policy	· The revised Main Board Listing Rules 13.92(1), GEM Listing Rules 17.104(1) and Mandatory Disclosure Requirements section J(b) require the listed companies to implement a workforce diversity policy alongside a board diversity policy.
Annual review of board diversity policy and disclosure of gender ratio	· The updated Mandatory Disclosure Requirements section J(a) specifies that listed companies are obliged to conduct a review of the board diversity policy annually to encourage increased accountability for the measurement of progress and pursuit of diversity objectives. · The revised Mandatory Disclosure Requirements section J(c) states that the issuers are required to disclose separately in the CG Report regarding the gender ratio of (i) senior management and (ii) the workforce (excluding senior management) to update the market and investors that enable them to perform a more sophisticated examination on the diversity and inclusion initiatives.
Arrangements during temporary deviation	· The revised Main Board Listing Rules 13.92(2) and GEM Listing Rules 17.104(2) stipulate that the current guidance provided by the Exchange on temporary deviations from the requirement that issuers have listed companies consist of directors of various genders on the board will be codified.
Risk Management and Internal Controls
Strengthened the board’s obligations in conducting annual reviews on the risk management and internal control system (“RMIC Systems”)	· The obligation to perform annual reviews on the effectiveness of the RMIC Systems in the listed companies is stated in the revised Mandatory Disclosure Requirements section H to promote a systematic approach in identifying potential risks and vulnerabilities. · The revised Code Provision D.2.1 has been refined to specify the scope of the review, encompassing the coverage of material controls of both the listed companies and its subsidiaries’ RMIC Systems. · A comprehensive evaluation of the RMIC Systems by the listed companies are expected to establish proper procedures and controls to mitigate business risks.
Dividends
Disclosure of the listed companies’ policies concerning dividends payments and the board’s dividend decisions	· The newly amended Mandatory Disclosure Requirements section M has provided that there is an enhanced disclosure requirement of the companies’ dividend policies and board’s dividend decisions to enhance transparency and accountability in financial reporting. · Details such as the policy’s aim and objective and the primary considerations in determining whether to declare, recommend or pay any dividend; and confirm the board’s compliance with the dividend policy (or otherwise, an explanation of its departure from the policies). · For listed companies without a dividend policy, it is necessary to disclose reasons for the non-existence of such policies. · For all listed companies, it is a mandatory requirement to state clearly whether (i) there are material variations in the dividend rate compared to the prior corresponding period; and (ii) the reasons for non-declaration of the dividends and the intended measures taken by the issuer to improve investors return.

B. Analysis and takeaways

The Exchange has strived to review and refine the Consultation Paper based on the recommendations and opinions provided by multiple industrial stakeholders and professional bodies. This has apparently reflected the Exchange’s efforts to enhance the sound corporate governance of the listed companies in multiple essential areas. The proposed amendments to the respective rules, provisions and requirements regarding Board Effectiveness, INED’s Independence, Board and Workforce Diversity, Risk Management and Internal Controls and Dividends, reveal the Exchange’s commitment to foster a structured and robust framework within the regulatory and compliance regime. As reflected in the Consultation Conclusions, the listed companies on the Exchange are expected to adhere to the most recent guidelines and their respective timelines to ensure effective compliance.

Please contact our Partner Mr. Rodney Teoh for any enquiries or further information.

[1] Please see our news update on the Exchange’s June 2024 Consultation Paper on Corporate Governance Code here.

Posted by Editor

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